Align v. ITC: Consent Orders Need Not Specify Digital Data

On July 18, 2014, the Federal Circuit vacated an opinion of the International Trade Commission that would have required cease-and-desist and consent orders aimed at barring importation of digital data to explicitly reference that data.  The Federal Circuit found that the Commission lacked authority under its own rules to review the ALJ’s underlying order, which was not an initial determination.  The Federal Circuit also rejected the Commission’s conclusion that there was an historic practice sufficient to put the public on notice that cease-and-desist and consent orders must explicitly reference the digital data they intend to exclude.

This appeal arose out of an enforcement proceeding concerning a consent order in an investigation regarding dental aligners.  Certain Incremental Dental Positioning Adjustment Appliances and Methods of Producing Same, Inv. No. 337-TA-562 (Enforcement).  In the ‘562 Investigation, instituted in February 2006, Align Technology, Inc. accused OrthoClear, Inc., OrthoClear Holdings, Inc., and OrthoClear Pakistan Pvt., Ltd. (collectively, “OrthoClear”) of infringing patents directed to orthodontic treatments that used three-dimensional digital models of the patient’s teeth.  Align and OrthoClear settled, and the parties agreed to terminate the investigation based on a consent order.  In October 2006, ALJ Robert Barton Jr. entered the consent order, which the Commission elected not to review.  See Inv. No. 337-TA-562, Order 31 (Oct. 27, 2006).

In 2012, the Commission instituted an enforcement proceeding based on Align’s complaint against the successors to the various OrthoClear entities (“Enforcement Respondents”).  Align alleged that the Enforcement Respondents had violated the consent order by importing into the United States, offering for sale, or selling digital models used to manufacture dental aligners.  See 77 Fed. Reg. 25747 (May 1, 2012).  The Enforcement Respondents moved to terminate the proceeding, arguing that the accused conduct did not fall within the scope of the consent order.  ALJ Robert Rogers issued Order No. 57 denying the motion, finding that the accused digital models were within the scope of the consent order.  See Inv. No. 337-TA-562, Order 57 (Nov. 28, 2012).

Treating Order No. 57 as an initial determination, the Commission reversed the order and terminated the enforcement proceeding.  See 78 Fed. Reg. 2282 (January 10, 2013); and Inv. No. 337-TA-562, Comm. Op. (Feb. 19, 2013).  The Commission held that the accused digital models were not covered by the consent order because the order did not contain an express provision prohibiting the electronic transmission of data.  See Inv. No. 337-TA-562, Comm. Op. at 10-11 (Feb. 19, 2013).  Align appealed.  The Federal Circuit vacated the Commission’s decision and remanded.

The Federal Circuit held that the Commission’s own rules prohibited the interlocutory review of Order No. 57.  The Court explained that the ALJ’s order denying the Enforcement Respondents’ motion to terminate was not an initial determination and, therefore, was not subject to Commission review under 19 C.F.R. §210.24.  The Court rejected the Commission’s argument that it had discretion to construe the order as an initial determination, observing that the Commission has historically declined to treat similar orders as initial determinations.

The Federal Circuit also addressed the question of whether cease-and-desist and consent orders aimed at barring importation of digital data must explicitly reference that digital data.  Citing two cease-and-desist orders, the Commission maintained that it has a historic practice of requiring cease-and-desist orders to explicitly reference digital data if those orders are intended to exclude importation of such data.  The Commission reasoned that this historic practice logically extended to consent orders as well.  The Federal Circuit disagreed with the Commission, finding that (1) the evidence did not establish there was a historic practice of explicitly referencing digital data in cease-and-desist orders, and (2) the cases cited by the Commission were not sufficient to put the public on notice of a requirement to reference digital data.