Align Tech fires off false advertising, infringement lawsuits, releases Q3 earnings

Align Technology (NSDQ:ALGN) today announced a series of lawsuits it filed in California over patent infringement, false advertising and unfair competition as well as releasing its 3rd quarter earnings.

The lawsuits, filed in the Northern District of California, are against SmileCareClub LLC, Camelot SI, SharperImage.com and Brookstone.

In its lawsuit against SmileCareClub, Align asserts that the company is infringing upon 14 Align patents through the sale of SmileCareClub’s clear liners.

“Doctors play a necessary and integral role in any orthodontic treatment process, starting with a diagnosis and treatment prescription based on an in-person examination of the patient. This critical role continues with in-person consultations throughout treatment as the doctor monitors the patient’s dental health and treatment progress. The SmileCareClub do-it-at-home system lacks this critical oversight and entirely eliminates the doctor’s role in treatment. It instead replaces the doctor with an unknown email address and no actual patient contact, thus impairing the ability to accurately diagnose and care for the patient during treatment,” veep Roger George said in a press release.

Align asserted that Sharper Image and Brookstone also infringed upon the same 14 patents through their marketing and sale of SmileCareClub’s clear liners.

The complaint continues that SmileCareClub, Sharper Image and Brookstone “deliverately deceive and confuse patients and unfairly compete with Align in violation of California and federal law by making unsupported claims regarding the safety and effectiveness of SmileCareClub’s products which are offered without any direct in-person contact with a dental professional.”

“Not only have SmileCareClub and its retailers attempted to deceive the public regarding the safety and effectiveness of its product when used without adequate supervision by a dental professional, but they also sell a product that infringes Align’s patents. We believe that SmileCareClub is working with ClearCorrect to manufacture clear aligners that infringe Align’s patents and we anticipate that additional information regarding this relationship will come to light during discovery. The ITC administrative law judge and the International Trade Commission itself have already found that ClearCorrect aligners infringe Align’s valid patents. We are confident of our ultimate victory in the ClearCorrect matter, and we will continue to assert and defend our intellectual property rights against attempts by SmileCareClub, ClearCorrect, or any other company attempting to manufacture or sell an infringing product,” George said in a prepared statement.

In a separate release, Align released its 3rd quarter earnings, missing Wall Street’s expectations for revenue and earnings but seeing shares rise.

Align Technologies reported profits of $27.6 million, or 35¢ per share, on sales of $207.6 million for the 3 months ended September 30.

That amounts to a 27.8% bottom-line slide on sales growth of 9.4% compared with the same period in 2014.

Adjusted to exclude 1-time items, earnings per share were 34¢. That’s a fair 13¢ off Wall Street’s expectations, who expected to see 47¢ and revenues of $227 million.

Though the company missed expectations, shares have risen 11.8% to $67.97 as of 4:20 p.m. EDT.

“Q3 was another good quarter, with revenues and EPS above the high-end of our guidance. Our results were driven by strong Invisalign case volume, with growth across all customer channels and geographies, reflecting our highest year-over-year growth in North America in three years with continued strength coming from EMEA and APAC, expansion in low-stage product segment and seasonally strong uptake by teenage patients, which account for 75% of the Orthodontic market,” CEO Joe Hogan said in prepared remarks.

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