Clearcorrect Operating, LLC v. Int'l Trade Comm'n

• Citation: 810 F.3d 1283
• Decision Date: 10 November 2015
• Docket Number: No. 2014–1527.,2014–1527.
• Parties: CLEARCORRECT OPERATING, LLC, ClearCorrect Pakistan (Private), Ltd., Appellants v. INTERNATIONAL TRADE COMMISSION, Appellee Align Technology, Inc., Intervenor.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

810 F.3d 1283

CLEARCORRECT OPERATING, LLC, ClearCorrect Pakistan (Private), Ltd., Appellants

v. INTERNATIONAL TRADE COMMISSION, AppelleeAlign Technology, Inc., Intervenor.

No. 2014–1527.

United States Court of Appeals, Federal Circuit.

Nov. 10, 2015.

Michael D. Myers, McClanahan Myers Espey, LLP, Houston, TX, argued for appellants. Also represented by Robert Henry Espey, II ; Gary Hnath, Paul Whitfield Hughes, Mayer Brown LLP, Washington, DC.

Sidney A. Rosenzweig, Office of the General Counsel, United States International Trade Commission, Washington, DC, argued for appellee. Also represented by Wayne W. Herrington, Dominic L. Bianchi.

Stephen Blake Kinnaird, Paul Hastings LLP, Washington, DC, argued for intervenor. Also represented by Thomas A. Counts, Igor Victor Timofeyev.

Charles Duan Public Knowledge, Washington, DC, for amici curiae Electronic Frontier Foundation, Public Knowledge.

John Thorne, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, DC, for amicus curiae The Internet Association. Also represented by Matthew A. Seligman ; Aaron M. Panner, Law Office of Aaron M. Panner, PLLC, Washington, DC.

Jeffrey A. Lamken, MoloLamken LLP, Washington, DC, for amicus curiae Business Software Alliance.

Steven Metalitz, Mitchell, Silberberg & Knupp, LLP, Washington, DC, for amicus curiae Association of American Publishers.

John D. Haynes, Alston & Bird LLP, Atlanta, GA, for amici curiae Nokia Corporation, Nokia USA, Inc. Also represented by Adam David Swain, Benn C. Wilson, Washington, DC.

Jonathan J. Engler, Adduci, Mastriani & Schaum-berg, LLP, Washington, DC, for amici curiae Motion Picture Association of America, Recording Industry Association of America. Also represented by Thomas Richard Burns, Jr., Tom M. Schaumberg.

Before PROST, Chief Judge, NEWMAN and O'MALLEY, Circuit Judges.

Opinion for the court filed by Chief Judge PROST. Concurring opinion filed by Circuit Judge O'MALLEY. Dissenting opinion filed by Circuit Judge NEWMAN.

PROST, Chief Judge.

The Tariff Act of 1930 provides the International Trade Commission ("Commission") with authority to remedy only those unfair acts that involve the importation of "articles" as described in 19 U.S.C. § 1337(a). Here, the Commission concluded that "articles" "should be construed to include electronic transmission of digital data...." In re Certain Digital Models, Inv. No. 337–TA–833 at 55 (Apr. 3, 2014) ("Final Comm'n Op. "). We disagree.

The Commission's decision to expand the scope of its jurisdiction to include electronic transmissions of digital data runs counter to the "unambiguously expressed intent of Congress." Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Under step one of Chevron, "[w]e begin with the text of [the statute]." King v. Burwell, ––– U.S. ––––, 135 S.Ct. 2480, 2489, 192 L.Ed.2d 483 (2015). Here, it is clear that "articles" means "material things," whether when looking to the literal text or when read in context "with a view to [the term's] place in the overall statutory scheme." Id. We recognize, of course, that electronic transmissions have some physical properties—for example an electron's invariant mass is a known quantity—but commonsense dictates that there is a fundamental difference between electronic transmissions and "material things." Our analysis is therefore complete. However, even under step two of Chevron, an analysis of the Commission's opinion makes clear that it is unreasonable and therefore not entitled to deference.¹

Accordingly, we reverse and remand the Commission's decision and conclude that the Commission does not have jurisdiction over this case.²

I. BACKGROUND

The Commission instituted the present investigation based on a complaint filed by Align Technology, Inc. ("Align"). Align alleged a violation of 19 U.S.C. § 1337 ("Section 337") by reason of infringement of various claims of seven different patents.³ The respondents to the investigation were ClearCorrect Operating, LLC ("ClearCorrect US"), and Clear Correct Pakistan (Private), Ltd. ("ClearCorrect Pakistan") (collectively "ClearCorrect").

