Federal Circuit ClearCorrect Decision May Impact Downloaded Software as Well as Digital Data

On March 31, 2016, the Federal Circuit denied a petition to rehear en banc its panel decision in ClearCorrect Operating, LLC v. International Trade Commission, No. 14-1527 (Fed. Cir. Nov. 10, 2015), which held that “digital data” is not an “article” within the meaning of 19 U.S.C. § 1337 and, consequently, that the U.S. International Trade Commission does not have jurisdiction over digital data.

The Federal Circuit’s per curiam order ends speculation on whether the Federal Circuit will reconsider its holding in ClearCorrect. It remains unknown whether the ITC will seek review by the Supreme Court. Practitioners must now turn their eyes back to the ITC to learn the full impact of the decision.

The Federal Circuit’s ClearCorrect decision stemmed from ITC Inv. No. 337-TA-833 brought by Align Technology against two respondents—ClearCorrect Operating, LLC (ClearCorrect US) and Clear Correct Pakistan (Private), Ltd. (ClearCorrect Pakistan). Align alleged the respondents infringed various patents relating to, inter alia, methods of forming dental appliances and methods of producing digital data sets. ClearCorrect US would scan the teeth in a patient’s mouth and send the image to ClearCorrect Pakistan, which would process the data to generate various iterations of the patient’s teeth with aligners used to straighten the teeth. ClearCorrect Pakistan transmitted the processed data back to ClearCorrect US, which would print 3D models of aligners based on the data. Those aligners would be used to straighten a patient’s teeth. There was no dispute on appeal that the respondents infringed valid and enforceable U.S. patents or that the complainant had a protectable domestic industry related to the asserted patents. The sole question on appeal was whether the digital data was an “article” over which the ITC had jurisdiction under Section 337.

In reviewing the scope of the statutory term “article,” the Federal Circuit panel conducted a Chevron analysis to determine whether Congress had spoken to the issue and whether the ITC’s interpretation of “article” was permissible. After reviewing numerous dictionaries, the use of the term “article” in Section 337, and the term as part of the statutory scheme, a majority of the panel decided that Congress intended “article” to mean “material things” and that, under this interpretation, an “article” does not include digital data. The Federal Circuit also determined that the ITC’s interpretation was not permissible. Consequently, the Federal Circuit determined the ITC does not have jurisdiction over digital data.

Although the only import in ClearCorrect was digital data, the Federal Circuit’s opinion potentially impacts any ITC case involving downloaded software. In ITC Inv. No. 337-TA-845, which pre-dates the Federal Circuit’s ClearCorrect decision, the complainants accused respondents of infringing certain patents through the importation into the United States of software (a user interface) running on imported hardware. The Commission, however, held that the complainants failed to prove that the software was imported into the United States and that the software was part of a device as imported. See Inv. No. 337-TA-845, Commission Opinion at 12-15 (Dec. 11, 2013). To prove a violation of Section 337, a complainant must prove the accused product is imported. 19 U.S.C. § 1337(a); Inv. No. 337-TA-845, Commission Opinion at 15. If the complainants in the 845 investigation failed to prove a violation by presenting insufficient evidence to establish the software was imported into the United States, under the holding in ClearCorrect, a complainant will never be able to prove importation of downloaded software, since it is not within the ITC’s jurisdiction. And consequently, a complainant will never be able to establish a violation of Section 337 if the infringement is based on downloaded software.

The ITC may reconcile these cases if presented with the issue. But the public will need to wait until the issue reaches the ITC for review to receive further guidance.