By Brent Kendall
The clash over protecting a free-flowing Internet while also
fighting online piracy has shifted to an unlikely and largely
unknown setting: a legal battle about teeth-alignment devices at a
federal trade body.
A U.S. appeals court this month will consider whether federal
tariff law gives the International Trade Commission the power to
order a halt to foreign digital transmissions into the U.S. when
those communications infringe U.S. intellectual property.
Traditionally, the ITC has intervened only to stop the importation
of physical goods.
In a proceeding closely watched by tech companies and the movie,
music and publishing industries, the commission expanded its
approach last year while reviewing a trade dispute over orthodontic
devices. The ITC decided it could take action against virtual
material coming into the U.S. and ordered a Texas-based company,
ClearCorrect, to stop receiving digital models and data from
Pakistan for the manufacture of teeth aligners, invisible
mouthpieces used as an alternative to braces.
The ITC had said ClearCorrect was infringing patents held by
larger rival Align Technology Inc., a San Jose, Calif., company
that generated more than $700 million in revenue last year from its
Invisalign devices.
The U.S. Court of Appeals for the Federal Circuit will hear
arguments on ClearCorrect's appeal in Washington on Aug. 11.
The Internet Association, a trade group representing companies
like Google Inc., Amazon.com Inc. and Yahoo Inc., opposes the ITC's
approach, saying it could disrupt the global Internet and interfere
with cloud-computing networks, where data is stored in centers all
around the world.
The current case is about patents, but the ITC also can take
action against goods that infringe copyrights, an issue important
to Hollywood and other rights holders. They are eyeing the ITC as a
new venue for combating foreign websites that trade in pirated
digital material and the ability of U.S. consumers to access
them.
The ITC's mission of protecting U.S. companies from imported
goods that infringe on intellectual property "matches up well with
some of our current problems," said Dan Robbins, a senior attorney
with the Motion Picture Association of America, which filed a legal
brief with the Recording Industry Association of America in support
of the ITC in the ClearCorrect case.
If the commission's jurisdiction "is limited to just physical
goods, the ITC will end up in the historical dustbin because
everything these days is moving toward electronic importation," Mr.
Robbins said.
Allan Adler, general counsel for the Association of American
Publishers, said if the ITC's digital jurisdiction is upheld, "we
would certainly be exploring it more seriously." The commission
could be "an ancillary or alternative to litigation in federal
court," said Mr. Adler, whose group also is backing the ITC in the
case.
The ITC process allows companies to file complaints alleging
they are being harmed by illegal imports. The only remedies
available to the commission are to exclude imports and to order
companies to cease-and-desist from selling or distributing
infringing goods. Companies using the process for physical goods
often file related lawsuits in federal court seeking monetary
damages and injunctions against infringing activity.
As the teeth case has gained steam, open-Internet advocates have
raised concerns about expanded ITC powers.
Charles Duan of the public-interest group Public Knowledge,
which filed a friend-of-the-court brief opposing expanded ITC
authority, said the debate resembles the battle in 2011 and 2012
over the Stop Online Piracy Act. That bill was important to the
entertainment industry but lawmakers abandoned it when Internet
companies waged an opposition campaign, saying the legislation
would stifle the Web and burden free speech.
"The concern is that the ITC is opening the door to Internet
site-blocking, the policy that killed SOPA," said Mr. Duan,
director of Public Knowledge's patent reform project. "Blocking
data transmissions based on their content cuts against the general
principles of the openness of the Internet, which has been a
foundation of its success."
The Internet Association agrees. "The ITC believes it can use
patent law to regulate all electronic data entering the U.S. We
believe the Commission's position is unlawful, unenforceable and
harmful to global Internet commerce," said Abigail Slater, the
group's vice president of legal and regulatory policy.
Aside from the piracy issue, the case highlights the importance
of digital goods in an age where products can be built with 3-D
printers.
ClearCorrect's manufacturing process starts with a physical
model of a patient's teeth in the U.S., which is scanned digitally.
The file is uploaded and received by technicians in Pakistan who
create virtual models of a patient's teeth moving into straight
positions. The files are transferred back to the U.S.
electronically, where ClearCorrect prints 3-D models that are used
to make aligners.
The ITC in court papers said ClearCorrect hoped to skirt U.S.
patent law by farming out part of its process to Pakistan. The
commission argues it would be unreasonable to say it could block
physical dental molds at the border yet do nothing to stop digital
ones.
An ITC spokeswoman said the agency wouldn't comment further,
citing current litigation.
ClearCorrect lawyer Michael Myers denied the company was
infringing patents and said it had good reasons for outsourcing
part of its process overseas. Creating digital orthodontic models
is a labor-intensive process "and labor is cheaper" in Pakistan, he
said.
Mr. Myers said Align Technology and its entertainment industry
backers were seeking to push the envelope by nudging the ITC into
digital commerce. "If this was such an important tool to fight
online piracy, why haven't they used this mechanism? It's because
it hasn't been available," he said, adding Congress should be the
body to extend that power.
Align didn't respond to requests for comment. In a court brief,
the company said the ITC was targeting only the specific actions of
ClearCorrect and wasn't installing itself as a new government
regulator of U.S.-bound Internet transmissions.
"The commission no more regulates electronic carriage of
articles into the U.S. than it regulates traditional carriage of
goods into the U.S. by ship, railroad, or truck," it said.
Write to Brent Kendall at brent.kendall@wsj.com