Categories: ITC
      Date: Sep 18, 2014
     Title: Align Tech. v. ITC: Commission Review of ALJ Initial Determination
Category: ITC   
By: Roy Rabindranath, Contributor 
TItleAlign Tech., Inc. v. International Trade Commission (Fed. Circ. July 18, 2014).
IssueThe International Trade Commission's regulations authorize the Commission to review a decision of an administrative law judge (ALJ) when that decision is designated as an "initial determination." [...] Here, the ALJ denied a motion via an order. This case requires us to consider whether the Commission's review of that order was procedurally sound.
Align Technology, at *2.
HoldingBecause the Commission circumvented its own rules without waiving, suspending, or amending them, we find that its review of Order No. 57 was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law."
Id. at *10. 

Procedural History
Believing Orthoclear to be infringing its patents and using its trade secrets, Align filed a complaint with the [Commission] in 2006 [....] Align's complaint alleged that OrthoClear violated 19 U.S.C. 1337 by importing, selling for importation, or selling within the United States after importation aligners that infringe on Align's asserted patents [....] In August 2006, OrthoClear negotiated a global settlement with Align that required Orthoclear to assign its entire intellectual property portfolio to Align, to agree to the entry of [a] Consent Order, and to file a joint motion to terminate the investigation [....] The Consent Order, provided, in relevant part:
The incremental dental positioning adjustment appliances manufactured by or for OrthoClear referenced in the complaint and any other articles manufactured in violation of the patents or trade secrets described therein (the "Articles") are hereby prohibited from importation into the United States until the expiration of the last to expire of the following patents...U.S. Patent 6,722,880 ("the '880 patent) [and] U.S. Patent No. 6,471,511 ("the '511 patent")..., except under license of the patent owner or as provided by law.
Align Technology, at *4-5.
After suspecting that OrthoClear and others were violating the Conesent Order, Align filed a new complaint, this time for an enforcement proceeding under 19 C.F.R. 210.75 [....] The Commission then instituted an investigation against six respondents (hereinafter, Intervenors) [including ClearCorrect Pakistan and ClearCorrect USA ....] ClearCorrect USA is the successor of ClearCorrect Systems, LLC - a company formed by one of OrthoClear's customers shortly after OrthoClear ceased its operations and transferred its intellectual property and customers' patients to Align. The new complaint alleged that ClearCorrect USA works with ClearCorrect Pakistan to provide infringing dental aligners: specifically, that Clear Correct Pakistan creates in Pakistan the digital data sets used to create the molds on which the aligners are formed, while ClearCorrect USA manufacturers and sells aligners in the United States. The complaint also alleged that ClearCorrect Pakistan imports ... digital data sets by electronic transmission to ClearCorrect USA.
Id. at *5-7 (text added, internal citations omitted).
According to Align, Intervenors had violated the Consent Order by importing into the United States, offering for sale, or selling for importation digital data sets used to manufacture dental aligners in the United States, and that those acts [...] induced or contributed to the infringement of certain claims of Align's patents. The Commission instituted the investigation and, in its Notice of Institution (Notice) [....] stated that the ALJ's decision "should be issued in the form of an initial determination ("ID") under Commission Rule 210.42(c), 19 C.F.R. 210.42(c)" [....] In response to the ALJ's order, Intervenors filed a motion to terminate the enforcement proceeding, arguing that the accused conduct did not fall within the scope of the Consent Order [....] Rather than issue an "initial determination," the ALJ issued Order No. 57, finding that "[t]he accused digital datasets identified in the enforcement complaint are...within the scope of the term 'articles manufactured' as that term appears in the Consent Order. The ALJ therefore denied Intervenors' motion to terminate and scheduled the trial to begin [....]
Id. at *6-7.
