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U.S. ITC Issues Groundbreaking Stay on Cease and Desist

Posted by Brandon Selinsky on Dec 22, 2014 11:00:26 AM
Brandon Selinsky

Why did the USITC issue a stay on a cease and desist order?

On June 11, 2014, the United States International Trade Commission (“Commission”) issued a stay of a cease and desist order (“CDO”) for the first time in its history. The stay was issued in 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.

Background

The Commission instituted the investigation on April 5, 2012 based on Align Technology, Inc’s (“Align”) complaint that ClearCorrect Pakistan, Ltd. and ClearCorrect Operating, LLC (collectively, “ClearCorrect”) infringed upon seven of Align’s patents in violation of Section 337 of the Tariff Act, which prohibits the importation of articles into the United States that infringe on U.S. patents.

On May 6, 2013, the presiding administrative law judge (“ALJ”), Robert K. Rogers, Jr., issued his final initial determination.  He found that ClearCorrect violated Section 337 with respect to six of Align’s seven patents, finding no violation as to the seventh. The ALJ recommended the Commission issue cease and desist orders directed against ClearCorrect. On April 3, 2014, the Commission affirmed-in-part, modified-in-part, and reversed-in-part the ALJ’s initial determination.

Flash Forward a Year

In May of 2014, ClearCorrect moved to stay the CDO pending appeal to the Federal Circuit pursuant to the Administrative Procedure Act. Under the Act, the Commission will only issue a stay of a CDO where the party seeking the stay 1) makes a strong showing that he is likely to succeed on the merits, 2) shows that he would suffer irreparable harm without a stay, 3) shows harm to other interested parties, and 4) shows a public interest.

The Commission takes a flexible approach to applying the test and thus, even if the movant cannot demonstrate a likelihood of success, the Commission may still issue a stay where the movant presents an “admittedly difficult question” and demonstrates that the harm factors fall in its favor.

The Decision

Ultimately, the Commission issued a stay of the CDO because it determined that ClearCorrect presented an “admittedly difficult question” and the balance of hardships tilted in favor of Clear Correct.

The Commission agreed with ClearCorrect that the meaning of “articles” under Section 337 was a difficult question as evidenced by the prior extensive legal analysis of the issue.  The Commission next balanced the harms and found that ClearCorrect’s potentially “immediate and irreparable ruin,” even if ClearCorrect ultimately won on appeal, outweighed Align’s “price erosion” claims. In particular, the Commission noted ClearCorrect’s claim that, absent a stay, it would almost certainly immediately discontinue operations or drastically reduce its workforce of 115 employees.

The Commission stressed that the issuance of its first-ever stay was made under exceptional circumstances and that it should not be viewed as a sharp departure from its prior determinations denying stays.

Stay Informed

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Topics: International Law

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