Simon and Simon, PC v. Align Technology, Inc.

Background

The plaintiffs asserted an antitrust refusal-to-deal claim based on Align’s termination of an interoperability agreement with 3Shape. The agreement concerned the use of 3Shape’s scanners with Align’s products. Align terminated the agreement shortly after filing intellectual-property litigation against 3Shape, alleging that 3Shape’s scanner technology infringed Align’s patents. Align publicly stated that the termination was related to the patent litigation.

The plaintiffs did not contend that Align’s patent claims were a sham, lacked merit, or were so low in value that pursuing them was irrational. They argued instead that Align’s anticipated defenses—such as waiver and equitable estoppel—were weak and that terminating the agreement was unnecessary. They also presented evidence that Align wanted to harm an emerging competitor, increase its share of the scanner market, and preserve its position in the clear-aligner market.

Court’s reasoning

A refusal-to-deal claim generally cannot succeed when the refusal was based in part on a legitimate, non-pretextual business reason, even if the defendant also wanted to harm a competitor or knew the conduct would harm competitors. The court treated protecting and enforcing patent rights as a presumptively valid business justification.

The court concluded that no reasonable jury could reject the existence of a legitimate business reason on this record. Align’s patent litigation concerned the same scanner technology covered by the interoperability agreement. The agreement also created a potential basis for defenses by 3Shape in the patent case, and 3Shape ultimately asserted those defenses. The court stated that these facts strongly supported Align’s concern about the agreement’s effect on the patent litigation.

The court acknowledged evidence supporting the plaintiffs’ theory that Align also intended to harm a competitor, and noted that the case was close. But the court found contemporaneous evidence that Align had long been concerned about possible patent infringement and about the agreement’s effect on the litigation. Given the presumptive validity of actions taken to protect or assert intellectual-property rights, the court held that a reasonable jury could not find Align’s stated concerns to be a pretext or the termination illegitimate.

Additional arguments

The court declined to grant judgment based on Align’s argument that the plaintiffs had not shown Align was willing to offer similar interoperability agreements to other scanner companies. The court viewed that circumstance as one factor in the analysis, not a requirement in every refusal-to-deal case.

The court also rejected Align’s proposed interpretation that a defendant should prevail whenever a court can identify any conceivable justification for the refusal, regardless of the record. The court stated that the Ninth Circuit’s refusal-to-deal cases continue to use a three-step burden-shifting framework, including consideration of whether a stated justification is pretextual.

Disposition

The court granted Align’s motions for summary judgment. It stated that Align’s other alleged anticompetitive actions could not stand alone, although they might have contributed to a larger antitrust claim when combined with the refusal-to-deal allegation. The court indicated that a separate judgment could presumably be entered promptly in the Simon action, while the Snow action would remain open because of a pending Section 1 claim. A case-management conference was scheduled to address that status.