WASHINGTON—A federal appeals court appeared skeptical Tuesday of
claims by a government trade panel that it can block Internet
communications it finds infringe U.S. patents.
The U.S. International Trade Commission last year took the
unprecedented step of ordering ClearCorrect LLC of Round Rock,
Texas, to cease receiving digital models and data from Pakistan to
manufacture dental aligners, plastic orthodontic devices used to
straighten teeth.
The commission ruled the data to be the digital equivalent of
the aligners themselves, which it found infringed patents held by
Align Technology Inc., the San Jose, Calif., maker of competing
Invisalign aligners. Since the commission can block the importation
of infringing physical goods, it reasoned that it can likewise halt
the transmission of data.
The case has drawn attention of industries far removed from
orthodontics, because the commission also holds authority to
enforce copyrights. The entertainment and publishing industries
hope an ITC victory could open a new venue to fight digital piracy.
Internet providers worry it could expand government control over
the online world.
The commission faced a tough audience Tuesday at the U.S. Court
of Appeals for the Federal Circuit, a specialized court in
Washington that hears patent appeals.
"If we were to affirm the commission here, we would be saying
that the ITC has jurisdiction over electronic transmission," said
Chief Judge Sharon Prost. "I don't see very many limiting
principles that might apply to future cases."
"I'm not here to tell you exactly where the line is," ITC
attorney Sidney Rosenzweig. But he said that while the agency
claims authority over "digital goods," it doesn't seek to oversee
"digital services" or telephone calls. He added that Internet
service providers have specific protection from liability under a
separate federal law, the Digital Millennium Copyright Act.
The ITC, an independent agency comprised of six members
appointed by the president for nine-year terms, traces its history
to the 1916 Revenue Act, when it was established as the U.S. Tariff
Commission.
Judge Pauline Newman suggested that by extending its power to
digital transmissions, the commission was exceeding the authority
Congress initially conceived for the panel 99 years ago.
Mr. Rosenzweig argued that it was reasonable for the commission,
like the Federal Trade Commission and the Securities and Exchange
Commission, to apply powers granted in earlier eras to modern
conditions.
"We don't have people yelling and waving slips of paper to trade
stocks anymore," but the SEC still regulates Wall Street under the
Securities Exchange Act of 1934, he said. Likewise, laws covering
the commission "are broad enough to encompass trade in its various
forms."
Even if the court denies the commission power to block Internet
communications, Align has other ways to fight ClearCorrect's
alleged infringement. The two companies are battling in federal
court and the U.S. Patent and Trademark Office over the validity or
infringement of the aligner patents.
Write to Jess Bravin at jess.bravin@wsj.com
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