Import of Digital Goods Tested in Federal Cir.

WASHINGTON (CN) - The Federal Circuit on Tuesday heard arguments on an International Trade Commission ruling that a Pakistani company violated patent law by "importing" models of crooked teeth into the United States over the Internet - a case that critics say the ITC shouldn't have even accepted.

Chief Judge Sharon Prost said during the proceedings that the case is about much more than crooked teeth.

ClearCorrect makes clear plastic mouthpieces to straighten teeth. Align Technology, the makers of Invisalign, claimed ClearCorrect infringed on its patent when it transmitted models it used to make the mouthpieces from Pakistan to the United States.

Michael Myers, who argued for ClearCorrect, told the judges the ITC ruling goes well beyond the power Congress granted when it created it as the U.S. Tariff Commission in 1916.

The agency was never meant to deal with electronic transmissions such as radio signals, television broadcasts or the method ClearCorrect used to transmit the models of teeth, Myers said.

"What the commission has done is, it's unilaterally expanded its own power," Myers told the panel.

Critics of the ITC ruling say it would restrict Internet freedom. The Internet Association, a trade association that counts Google, eBay, Facebook, Twitter and a host of other prominent web companies as members, filed an amicus brief in support of ClearCorrect.

The Internet Association claims the decision opens the door for the ITC to restrict the flow of information over the Internet in the name of patent law.

"Radical transformations of global communications and commerce, and the unforeseeable but far-reaching results that would follow, should come, if at all, from clearly expressed powers conferred in an agency's enabling statute," John Thorne wrote for the Internet Association in the brief.

Others, such as the Association of American Publishers and the Motion Picture Association of America support the commission's decision, saying it will help fight Internet piracy.

"Today, electronic transmissions as well as freight containers can be used to import books," Steven J. Metalitz wrote for the Association of American Publishers in an amicus brief. "This fact must not diminish the scope of the commission's authority to address the underlying unfairness of trade practices that infringe U.S. intellectual-property rights."

But Myers likened the transmission of models over the Internet to Morse code or telegram transmissions, technologies the ITC never had the authority to regulate.

The ITC argued that changing definitions of words such as "goods" and "articles," over which Congress granted the ITC authority, means it has the ability to regulate some electronic transmissions.

Things such as phone calls or other digital services would not be subject to ITC regulations, but data transmitted for commercial gain would, Sidney Rosenzweig, who argued for the International Trade Commission, told the court.

The data ClearCorrect transmitted existed solely for the purpose of building the mouthpieces, which makes it commerce and therefore subject to ITC authority, Rosenzweig said.

"What they did is they produced an article and they were compensated for it and they profited from it," Stephen Blake Kinnaird, for Align Technology, told the court.

He said the ITC ruling closed "gaping loopholes" in the law that would have allowed widespread digital piracy.

Myers disagreed with Rosenzweig, saying the models were never sold to doctors or patients.

He said the commission's definition of international commerce in the case was arbitrary: that if the Pakistani programmers who sent the data had logged into a server based in the United States, the case wouldn't have been before the commission in the first place.

Myers said the case should be decided in a federal court - as is happening now. Align Technologies sued ClearCorrect in U.S. District Court for the Southern District of Texas in 2011, alleging infringement of nine patents. That case is pending.

"Instead of the International Trade Commission trying unilaterally to expand its power to cope with this brave new world - which I contend isn't that different from the old world - this is a matter that should be left for Congress," Myers said.

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