AAI has filed an amicus brief in Simon & Simon, PC, et al. v. Align Technology, Inc., urging the Ninth Circuit to reverse the lower court’s grant of summary judgment in favor of defendant Align, the maker of Invisalign, on a refusal-to-deal claim.
In Simon & Simon, the plaintiffs are owners of dental practices who allege that Align violated Section 2 by unlawfully terminating an interoperability agreement with 3Shape, its competitor in the market for the digital scanners used to manufacture aligners. After initially denying Align’s motion to dismiss, Judge Vince Chhabria of the Northern District of California granted summary judgment for Align. Although plaintiffs established that Align’s refusal to deal with 3 Shape caused substantial anticompetitive effect, the court accepted Align’s claimed procompetitive justification.
Under the rule of reason, once a plaintiff establishes at step one that a defendant’s refusal to deal has substantial anticompetitive effects, the burden shifts back to the defendant to show a nonpretextual, procompetitive rationale for its refusal. Here, Align argued that it terminated the interoperability agreement with 3Shape to undermine 3Shape’s potential defenses in a separate patent litigation, in which Align accused 3Shape of patent infringement. Plaintiffs presented evidence that this justification was pretextual, including testimony from a patent law expert that terminating interoperability would have had no effect on 3Shape’s defenses in the patent litigation. Nonetheless, the Court considered Align’s justification to be “presumptively valid” because it was related to Align’s “desire to protect and enforce patent rights.”
AAI’s amicus brief argues that the district court misapplied the rule of reason. It failed to assess whether Align’s claimed justification was in fact procompetitive and to balance it against the demonstrated anticompetitive effects. By blindly accepting Align’s justification merely because it was related to patent litigation, the district court effectively adopted the broad “scope of the patent test,” which treats patents like walled gardens completely immune from antitrust scrutiny. The “walled garden” concept was firmly rejected by the Supreme Court in Actavis, which instructed lower courts to forego the “scope of the patent test” in favor of a rule of reason analysis. Had the District Court actually assessed Align’s patent-litigation justification on the facts, AAI argued, it would have found a genuine dispute about the justification’s validity and effects which precludes summary judgment.
AAI also urged the Ninth Circuit to provide much-needed clarity to lower courts on how to address refusals to deal under Section 2. In a trend tracing back to the Supreme Court’s opinion in Trinko, courts’ wariness of an antitrust duty to deal has led them to impose strict evidentiary hurdles that are not reliable proxies for exclusion. Courts also often rely on dicta in Trinko to justify erring on the side of non-intervention. AAI explained that, under standard rule-of-reason analysis, the burden is on defendants to establish that their justification is non-pretextual and procompetitive. When a defendant moves for summary judgment, any disputes about this fact-bound issue must be resolved in the plaintiff’s favor.
AAI also explained how the extreme caution exercised in Trinko does not make sense in cases, such as this one, where the monopolist excludes its rivals in a secondary market into which it has vertically integrated. In Trinko, the Court believed that rivals of monopolist Verizon sought to free ride off Verizon’s telephone network so that they could compete in the local telephone market without building their own network. But requiring Align to make its aligners available through 3Shape’s scanner would not allow any kind of free riding on Align’s technology. Instead, it would increase competition by incentivizing both Align and 3Shape to innovate in better scanners to win over each other’s customers.
The brief was written by AAI Vice President and Director of Legal Advocacy Kathleen Bradish and AAI Senior Counsel David O. Fisher, with assistance from AAI President Randy Stutz and AAI interns Sheridan Phelan and Nick Nguyen.
Read the full brief here: AAI Amicus Brief on Simon & Simon v. Align
