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On July 18, 2014, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) vacated and remanded the decision of the United States International Trade Commission (“USITC”), finding that, under the Administrative Procedure Act and 19 CFR § 210.24, by reviewing an ALJ order denying a motion to terminate, USITC acted arbitrarily, capriciously, or otherwise not in accordance with the law. Moreover, for reasons of judicial efficiency, the Federal Circuit also held that, contrary to the allegedly established USITC practice, it is not required that the digital data at issue is explicitly mentioned in the consent order to be within the scope of protection of the consent order

This case originates with a dispute between Align Technology Inc. (“Align”) and OrthoClear, competing designers and manufactures of clear plastic dental aligners commonly known as an “invisalign.” This proceeding resulted in a Consent Order between the parties, dictating that OrthoClear would not manufacture or import such dental aligners and aid or abet others in doing so, for the term of Align’s relevant patents.

ClearCorrect sprung from the ashes of OrthoClear’s Consent Order, prompting Align to file for enforcement proceedings with the USITC. According to Align’s complaint, ClearCorrect designed custom blue prints for invisalign trays in digital format in Pakistanand transmitted the digital data to the United States where the trays were manufactured and sold, which allegedly infringed Align’s intellectual property rights.

The USITC undertook an investigation to determine whether ClearCorrect was violating the Consent Order between Align and OrthoClear, ultimately resulting in ALJ Order No. 57. The Order held that the transmitted digital datasets fell within the scope of the Consent Order, and thereforeinfringed Align’s intellectual property rights.

On review, the USITC overturned Order No. 57, noting that historically consent orders are enforced like cease and desist orders, which require explicit language including a subject to be enforced. The USITC found that the digital data transmission was not even mentioned in the Consent Order. According to the USITC, without this specific mention of digital data in the context of importation via transmission, the consent order will not prevent such action.

The Federal Circuit disagreed with the USITC’s reasoning and held that “the Commission circumvented its own rules without waiving, suspending, or amending them, [and therefore] its review of Order No. 57 was ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Align Tech., Inc., 575 Fed. Appx. at 905, Slip Op. at 10 (quoting 5 U.S.C. § 706(2)(A)).Moreover, the Court held that there is no record to indicate that consent orders are enforced in the manner consistent with cease and desist orders.

In reversing, the Court relied on the Commission’s Rules of Practice and Procedure, 19 C.F.R. § 210.1, which clearly delineate between the rulings by an ALJ that must be issued as “initial determinations” and those that must be issued as “orders.” Under these rules, an 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.”Id. (citing 19 C.F.R. § 210.24).  Under 19 C.F.R. § 210.42(c), an ALJ shall grant motions for termination by issuing an initial determination or shall deny them by issuing an order. The Court reasoned that the ALJ appropriately denied ClearCorrect’s motion for termination by issuing an order, which was not reviewable in the absence of a clear wavier of Commission rules, or by an interlocutory review. Finally, the Court ruled that, based on the body of evidence presented by the USITC, there was no “established practice” to enforce consent orders as cease and desist orders.

The Court vacated the USITC’s ruling and remanded with instructions for reconsideration in accordance with its decision.