Align Tech Offers Update on FTC Enforcement Complaint Filed Against ClearCorrect
Align Technology, Inc. (NASDAQ: ALGN) today provided an update on its Enforcement Complaint, one of two complaints filed against ClearCorrect Operating LLC, based in Houston, TX, and ClearCorrect Pakistan (Private) Ltd. (ClearCorrect Pakistan), based in Lahore, Pakistan with the United States International Trade Commission (ITC) in March 2012. The Enforcement Complaint sought enforcement against ClearCorrect of a prior Consent Order entered by the ITC on October 27, 2006 in the OrthoClear ITC action. The Consent Order prevented OrthoClear from importing its dental aligner products into the U.S., either directly or through third parties, such as ClearCorrect Operating, ClearCorrect Pakistan, and certain former OrthoClear employees who now own, manage, and are employed by ClearCorrect Pakistan in Lahore, Pakistan. On January 4, 2013, the Commission reversed an earlier ruling by the presiding Administrative Law Judge and terminated the Enforcement Proceeding instituted by the Commission on April 25, 2012, which sought enforcement of the 2006 OrthoClear Consent Order against ClearCorrect Operating, ClearCorrect Pakistan, and four officers of ClearCorrect Pakistan. In the Notice issued January 4, the Commission determined that the 2006 OrthoClear Consent Order could not be enforced against ClearCorrect and its former OrthoClear employees. The Commission's decision is limited to the contractual issue of whether the Consent Order could be applied against ClearCorrect's current method of operation. While the Consent Order expressly prohibits the importation of physical dental aligner products and generally prohibits the importation of any other products that infringe Align's patents, the Commission nevertheless found it dispositive that the Consent Order does not contain a specific, express prohibition of the transmission of digital treatment data, such as the digital data imported from Pakistan by ClearCorrect to manufacture its aligners. In an effort to avoid the prohibitions of the Consent Order, ClearCorrect structured its relationship with the former OrthoClear operation in Pakistan to rely on the transmission of digital treatment data, with the aligners themselves being manufactured in Houston, Texas. In the presiding Administrative Law Judge's Order issued November 28, 2012, Administrative Law Judge Robert K. Rogers found that digital transmission of data was within the general provisions of the Consent Order prohibitions and thus covered by the terms of the 2006 Consent Order. The Office of Unfair Import Investigation also supported Align's position on the issue. The Commission's decision regarding the Enforcement Proceeding does not impact the Patent Infringement Proceeding instituted by the Commission on April 1, 2012 against ClearCorrect Operating and ClearCorrect Pakistan.
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