The technology at issue in this case relates to the production of orthodontic appliances, also known as aligners. The aligners in question "are configured to be placed successively on the patient's teeth and to incrementally reposition the teeth from an initial tooth arrangement, through a plurality of intermediate tooth arrangements, and to a final tooth arrangement." '880 patent (abstract). ClearCorrect is a producer of these aligners.

ClearCorrect makes its aligners through the following process. ClearCorrect U.S. scans physical models of the patient's teeth and creates a digital recreation of the patient's initial tooth arrangement. This digital recreation is electronically transmitted to ClearCorrect Pakistan, where the position of each tooth is manipulated to create a final tooth position. ClearCorrect Pakistan then creates digital data models of intermediate tooth positions. One intermediate tooth position is created for each incremental aligner. ClearCorrect Pakistan then transmits these digital models electronically to ClearCorrect US. ClearCorrect U.S. subsequently 3D prints these digital models into physical models. Then an aligner is manufactured by thermoplastic molding using the physical model. Here, the accused "articles" are the transmission of the "digital models, digital data and treatment plans, expressed as digital data sets, which are virtual three-dimensional models of the desired positions of the patients' teeth at various stages of orthodontic treatment" ("digital models"), from Pakistan to the United States. Final Comm'n Op. at 17.

The parties and the Commission agreed to divide the patent claims into four Groups: Group I contains those claims that relate to methods of forming dental appliances,⁴ Group II contains those claims that relate to methods of producing digital data sets,⁵ Group III contains those claims that relate to a treatment plan based on a series of digital data sets on a storage medium,⁶ and Group IV contains those claims that relate to methods of producing dental appliances.⁷ The Commission found the Groups I and II claims⁸ to be infringed and not invalid. It is these claims that are at issue in this appeal. The Commission found the Groups III and IV claims to be either beyond the scope of the Commission's jurisdiction or not infringed. The Commission's ruling concerning Groups III and IV are at issue in companion case Align Technology, Inc. v. International Trade Commission, No. 2014–1533, and not at issue in this case.

While the Group I⁹ and Group II¹⁰ claims differ, for purposes of this appeal it is the similarity in Align's allegations of ClearCorrect's infringement that are relevant—namely, ClearCorrect Pakistan's electronic transmission of digital models to ClearCorrect US.

The Administrative Law Judge ("ALJ") conducted an evidentiary hearing in February 2013, and on May 6, 2013, issued its Initial Determination. The ALJ found that—but for the claims related to the '666 patent —ClearCorrect infringed the Groups I and II patent claims. In so finding, the ALJ determined that the Commission had authority to order ClearCorrect to stop electronically importing digital models into the United States. The ALJ recommended that the Commission issue a cease and desist order directed to ClearCorrect to prohibit the importation of digital models.

In response, both ClearCorrect and Align filed petitions for Commission review. The Commission initiated a review of the entire Initial Determination and solicited briefing from the parties and the public. While the public did not respond to the initial request by the Commission, the Commission extended its deadline and issued another notice to the public. In response to this notice, the Commission received briefing from various nonparties including: the Association of American Publishers, Google Inc., Andrew Katz, The Motion Picture Association of America, and Nokia Corp.

On April 3, 2014, the Commission terminated the investigation finding the Groups I and II patent claims infringed. Specifically, the Commission found that ClearCorrect U.S. directly infringed the Group I patents and ClearCorrect Pakistan contributed to that infringement.¹¹ The Commission determined that, because ClearCorrect US's infringement occurred in the United States, it was not a violation of Section 337. The Commission instead exerted its authority over ClearCorrect Pakistan as a contributory infringer for importing the data models. Additionally, the Commission found that ClearCorrect Pakistan practiced the Group II method claims in Pakistan and found that the importation of the resulting digital models violated 19 U.S.C. § 1337(a)(1)(B)(ii). Finally, the Commission agreed with the ALJ that the Commission had jurisdictional authority over electronically imported data under Section 337. The Commission has stayed its cease and desist order until this appeal is resolved.

Following the Commission's decision, this case was timely appealed to us. We have jurisdiction to review the Commission's findings under 28 U.S.C. § 1295(a)(6).

II. DISCUSSION

"Section 337 declares certain activities related to importation to be unlawful trade acts and directs the Commission generally to grant prospective relief if it has found an unlawful trade act to have occurred." Suprema, Inc., 796 F.3d at 1345. "As a trade statute, the purpose of Section 337 is to regulate international commerce. Section 337 necessarily focuses on commercial activity related to cross-border movement of goods." Id. (citation omitted). Congress established Section 337 to "curb[ ] unfair trade practices that involve the entry of goods into the U.S. market via importation. In sum, Section 337 is an enforcement statute enacted by Congress to stop at the border the entry of goods, i.e., articles, that are involved in unfair trade practices." Id. Section 337(a)(1)...