Key Points

  • The Ninth Circuit reversed summary judgment for Align Technology, holding that Section 2 refusal-to-deal claims are subject to rule-of-reason balancing at step three of the burden-shifting framework.
  • Plaintiffs raised triable disputes over whether Align's patent-litigation rationale was pretextual, supported by internal emails celebrating the competitive impact of cutting off 3Shape.
  • The panel held that Align impliedly waived attorney-client privilege by citing its CEO's testimony about the termination decision, requiring reopened discovery on remand.
  • Judge Miller concurred only in the judgment, calling the balancing framework a significant and unwarranted expansion of refusal-to-deal liability.
  • The case returns to the Northern District of California for trial, with classes covering roughly ninety percent of the U.S. aligner market.

The U.S. Court of Appeals for the Ninth Circuit on Monday reversed summary judgment for Align Technology Inc., maker of the Invisalign dental aligner, reviving antitrust class actions that accuse the company of monopolizing the clear-aligner market by cutting off a rival scanner's digital connection to its system.

Writing for a per curiam panel that included Judges Sidney R. Thomas and Richard A. Paez, the court held that refusal-to-deal claims under Section 2 of the Sherman Act are subject to rule-of-reason balancing when a defendant offers a legitimate business justification that the plaintiff cannot rebut. Judge Eric D. Miller concurred only in the judgment, calling the balancing framework "a significant and unwarranted expansion of refusal-to-deal liability."

The decision sends the consolidated cases back to the Northern District of California, where nationwide classes of dental practices that bought directly from Align and consumers who purchased aligners through their dentists will proceed to trial. At stake is a market that Align controlled at roughly ninety percent during the period at issue.

Align, which sells the iTero intraoral scanner alongside Invisalign, terminated a digital interoperability agreement with 3Shape, maker of the rival TRIOS scanner, in December 2017. The move blocked TRIOS users in the United States from submitting scans directly to Align for Invisalign orders, though interoperability continued abroad. About a month earlier, Align had filed patent-infringement suits against 3Shape, and it publicly said it would no longer accept scans from scanners it claimed infringed its patents.

The district court, Judge Vince Chhabria presiding, granted summary judgment to Align, reasoning that termination was "bound up in Align's decision to initiate intellectual property litigation against 3Shape" and that "no reasonable jury could reject the notion that termination of the agreement was based 'in part' on legitimate business reasons."

The Ninth Circuit disagreed. Applying a three-step burden-shifting framework it said clarifies existing precedent, the panel held that plaintiffs established a prima facie case of anticompetitive conduct because Align ended a voluntary and profitable course of dealing, refused to sell at the retail price through 3Shape's scanner, and singled out its main competitor while maintaining interoperability with other scanners. At step two, Align met its burden by asserting that termination strengthened its position in the patent litigation. At step three, however, the plaintiffs raised triable disputes.

"We hold, as Qualcomm implied, that the rule of reason is part of our refusal-to-deal framework," the court wrote, referring to its 2020 decision in FTC v. Qualcomm Inc. The panel explained that if a plaintiff cannot show a business justification is pretextual or not legitimately procompetitive, it may still prevail by demonstrating that anticompetitive harm outweighs any procompetitive benefit.

The court found sufficient evidence for a jury to conclude that Align's patent rationale did not legitimately promote competition. Plaintiffs' patent expert testified that terminating interoperability actually weakened Align's position by exposing it to a patent-misuse defense rooted in the same antitrust theory underlying the case. Align's own expert did not rebut that assessment.

The panel also found triable pretext issues. Internal Align emails celebrated the move's market effects. Shortly after termination, one executive wrote, "Cutting [off] 3shape really worked," the opinion noted, and a presentation months later observed, "No 3-Shape interoperability eliminates primary competition." Align's chief financial officer later emailed the CEO to suggest the company "stop litigation, but don't reinstate interoperability."

Plaintiffs had argued that the timing itself raised questions: Align knew about potential patent claims as early as 2015 but waited until key Invisalign patents were set to expire and 3Shape had repeatedly refused Align's proposals for an exclusive arrangement.

The panel also held that Align impliedly waived the attorney-client privilege by citing CEO Joseph Hogan's deposition testimony that he faced a "binary decision" and lacked the "optionality" of maintaining interoperability after suing. Having advanced that theory at summary judgment, the court wrote, Align may not invoke privilege to prevent plaintiffs from examining whether Hogan received contrary legal advice. On remand, if Align continues to rely on Hogan's testimony, the district court should reopen discovery into the waived materials.

Judge Miller, in his concurrence, agreed that plaintiffs raised a genuine dispute on pretext sufficient to reverse summary judgment but parted company on the majority's adoption of a balancing test. "Current law allows plaintiffs to prevail by rebutting a defendant's proffered business justification as pretextual or anticompetitive," he wrote. Permitting juries to weigh harms against benefits, he warned, "risks transforming virtually every refusal-to-deal claim into an inquiry into whether the defendant's asserted business justification outweighs the harm to competition."

The concurrence invoked the Supreme Court's admonition in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP that courts "lack the institutional competence to function as central planners" and should be wary of chilling legitimate competitive conduct through mistaken inferences.

Lawyers for the plaintiffs included Joshua P. Davis of Berger Montague PC; Kannon K. Shanmugam of Paul Weiss Rifkind Wharton & Garrison LLP represented Align. The Justice Department's Antitrust Division filed an amicus brief urging reversal, with Patrick M. Kuhlmann arguing for the United States.

The case now returns to Judge Chhabria for trial on the refusal-to-deal claims. The panel left for the district court the question of how to address plaintiffs' broader scheme allegations, which include bundling and exclusive-dealing conduct that the lower court had not evaluated as independent claims.