What happened this week at the ITC?

The rumor mill has been spinning overtime, so let's make a few things clear:

  • Align has not won any of their suits against us.
  • We are still making aligners.
  • Nothing has changed.

First, a quick recap. As you probably know, our good buddies at Align have a long history of suing their competitors. This doesn't usually work out that well for them—Align has had patent claims invalidated and they've paid out tens of millions of dollars in settlements.

But old habits die hard, and they've stuck to this strategy against us. In March 2011, Align sued us in California and Texas, and in March 2012, they filed two complaints with the ITC. These cases take a long time to play out: nothing significant has happened in the California case, and the Texas case is on hold. The first ITC complaint was decided in our favor this January.

This week, Administrative Law Judge (ALJ) Rogers issued his initial determination for the second ITC complaint. His opinion was that ClearCorrect did not violate Align's product claims, but Align's method claims were violated. Naturally, we disagree with that opinion. Regardless, here's what you need to know:

  1. This is not the final ruling on the case. The ALJ's initial determination will be reviewed by the ITC before they make their final decision, scheduled for September 2013. Then that decision is likely to be appealed in the U.S. Court of Appeals for the Federal Circuit. The ultimate conclusion is probably still years away.
  2. In the previous complaint, the ITC reversed this same judge's initial determination and ruled in our favor.
  3. We don't have to do anything differently right now. There's no effect on our day-to-day operations until the ITC makes their final decision.
  4. This initial determination has been incorrectly reported as "a ruling to block U.S. imports of a competing product by ClearCorrect." We make our aligners right here in Houston, Texas, so it's impossible for the ITC to block us from "importing" them. The only "imports" at stake in this case are digital files transmitted by diagnostic technicians in Pakistan. (We've argued that data transmissions shouldn't even be considered imports.)
  5. Align's legal VP recently claimed to investors that if the ITC ruling went their way, "ClearCorrect will be excluded from the domestic market." That's simply not true. Even if the ITC rules completely in Align's favor, we can continue manufacturing and selling aligners in the U.S. The only thing the ruling will determine is how and where we can stage the treatment plans.

In short, don't panic. We're sticking around. We've just invested in scaling up our production capacity by 30%, and we've got a really cool announcement to share with you tomorrow. Until next time…

Update: Align put out a second press release shortly after this was posted, but nothing has changed. The "cease and desist orders" they refer to are just the ALJ's recommendations from his initial determination. As explained above, the ITC is not expected to make a decision until September. If the ITC does issue cease & desist orders, they will apply only to imported data—our ability to design, manufacture, and sell aligners in the U.S. is not at risk.

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