Align Wins Dental Patent Ruling Against ClearCorrect

Align Technology Inc., maker of the Invisalign system to straighten teeth, won a ruling in its efforts to block U.S. imports of a competing product made by ClearCorrect Operating LLC. Shares rose the most since January.

ClearCorrect violated Align’s patent rights, U.S. International Trade Commission Judge Robert Rogers in Washington said in a notice posted today on the agency’s website. The judge’s determination is subject to review by the six-member commission, which has the power to block imports of products that infringe U.S. patents. A final decision in the case is scheduled to be announced in September.

The Invisalign system accounted for about 92 percent of Align’s $560 million in revenue last year, the San Jose, California-based company said in its annual report. Invisalign uses a series of clear plastic molds to treat mild or moderate cases of uneven teeth. Align said more than a third of the people who seek teeth-straightening are eligible for the system.

“Most people we have talked to feel that Align has the IP and portfolio to win the case,” Jose Haresco, an analyst with JMP Securities in San Francisco, said in an interview before the decision was announced. He has a “market outperform” rating on the company’s shares.

Align rose $1.82, or 5.6 percent, to $34.42 in New York trading of 2.9 million, more than three times the three-month daily average. The stock is up 24 percent since the beginning of the year.

Customized Straighteners

Rogers found Houston-based ClearCorrect infringed six patents issued from 2001 to 2011 that cover the devices and treatment plan. In its March 2012 complaint, Align said ClearCorrect was the only U.S. company other than itself that made the customized straighteners.

The decision is “an important step in the vindication of our patent rights against this persistent foreign infringement,” Align General Counsel Roger George said in a statement. “We remain committed to protecting our intellectual property rights. We support fair competition, but competitors should be required to compete on the basis of their own original technology.”

ClearCorrect argued Align’s patents are invalid. In January, the company said Align is claiming legal protection for “what orthodontists have been doing for decades.” ClearCorrect told Rogers that most of its work is done in the U.S., with only the staging of the treatment through different aligners conducted at the company’s offices in Pakistan, according to a transcript of a February hearing.

Officials with ClearCorrect couldn’t immediately be reached for comment.

Consent Order

Align had won a consent order in 2006 with another competitor, OrthoClear, which agreed to stop selling its product. Last year, Align said ex-employees had reformed under the name ClearCorrect and violated that agreement. The ITC in January found no violation of the 2006 order. Align has asked the commission to reconsider that decision.

Even if it were to ultimately prevail, ClearCorrect doesn’t have Align’s size or sales force, Jeremy Feffer, an analyst with Cantor Fitzgerald who has a “hold” rating on Align, said in an interview before the decision. Haresco estimated that ClearCorrect could capture as much as 15 percent of the market.

The case is In the Matter of 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, 337-833, U.S. International Trade Commission (Washington).

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