Further to our April 7, 2014 post, on April 10, 2014, the International Trade Commission (the “Commission”) issued the public version of its opinion finding a violation of Section 337 in Certain Digital Models, Digital Data, and Treatment Plans for Use in Making Incremental Dental Positioning Adjustment Appliances, the Appliances Made Therefrom, and Methods of Making the Same (Inv. No. 337-TA-833).

By way of background, the Complainant in this investigation is Align Technology, Inc. (“Align”), and the Respondents are ClearCorrect Operating, LLC (“CCUS”) and ClearCorrect Pakistan (Private), Ltd. (“CCPK”) (collectively, “Respondents”). The asserted patents are U.S. Patent Nos. 6,217,325 (the ‘325 patent), 6,722,880 (the ‘880 patent), 8,070,487 (the ‘487 patent), 6,471,511 (the ‘511 patent), 6,626,666 (the ‘666 patent), 6,705,863 (the ‘863 patent), and 7,134,874 (the ‘874 patent) (collectively, the “asserted patents”).

On May 6, 2013, former ALJ Robert K. Rogers, Jr. issued an Initial Determination (“ID”) in the investigation. In the ID, ALJ Rogers found that Respondents had violated Section 337 with respect to the ‘325, ‘880, ‘487, ‘511, ‘863, and ‘874 patents. However, the ALJ found no violation with respect to the ‘666 patent. The ALJ also recommended the issuance of cease and desist orders directed to Respondents. See our June 24, 2013 post for more details on the ID.

On July 25, 2013, the Commission determined to review the ID in its entirety and requested briefing on the issues on review and on remedy, the public interest, and bond. The Commission then extended the target date for completion of the investigation on four separate occasions, first to November 1, 2013, then to January 17, 2014, then to March 21, 2014, and finally to April 3, 2014. As part of the third such extension, the Commission requested additional briefing from the parties and the public. See our January 27, 2014 post for more details.

In the opinion, the Commission determined to affirm-in-part, modify-in-part, and reverse-in-part the ID and to find a violation of Section 337. In particular, the Commission affirmed the ALJ’s conclusion that the accused products are “articles” within the meaning of Section 337(a)(1)(B) and that the mode of bringing the accused products into the U.S. constitutes importation of the accused products into the U.S. pursuant to Section 337(a)(1)(B). The Commission further determined to find a violation of Section 337 with respect to (i) claims 1 and 4-8 of the ‘863 patent; (ii) claims 1, 3, 7, and 9 of the ‘666 patent; (iii) claims 1, 3, and 5 of the ‘487 patent; (iv) claims 21, 30, 31, and 32 of the ‘325 patent; and (v) claim 1 of the ‘880 patent. The Commission also determined to issue cease and desist orders directed to the Respondents, with an exemption for activities related to treatment of existing patients in the U.S. 

“Importation … of Articles”

As a threshold issue, the Commission addressed whether Respondents’ electronic transmissions of digital data sets constitute “importation of … articles” within the meaning of Section 337. In particular, Respondents argued that the digital data sets representing the initial, intermediate, and final positions of patients’ teeth are not “articles” within the meaning of Section 337(a)(1)(B). Moreover, Respondents argued that because the accused data sets are brought into the U.S. by CCPK by uploading them to CCUS’s server in Houston, Texas, this mode of bringing the accused products into the U.S. is not an importation into the U.S. under Section 337(a)(1)(B).

In addressing this question, the Commission acknowledged that the term “articles” is not expressly defined in the statute. However, the Commission found that the statutory construction of “articles” that is most consistent with the overall language of the statute and that implements the avowed Congressional purpose of Section 337 encompasses within its scope the electronic transmission of the digital data sets at issue in the investigation. The Commission found that the legislative history of Section 337 indicates that the statute’s purpose is to prevent every type of unfair act in connection with imported articles (assuming consistency with the public interest) and to strengthen protection of intellectual property rights. Accordingly, in order to faithfully carry out this purpose, the Commission found that it could not limit the definition of “articles” in the manner proposed by Respondents. Rather, the Commission concluded that the statutory phrase “importation … of articles” should be construed to include electronic transmission of digital data, as in the instant investigation.

Claim Construction

ALJ Rogers had found that the term “a predetermined series of dental incremental position adjustment appliances” in claim 1 of the ‘880 patent allowed for the predetermined series to be constructed prior to the fabrication of an intermediate aligner, and was not limited to requiring construction of the series prior to the fabrication of all aligners. The ALJ had also found that this claim required that the four steps of the claimed method be performed in the recited order because each subsequent step necessarily required the completion of the previous step. Align disputed this requirement that the claimed steps be performed in the recited order, but the Commission ultimately affirmed the ALJ’s construction.

