Dental devices maker Align Technology (NSDQ:ALGN) touted a Federal Circuit Court ruling issued this month, calling it a "total win for Align."
The ruling overturns a 2013 decision made by the International Trade Commission and allows Align to move forward with its lawsuit accusing ClearCorrect and its partners of infringing on technologies used to create the custom-fitted Invisalign dental alignment devices.
The lawsuit goes nearly a decade to a complaint that Align filed against the company’s founder and former CEO, Muhammad Chisti, who had moved on to found OrthoClear, taking with him a handful of former Align employees, according to a court document.
Chisti allegedly used Align’s patents and trade secrets to sell it’s own dental aligners, spurring an Align complaint and an ITC investigation. The companies negotiated a settlement in 2006 that saw OrthoClear turn over all its entire intellectual property portfolio to Align in exchange for an end to the investigation.
Align filed a new complaint in 2012 after suspecting that OrthoClear and partners were violating the terms of their consent order. By that time OrthoClear had turned into ClearCorrect, a company that was formed by one of OrthoClear’s customers shortly after OrthoClear went out of business. Align claimed that ClearCorrect was using a Pakistan-based office to illegally create digital data and molds for guiding dental alignment and a U.S.-based office to manufacture and sells the aligners in the U.S.
The ITC issued some rulings in Align’s favor, but part of the compalint got hung up on a technicality when ClearCorrect claimed that the digital data sets used to manufacture dental aligners were transmitted electronically, a medium not expressly prohibited in the signed consent order. The administrative law judge assigned to the case ruled that the digital datasets were indeed part of the consent order, throwing out ClearCorrect’s attempt to dismiss the lawsuit and giving Align a clear path to pursue its litigation.
The ITC reviewed the case and reversed the judge’s ruling, finding that the digital datasets were not subject to the consent order, saying that "the subject consent order did not contain an express provision prohibiting the electronic transmission of data."
In the latest decision, Federal Circuit Chief Judge Sharon Prost and Judge Raymond Chen ruled that the ITC had violated its own rules by reviewing the case and overturning the administrative judge’s decision. The administrative judge had been given authority to issue a formal order, rather than initial determination that could be subject to ITC review, and the Federal Circuit was unsympathetic to the ITC’s claim that that authority had been granted on accident.
As a final comment, the Federal Judges also noted that the ITC hadn’t in the past taken a hard stance on explicitly defined rules for digital data transmissions.
"The only two cease-and-desist orders that the Commission can point to included simply a brief parenthetical notation prohibiting electronic transmissions, without any representation that the notation was required or was somehow necessary for consent orders as well," the judges wrote. "While the two orders do refer to electronic transfers or imports, neither indicates that it was critical to do so."