Suprema Says No ITC Exclusion Order Based on Induced Infringement

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On December 13, 2013, the Federal Circuit vacated the International Trade Commission’s infringement determination holding that the ITC may not issue an exclusion order based on a violation of Section 337 “predicated on a theory of induced infringement under 35 U.S.C. § 271(b) where direct infringement does not occur until after importation of the articles the exclusion order would bar.”  The majority found that the statutory language of Section 337 requires that the article must infringe at the time of importation to fall within the jurisdiction of the ITC.

Background

In Certain Biometric Scanning Devices, Components Thereof, Associated Software, and Products Containing the Same, Inv. No. 337-TA-720, complainant Cross Match Technologies Inc. accused respondents Suprema, Inc. and Mentalix, Inc. of violating Section 337 based on infringement of method and apparatus claims.  Suprema manufactured and imported biometric scanners and a software development kit (SDK) that could be used to develop software for use with the scanners.  Mentalix distributed Suprema’s scanners along with software developed using Suprema’s SDK.  The method claim at issue was directed to a method for capturing and processing a fingerprint image.  The apparatus claims were directed to an optical scanning system.

The Commission determined that Suprema and Mentalix violated Section 337 based on induced infringement of the method claim and direct infringement of the apparatus claims, and issued a limited exclusion order to exclude the optical scanners from the United States.  Suprema appealed to the Federal Circuit.  With respect to the method claim, Suprema argued that the imported optical scanners do not infringe at the time they are imported and that they may never directly infringe after importation because they have non-infringing alternative uses.

Discussion

Section 337, in pertinent part, provides that:  “Subject to paragraph (2), the following are unlawful . . . the importation into the United States, the sale for importation, or the sale within the United States after importation  . . . of articles that infringe a valid and enforceable United States patent.”  19 U.S.C. §1337(a)(1)(B)(i) (emphasis added).  Finding this statutory language unambiguous, the majority found that the statute only gives the ITC the ability to exclude articles that infringe at the time of importation.  The majority therefore held that the ITC cannot exclude articles based on induced infringement where the article is not infringing when it is imported because direct infringement occurs in the United States after importation.

The dissent criticized the majority’s focus on infringement “at the time of importation,” stating that its broad holding will allow importers to easily circumvent an exclusion order by assembling the infringing apparatus after importation or disabling a feature of an electronic device so that a complete method is not practiced at the time of importation.  The dissent also criticized the majority for not acknowledging that its holding removes all forms of indirect infringement from the ITC when direct infringement does not occur until after importation.

Practice Implications

In an ITC investigation based on indirect infringement, a complainant must be able to establish that the act of direct infringement occurs at or before importation, or that the imported product can only be used in an infringing manner.  Unless the Federal Circuit’s decision is revisited en banc or on certiorari to the Supreme Court, this decision is likely to preclude enforcement of method-of-use claims at the ITC.  Existing exclusion orders predicated on induced infringement should be reviewed by affected parties for possible revision or rescission by the Commission.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Topics:  Exclusion Orders, Induced Infringement, