The entire future of the internet may now depend on some plastic retainers. Specifically, two competing versions of those clear plastic alignment systems adults sometimes get instead of braces. And if that sounds weird — which to be fair, it really is — well, welcome to the strange, utterly pervasive world of IP law in a digital century.

The Wall Street Journal explains where this particular strange test case for regulation came from. It all stems from a question of international trade and digital transmissions originating overseas.

Here’s the background: there are two companies in a trade dispute over orthodontic devices. The products are InvisAlign, which you’ve probably heard of, and ClearCorrect, a competitor that you may not have.

Align Technology, the company behind InvisAlign, holds some patents on the technology. The International Trade Commission found that ClearCorrect was infringing on some of Align’s patents when they made their own teeth-alignment devices, and ordered ClearCorrect to stop. That’s pretty straightforward; it’s what the ITC does. One of the agency’s major purposes is to stop IP-infringing stuff — including counterfeit and knockoff goods, and items that infringe on patents or trademarks — from coming into the U.S.

Except ClearCorrect, a Texas-based company, wasn’t importing the actual plastic devices from overseas. They were importing digital information from overseas. Their process starts by scanning a patient’s teeth, here in the U.S. Then that digital file is sent to technicians in Pakistan who create more digital models, for the steps between crooked teeth and straight ones. Those digital models — just files — then get zapped back across to Texas, where ClearCorrect feeds the models into a 3D printer. Voila: retainers.

To the ITC, however, importing the digital infringing articles worked out to the same end as importing the physical infringing articles, and so in 2012 (PDF) they told ClearCorrect to stop.

The action by the ITC marked the first time the agency had intervened to take action against virtual, rather than physical, infringing material. As you might guess, that decision has resulted in a whole lot of pushback. ClearCorrect appealed the decision, and both sides are being joined by a wide array of internet, tech, consumer, and privacy groups.

The key issue everyone else is worked up about has nothing to do with dentistry, orthodontics, or even patents but everything to do with copyright, software, networks, piracy, and precedent. In short: if a trade regulatory agency can go after companies that send IP-infringing files zipping around the world, that opens up a whole new Pandora’s box of potential woe.

To trade groups like the MPAA and RIAA, the ITC’s move is a great idea. It gives them a new tool in the regulatory toolbox that would let them shut down pirated music, movies, and other media that come in from sites hosted outside of the United States. A senior attorney for the MPAA told the WSJ that the ITC’s approach “matches up well with some of our current problems,” and added that if the commission “is limited to just physical goods, the ITC will end up in the historical dustbin because everything these days is moving toward electronic importation.”

Groups that represent internet businesses and individuals, however, are much more concerned. The Internet Association, which represents basically every top-tier internet business you’ve ever heard of, filed a brief in the case (PDF) arguing that the ITC’s stance was dangerous overreach. At the time the brief was filed, Abigail Slater, the organization’s VP of Legal and Regulatory Policy, said, “This landmark patent law case has enormous implications for cloud computing, the free flow of information between countries and the future of a free and open Internet. … We believe the Commission’s position is unlawful, unenforceable, and harmful to global Internet commerce.”

Advocacy groups Public Knowledge and the EFF also filed a brief arguing that treating digital files as imported articles could have further harms. “The decision to treat digital data as an article of importation raises the question of whether all telecommunications, including phone calls, audio streams and television broadcasts, are also articles of importation,” Charles Duan, Director of the Patent Reform Project at Public Knowledge, said of their filing.

He added, “Additionally, we must now ask if internet service providers, telecommunication companies, or even individual internet users can be summoned before the ITC. Unless the Federal Circuit rejects the ITC’s overboard and incorrect decision, these questions may plague the courts and the public for years to come.”

It’s not hard to see why the ITC made the initial judgement it did about ClearCorrect. The line between digital and physical content grows more blurred every day, and it’s now possible for anyone with a 3D printer, anywhere in the world, to print out basically anything from a file generated anywhere else in the world. Patent-infringing and counterfeit goods are only going to get easier to make and distribute as more and more items have their full plans scanned into a computer somewhere, and it’s the ITC’s job to try to stop that.

But it’s also easy to see how dangerous a precedent may be set if the appeals court agrees. The movie and recording industries are not known for restraint when it comes to throwing every kitchen sink they can find at anyone they even suspect of getting a $5 movie or a 3-minute song for free — regardless of how much other damage it could cause to the entire rest of the internet.

Either way, it will be months yet before we know how this will play out: The U.S. Court of Appeals for the Federal Circuit will hear arguments in the case in Washington, D.C. on August 11.

Imports of Digital Goods Face Test [Wall Street Journal]

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