Intervenors sought the Commission's review of Order No. 57 [....] Align argued that the Commission should [...] deny review because Order No. 57 was a non-final order, not subject to review by the Commission unless Intervenors moved for interlocutory appeal, which they did not. Specifically, Align identified two reasons why Order No. 57 was non-reviewable: (1) it did not have the elements of an initial determination required by 19 C.F.R. 210.42(d); and (2) it did not terminate the investigation but merely denied Intervenors' motion for termination, which was an interlecutory decision under 19 C.F.R. 210.42(c). The Commission ultimately concluded that Order No. 57 constituted an "initial determination," and thus was subject to its review. Noting that its initial Notice had indicated that the ALJ's resolution of this threshold issue "should be issued in the form of an initial determination," the Commission treated Order. No. 57 as such. In January 2013, the Commission reversed Order No. 57 and terminated the enforcement proceeding. It concluded that the accused digital data sets were not covered by the scope of the Consent Order "because the subject consent order did not contain an express provision prohibiting the electronic transmission of data."
Id. at *8 (text added, internal citations omitted). 
Legal Reasoning (Prost, Chen)
FactsAlign develops, manufacturers, and markets clear aligners to treat malocclusion - i.e., teeth misalignment. Conventionally, dental professionals treated misalignment with metal archwires and brackets, commonly known as braces. Braces, however, have a number of disadvantages, including tooth discoloration, oral discomfort, and, for some, embarrassment. To overcome these problems, Align conceived of and developed its clear aligners, marketed as the Invisalign System. [...] To design these aligners, dental professionals generate and obtain data to determine the positioning of a patient's teeth and create complex three-dimensional digital models. [...] In 2005, Align's founder and former Chief Executive Officer, Muhammad Chisti, founded OrthoClear and used former Align employees in Pakistan and the United States to manufacture and sell dental aligners.
Align Technologies, at *2-3.
Standard of ReviewWe must set aside any findings or conclusions of the Commission that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."
Id. at *10.
At the time of the orders in question, the Commission's Rules of Practice and Procedure [...] explicitly distinguished between rulings by the ALJ that must be issued as "initial determinations" and those that must be issued as "orders." The rules stated that the ALJ's rulings on motions "may not be appealed to the Commission prior to the administrative law judge's issuance of an initial determination," unless the requirements for interlocutory review are satisfied [....] Whether an ALJ's ruling issues as an initial determination or an order is important because it determines whether the Commission may review the ALJ's decision. The ITC's regulatory regime contemplates that an ALJ's grant of certain kinds of relief, such as to terminate a proceeding or permit a party to intervene, justifies immediate Commission review. But, at the same time, the regulations treat the denials of such requests for relief as not warranting immediate review [....] Therefore, the rules clearly prohibited the Commission from reviewing orders like this one. On appeal, the Commission contends that it has discretion to construe the order as an initial determination, but this is not so: the rules expressly state that denials of motions to terminate must be issued as non-reviewable orders. The Commission's regulations explicitly define which ALJ decisions should be considered orders, and decisions denying motions to terminate fall in the latter category [....] Commission precedent also reflects that the Commission has historically declined to treat orders denying motions for summary determinations as initial determinations [....] Despite the clear language of its rules and its precedent enforcing those rules, the Commission argues that the Notice superceded its rules by redefining initial determinations for purposes of this proceeding to include a denial of a motion to terminate the proceeding. The Commission may supercede its rules only by waiver, suspension, or amendment of the regulation. Waiver or suspension can be invoked only "when in the judgment of the Commission there is good and sufficient reason therefor." The Commission maintains that identifying and resolving threshold issues is "good and sufficient reason," to waiving Rule 210.42(c). But the Commission did not articulate below any reason, let alone "good and sufficient reason" to waive the regulation. In fact, there is no evidence in the record that the Commission intended to invoke its waiver.
Id. at *10-14.
The Commission exceeded its authority by reviewing the order below. The ALJ issued an order (not an initial determination) denying (not granting) Intervenors' motion to terminate the investigation. This order was not subject to Commission review under Rule 210.04.
Align Technology, at *12. 
 Image Attribution Statement:  Fig. 1 of U.S. Patent 6,722,880.