The Commission also affirmed the ALJ’s construction of the term “treatment plan” in clams 7, 8, and 9 of the ‘487 patent and claim 1 of the ‘874 patent, as well as the term “computer implemented method” in claim 1 of the ‘511 patent and claim 1 of the ‘874 patent. However, the Commission reversed the ALJ’s construction of the term “distinct successive incremental dental positioning appliance” in claim 1 of the ‘863 patent. In particular, the Commission found that, contrary to the ALJ’s construction, the term meant that while the claim required a series of dental appliances, the entire series did not need to be manufactured before the beginning of treatment.

With respect to the term “providing” in the ‘325 patent, Respondents argued that, contrary to ALJ Rogers’s construction, the term required that the providing be from one entity to a different entity, and that an entity could not provide something to itself. However, the Commission disagreed and affirmed the ALJ’s broad construction of “providing,” which did not distinguish between whether a given electronic transmission was to a computer owned by another individual or to a computer owned by the same individual.

The Commission also noted that ALJ Rogers had improperly applied the “broadest reasonable” claim construction standard with respect to claims 1 and 33 of the ‘325 patent, claim 2 of the ‘511 patent, and claim 1 of the ‘874 patent. The Commission noted that this was not the correct claim construction standard before the ITC, citing Phillips v. AWH Corp., 415 F.3d 1303, 1312-17 (Fed. Cir. 2005) (en banc). However, the Commission found that the ALJ’s incorrect statement of the claim construction standard was harmless error because his ultimate claim constructions were consistent with an application of the correct standard.

Infringement

With respect to infringement, the Commission adopted ALJ Rogers’s finding that the CCUS and CCPK accused products satisfy the claim limitations as construed. However, the Commission proceeded to analyze whether infringement had been demonstrated in light of the requirements of Section 337. In doing this, the Commission divided the asserted claims into four distinct groups, and analyzed each of these groups separately.

The Commission designated claims 21 and 30 of the ‘325 patent and claim 1 of the ‘880 patent as Group I claims. These claims are directed to methods of manufacturing dental appliances starting with a digital data set. According to the opinion, prior to the accused manufacturing activity related to these claims, CCPK manipulates digital models, thereby generating intermediate and final data sets in Pakistan, and then electronically transmits those data sets to CCUS in the U.S. Then, CCUS uses the generated data sets to prepare molds of the patient’s teeth which are in turn used to make the physical dental appliances in the U.S.

The Commission found that the Group I claims are directly infringed by CCUS within the U.S. However, since the direct infringement of these methods claims occurs entirely within the U.S., the direct infringement itself is not a violation of Section 337. Nevertheless, the Commission further found that CCPK contributorily infringes the Group I claims under 35 U.S.C. § 271(c). In particular, the Commission found that Respondents had knowledge of the ‘325 and ‘880 patents and that there were no substantial non-infringing uses for the digital data sets at issue. Moreover, the Commission found that the digital data sets are “a material or apparatus” within the meaning of § 271(c). Accordingly, the Commission affirmed ALJ Rogers’s finding of contributory infringement of the Group I claims.

The Commission designated claims 31 and 32 of the ‘325 patent, claims 1 and 4-8 of the ‘863 patent, claims 1, 3, 7, and 9 of the ‘666 patent, and claims 1, 3, and 5 of the ‘487 patent as Group II claims. These claims are directed to methods of generating digital data sets. According to the opinion, the digital data sets at issue are generated by CCPK in Pakistan prior to their electronic transmission to the U.S. Specifically, CCPK provides the initial data set that it obtains from CCUS to the CCPK computer platform and manipulates the data set into final and intermediate positions. These final and intermediate data sets are then transmitted to CCUS in the U.S.

The Commission found a violation of Section 337 with respect to the Group II claims. In particular, the Commission determined that the digital data sets at issue are “articles” that are “processed” within the meaning of Section 337(a)(1)(B)(ii). Since CCPK creates the digital data sets at issue by practicing the methods of the Group II claims in Pakistan, it was a violation of Section 337 to import the data sets into the U.S., sell them for importation, and sell them after importation into the U.S.

The Commission designated claims 7-9 of the ‘487 patent as Group III claims. These claims are directed to treatment plans (i.e., a series of digital data sets) on a storage medium. With respect to these claims, the Commission agreed with the ALJ that there was no direct infringement at the time of importation. Moreover, the Commission found that Align had waived its indirect infringement theory with respect to these claims because Align had raised indirect infringement for the first time in its petition for review. Accordingly, the Commission found no violation of Section 337 with respect to the Group III claims.

The Commission designated claims 1-3, 11, 13-14, 21, 30-35, and 38-39 of the ‘325 patent, claims 1 and 3 of the ‘880 patent, claim 1 of the ‘511 patent, and claims 1, 2, 38-39, 41, and 62 of the ‘874 patent as Group IV claims. These claims are directed to methods of producing dental appliances starting with images of a patient’s teeth which are exported to Pakistan, manipulated abroad, and then imported. The final digital data sets are imported and the dental appliances are constructed by CCUS in the U.S. after importation.

