Business & Practice

Align’s Dominance of Clear-Teeth-Straightener Market Challenged

Aug. 28, 2018, 6:15 PM

Align Technology Inc. dominates the market for clear teeth-straighteners. Its Invisalign brand has become the catch-all noun for the transparent plastic alternative to metal dental braces, what Frisbee became for flying discs and Band-Aid is for peel-away bandages.

It’s been fighting tooth-and-nail to maintain that grip, filing patent lawsuits and trade complaints against smaller rivals. But now, Copenhagen-based 3Shape Trios A/S is striking back with an antitrust lawsuit targeting Align Technologies’ attempts to allegedly monopolize the market for the digital scanners that are used to order teeth straighteners.

Align Technologies is “using its dominant position to stifle competition and crush rivals” and startups, 3Shape said in the lawsuit filed Aug. 28 in Wilmington, Del., federal court.

Officials at Align didn’t immediately respond to queries seeking comment on the lawsuit.

Dentists digitally scan patients’ mouths, with computer software using the images as a baseline to create a series of aligners to slowly straighten teeth without causing pain or gum damage. The aligners, which are replaced every two weeks, are produced by 3-D printers.

In January, Align Technologies stopped accepting scans from dental professionals who use 3Shape’s Trios scanner—which competes with Align Technologies’ iTero scanner— because of ongoing patent litigation. That meant dentists who used Trios couldn’t order the Invisalign treatment. Align Technologies has a market share of more than 80 percent, according to the complaint.

The move “has effectively shut 3Shape out” of the U.S. market and boosted sales of Align Technologies’ iTero scanner, 3Shape said in the complaint. “Injuring 3Shape,” the company said, “was the very means by which Align could attack its clear-aligner competitors.”

3Shape is seeking a jury trial, cash compensation and a court order forcing Align Technologies to end its monopolization of the market for clear aligners and its attempts to monopolize the market for intraoral scanners, according to the complaint.

Shutting off 3Shape’s access to the Invisalign treatment was the culmination of a drawn out battle involving the two companies, which was sparked by 3Shape’s open-access feature that allowed dentists to use Trios with Invisalign or any other company making aligners.

Align Technologies first tried to convince 3Shape to eliminate the open system, according to the complaint. 3Shape said it “refused to accede to that anticompetitive demand,” so Align Technologies sought to form a joint venture “to control Trios.” When 3Shape again refused, it said Align Technologies “cut off dental professionals’ ability to send Trios scans to Align,” effectively forcing them to switch to the iTero.

Align Technologies’ key patents covering Invisalign’s design and manufacturing expired in October 2017, and many of its remaining related patents will expire by 2019. 3Shape said in the complaint that rather than improving Invisalign or reducing its costs, Align Technologies “found ways to entrench that dominance by excluding its current and would-be rivals,” in part by its refusal to accept orders from digital scans in an industry standard file format.

Align Technologies’ clear-aligner segment, which includes the Invisalign series of products, had global sales of $818.7 million in the first half of 2018, 36 percent higher than in the same period last year, Align Technologies said in its quarterly earnings report. Its scanners had global sales of $108.4 million during the first half of 2018, a 71 percent jump from the same period in 2017.

Align Technologies shares have jumped more than fivefold in the past three years, spurred by a doubling in sales, and the company was among the best performers on the S&P 500 Index in 2017.

While many of its important patents expired last year, Align Technologies isn’t too worried about competition, CEO Joe Hogan said May 30 in a Bloomberg Television interview with Yvonne Man and Ramy Inocencio. Align Technologies will benefit from greater demand as rivals “legitimize the space,” more doctors are trained on using clear aligners, and consumers get used to such products, Hogan said.

Over the past decade, Align Technologies has been involved in a complex patent dispute with ClearCorrect Operating LLC and previously forced another company, OrthoClear, to stop selling its products. In the past year, it’s filed lawsuits and trade complaints seeking to derail 3Shape. The first of two trials before the U.S. International Trade Commission is scheduled to begin in three weeks.

And this isn’t 3Shape’s first attack on Align Technologies. In May, it sued claiming the iTero Elements scanner is using 3Shape’s patented technology. Tais Clausen, a 3Shape co-CEO, said in a statement at the time that “recent events and aggressive actions by Align, not only towards 3Shape, but also actions affecting doctors using Trios with Invisalign, compel us to vigorously defend our intellectual property.” Align had filed four lawsuits against 3Shape in November, all in Delaware.

As patents expire, weakening the company’s legal monopoly on the technologies, Align is using a business model that focuses on the sale of scanners—Hogan, the CEO, told Bloomberg in May that scanners are expected to drive more growth than aligners going forward and may contribute to 20 to 30 percent of revenue in the future, rising from 11 percent currently.

The case is 3Shape Trios A/S v. Align Technology Inc., D. Del., 18-1332, complaint filed 8/28/18.

—With assistance from Livia Yap and Susan Decker.

©2018 Bloomberg L.P. All rights reserved. Used with permission

To contact the reporter on this story: Christopher Yasiejko in Wilmington, Delaware, at cyasiejko1@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net Joe Schneider, Heather Smith

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