• Northern District Of California Grants Summary Judgment Finding That Evidence Of Valid Business Justification For Refusal-To-Deal Was Sufficient Despite Evidence Of Anticompetitive Intent

  03/26/2024

  On February 21, 2024, Judge Vince Chhabria of the United States District Court for the Northern District of California granted motions for summary judgment finding that presented evidence did not give rise to a viable refusal-to-deal claim because, even though there was evidence of a motivation to harm a competitor with the refusal, there was also evidence of a valid business justification. This ruling applies to two cases Simon and Simon, PC v. Align Tech., Inc., No. 3:20-cv-03754, 2022 WL 15523532 (N.D. Cal. Jun. 5, 2020), and Misty Snow v. Align Tech., Inc., 586 F. Supp. 3d (N.D. Cal. 2021), where plaintiffs, dental and orthodontic practices and orthodontic customers, asserted that defendant, a global medical device company who makes dental aligners under the Invisalign brand, violated Section 2 of the Sherman Act’s ban on attempts to monopolize a market.

  Plaintiffs alleged that defendant maintains monopoly power in the market for two products: (1) custom-manufactured, transparent dental aligners made from clear plastic, and (2) hand-held digital intraoral scanners that generate scans used in creating the dental aligners, maintaining approximately 90 and 80 percent market share, respectively. With respect to the alleged market for hand-held digital intraoral scanners, there was only one other competitor offering a similar product. Defendant and this competitor allegedly previously had an interoperability agreement whereby dental professionals could use the competitor’s scanners in creating defendant’s aligners. Plaintiffs allege that defendant filed a patent litigation claiming its competitor’s scanner infringed on multiple patents. Shortly after filing the patent litigation, defendant cited the pending patent litigation as justification to terminate the interoperability agreement, thereby preventing the company’s digital mouth-scanning equipment from being used for defendant’s products.

  Plaintiffs claimed that the termination of the interoperability agreement allowed defendant to maintain and enhance its monopoly power in the aligner market through anticompetitive conduct and has resulted in increased prices and overall harm to competition in the aligner markets. Further, plaintiffs alleged that there was no legitimate procompetitive justification for the termination of the interoperability agreement and that “as a direct, material, and proximate result of defendant’s violation of § 2 of the Sherman Act, [they] and the Class have suffered injury to their business and property within the meaning of § 4 of the Clayton Act throughout the Class Period.” In response, defendant claims it terminated the interoperability agreement due to ongoing patent infringement litigation with the competitor.

  The Court in its order granting defendant’s motions for summary judgment, noted that “a refusal to deal that is based in part on legitimate business reasons does not violate the antitrust laws, even if it is also motivated by the desire to harm competitors or does in fact harm competitors” and that “no reasonable jury could reject the notion that termination of the agreement was based ‘in part’ on legitimate business reasons.” Furthermore, the Court noted that “[t]he desire to protect and enforce patent rights is a presumptively valid business justification.”

  The Court noted that this was a difficult case because there was evidence that defendant’s conduct was motivated by a desire to harm an emerging competitor but that there was also evidence that the patent litigation would diminish its own aligner profits at least in the short term. Ultimately, the Court found that the record showed contemporaneous evidence that defendant was concerned about patent infringement and the impact of the interoperability agreement on the pending litigation and that “given the presumptive validity of an action taken to protect or assert intellectual property rights, a reasonable jury could not find that defendant’s expressed concerns were a ruse or that the actions taken to address them were illegitimate.”

  CATEGORIES: Attempted Monopolization, Exclusionary Conduct, Monopolization, Refusal to Deal, Sherman Act § 2, Summary Judgment
  

LINKS & DOWNLOADS

• Simon and Simon, PC v. Align Tech., Inc.