The Commission found that ALJ Rogers erred in finding a violation of Section 337(a)(1)(B)(ii) with respect to the Group IV claims because the imported digital data sets are not the end product of the Group IV claims, which disclose methods for fabricating dental appliances. Since the Group IV claims are directed to fabricating dental appliances, the last claim step is not performed prior to importation as required by Section 337(a)(1)(B)(ii).

The Commission also disagreed with Align’s argument that infringement under 35 U.S.C. § 271(g) can form the basis for a finding of violation of Section 337(a)(1)(B)(i). Applying canons of statutory construction, the Commission found that the existence of Section 337(a)(1)(B)(ii), which specifically defines violations of Section 337 based on the importation of articles produced by a patented process, precluded Align’s theory that infringement could be based on Section 337(a)(1)(B)(i) read in conjunction with 35 U.S.C. § 271(g). Accordingly, the Commission found no violation of Section 337 with respect to the Group IV claims.

Invalidity

According to the opinion, Respondents argued that claims 1, 37, and 38 of the ‘325 patent are invalid. The Commission found that any invalidity arguments for other claims had been waived because Respondents had failed to specifically argue invalidity for any other claims.

Respondents argued that claims 1, 37, and 38 of the ‘325 patent were anticipated by U.S. Patent No. RE35,169 to Lemchen (“Lemchen”), which allegedly incorporated U.S. Patent No. 2,467,432 to Kesling (“Kesling”) by reference. The Commission first found that Lemchen only incorporated certain figures from Kesling by reference, rather than the entirety of the Kesling patent. The Commission further found that Lemchen does not anticipate the asserted claims of the ‘325 patent because it does not teach interpolation or how to create successive appliances. Moreover, the Commission found that Lemchen does not discuss defining or moving tooth boundaries.

Respondents also argued that claims 1, 37, and 38 of the ‘325 patent were invalid as obvious over Lemchen in view of Kesling. The Commission found that the claims were not obvious over these references because, inter alia, Lemchen and Kesling do not teach the interpolation of digital data sets. The Commission further found that another obviousness argument based on U.S. Patent No. 6,471,511 in view of the knowledge of one of ordinary skill in the art had been waived because it had not been properly raised prior to the evidentiary hearing in the investigation.

Estoppel

According to the opinion, Respondents argued that Align was estopped from asserting the asserted patents against them because Align had withdrawn a prior lawsuit in Texas in which Align had asserted U.S. Patent No. 6,554,611 (the ‘611 patent), and had issued a statement which Respondents argued was a covenant not to sue. ALJ Rogers had previously found that this argument had been waived because it had not been raised in Respondents’ response to the original complaint in the investigation. Moreover, even if it had not been waived, it was without merit. The Commission affirmed these findings.

Domestic Industry

With respect to domestic industry, the Commission affirmed ALJ Rogers’s finding that Respondents had waived the right to contest domestic industry. The Commission also agreed that Align had established that it satisfied the economic prong of the domestic industry requirement. As to the technical prong, the Commission affirmed the ALJ’s finding that Align satisfied the technical prong for the ‘487, ‘863, ‘325, ‘880, ‘511, and ‘874 patents. However, the Commission reversed the ALJ’s finding that Align had not satisfied the technical prong for the ‘666 patent. In particular, the Commission determined that Align had put forth sufficient evidence to show that it practices claim 7 of the ‘666 patent.

Remedy

With respect to remedy, the Commission determined to issue cease and desist orders directed to CCUS and CCPK. ALJ Rogers had found that CCUS has a “rolling” inventory of digital data sets that make up particular phases of patients’ treatment provided by CCPK to CCUS on a daily basis, which are then used by CCUS to manufacture aligners. Since cease and desist orders are the typical remedy to deal with domestic inventories of articles in violation of Section 337, cease and desist orders were the appropriate remedy in the investigation. In any event, Align had not requested an exclusion order.

However, the Commission also considered the public interest, and determined to include an exemption in the cease and desist orders for existing ClearCorrect patients. In particular, the Commission exempted repair and replacement of existing appliances from the scope of the cease and desist orders, as well as activities relating to the treatment of patients who had already contracted for treatment with ClearCorrect as of April 10, 2014.

Conclusion

In view of the above, the Commission found a violation of Section 337 and issued cease and desist orders directed to CCUS and CCPK.

Dissenting Opinion by Commissioner David S. Johanson

Commissioner David S. Johanson filed a dissenting opinion disputing the Commission majority’s determination that electronically-transmitted digital data sets can be considered “articles” within the meaning of Section 337. Commissioner Johanson argued that the majority’s interpretation did not properly address Congress’s delegation of authority to the Commission, ignored Section 337’s remedial scheme, and contradicted the federal courts’ interpretation of “articles.” Accordingly, Commissioner Johanson would have found no violation of Section 337 due to the lack of importation of true “articles” within the meaning of Section 337.