April 3 (Bloomberg) -- Align Technology Inc., maker of the Invisalign teeth-straightening system, won its U.S. patent bid to curb the growth of its biggest competitor, ClearCorrect Operating LLC.
Closely held ClearCorrect violated Align’s patent rights, the U.S. International Trade Commission in Washington said in a notice on its website today. The commission said ClearCorrect can’t transmit into the U.S. the digital data needed to make the dental aligners, though it can continue to serve existing patients.
Align rose 5.1 percent to $56.30 at 5:09 p.m. New York time after closing at $53.59.
The Invisalign system accounted for about 93 percent of Align’s $660 million in revenue last year, the San Jose, California-based company said in its annual report. Invisalign uses clear plastic molds to straighten moderately uneven teeth for patients. The order against ClearCorrect can be overturned by President Barack Obama on public-policy grounds, and the underlying case can be appealed.
The dispute is over the software and techniques used to create the series of aligners, which are replaced every two weeks and move the teeth in increments without causing pain or gum damage. A 3-D printer actually makes the aligners after the computer-generated models are designed.
ClearCorrect’s unit in Pakistan creates computer files of which patient teeth need to be moved and how. Those files are then sent to its main offices in Houston to make the aligners.
ITC Judge Robert Rogers in May found a violation; the commission modified his findings and said five patents were infringed and affirmed his determination that the ClearCorrect file transmissions fall under the agency’s authority. Commissioner David Johanson dissented.
A final decision in the case had been postponed several times as the commission gathered public comments on the issue of whether electronic data qualifies as something that is imported and may therefore be banned from the U.S. How far the commission went in its decision won’t be known until both sides get a chance to redact confidential information.
Lawyers for the two companies couldn’t immediately be reached for comment.
The Motion Picture Association of America and Association of American Publishers supported Align’s position, saying that the word “articles” under the statute must include electronic transmissions, since bootleggers have moved away from CDs and DVDs in making illegal copies of movies, music and books.
Refusing to block electronic transmissions that originate overseas “would deprive many important U.S. industries of one of the most powerful remedies against international unfair acts available under U.S. law,” the movie industry trade group said in a Feb. 3 filing.
Google Inc., owner of the most widely used search engine, said the law, which dates back to the Great Depression, didn’t include electronic transmissions even when revised in the 1980s. There are enough enforcement obstacles with import bans, and adding orders related to electronic transmissions would only exacerbate the issues, Google said in a Feb. 3 filing.
“Because electronic transmissions do not pass through ports of entry, Customs is unable to seize them,” Google’s filing said. “Accordingly, there is no independent third party to oversee enforcement of an exclusion order.”
ClearCorrect, in a filing with the ITC, said there was nothing that could be excluded since the only issue relates to information sent to a machine or 3-D printer to make a model of the person’s teeth. Plastic sheets are placed over dental molds to make the mouthpieces.
Align said that ClearCorrect set up the business in Pakistan as part of an “attempted strategy to skirt Align’s patents.” The enforcement of the patents “will allow Align to increase capacity, hire more employees and increase its already growing presence in the U.S.,” the California company said.
ClearCorrect said it was founded by a dentist who couldn’t get the mouthpieces from Align. ClearConnect accused its competitor of running a monopoly that puts unreasonable demands on dentists who want to use its products, such as requiring they buy a minimum amount of the company’s aligners.
“Without ClearCorrect as a check on Align’s power, Align will be free to exclude dentists and orthodontists from access to the appliance if those doctors do not provide Align enough profit,” ClearCorrect said in a June 13 ITC filing.
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).
To contact the editors responsible for this story: Brad Skillman at firstname.lastname@example.org Romaine Bostick, Bernard Kohn