Further to our June 4, 2014 post, on June 11, 2014, the International Trade Commission (the “Commission”) issued the public version of its opinion granting a motion to stay the cease and desist orders pending Federal Circuit appeal in 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 (Inv. No. 337-TA-833).

By way of background, this investigation is based on a complaint filed by Align Technology, Inc. (“Align”) alleging violations of Section 337 for the importation into the United States, sale for importation, and sale within the United States after importation of certain digital models, digital data, and treatment plans for use in making incremental dental appliances that infringe one or more claims of U.S. Patent Nos. 6,217,325; 6,722,880; 8,070,487; 6,471,511; 6,626,666; 6,705,863; and 7,134,874.  See our March 2, 2012 post for more details on Align’s complaint.  The notice of investigation named respondents as ClearCorrect Operating, LLC and ClearCorrect Pakistan (Private), Ltd (collectively, “ClearCorrect”).  See our April 6, 2012 post for more information on the Notice of Investigation.  On May 6, 2013, former ALJ Robert K. Rogers, Jr. issued an Initial Determination (“ID”) in the investigation.  In the ID, ALJ Rogers recommended the issuance of cease and desist orders directed to ClearCorrect.  See our June 24, 2013 post for more details on the ID.  On April 3, 2014, the Commission issued a notice of its determination to affirm-in-part, modify-in-part, and reverse-in-part the final ID and to find a violation of Section 337.  The Commission also terminated the investigation.

On May 2, 2014, ClearCorrect filed a motion to stay the cease and desist orders pending appeal to the Federal Circuit pursuant to the Commission’s authority under section 10(d) of the Administrative Procedure Act, 5 U.S.C. § 705.  ClearCorrect argued that determining whether electronic transmissions are “articles” under Section 337 is a difficult question, that the orders would cause irreparable harm to ClearCorrect, and that the potential harm to Align is insignificant because Align and ClearCorrect do not share the same customers.  ClearCorrect also argued that the public interest favored a stay because doctors do not have an adequate substitute for ClearCorrect’s products and will be forced to buy expensive new equipment.   

Align opposed the motion, arguing that ClearCorrect could not demonstrate that the issue presents an admittedly difficult question because the Commission’s construction of Section 337 was correct and entitled to deference on appeal.  Additionally, Align asserted that ClearCorrect could not demonstrate that ClearCorrect would face irreparable injury absent a stay and that ClearCorrect only alleges harm to ClearCorrect Pakistan (Private), Ltd, which is not related to ClearCorrect’s U.S. operations.  Align also asserted that it would suffer harm if a stay were granted.

In reaching its stay determination, the Commission agreed with Align that the difficulty of the question presented counsels in favor of judicial deference to the Commission’s interpretation of Section 337, but also stated that the existence of deference does not, in and of itself, obviate the fact that the question the Commission ruled upon was a difficult question.  As the Commission found that the investigation does present a difficult legal question, the Commission next analyzed the harm factors.  On balance, the Commission found that the balance of hardships tips in favor of ClearCorrect.  The Court noted that Align has a pending district court action against ClearCorrect that had been stayed pursuant to 28 U.S.C. § 1659(a) and that Align could attempt to recover damages for past infringement, not only during pendency of the stay, but also for infringement during the pendency of Commission proceedings.  The Court also rejected Align’s argument that monetary recovery is impossible due to price erosion.  Additionally, the Commission found that the public interest arguments raised in the parties’ briefing did not weigh heavily in either direction.  Accordingly, as the Commission recognized an admittedly difficult question and weighed the harms as favoring a stay, the Commission granted ClearCorrect’s motion.  The Commission additionally noted that this determination should not be viewed as a sharp departure from prior Commission determinations denying stays, stating that the circumstances of most investigations do not justify a delay in enforcing statutory remedies against adjudged infringers.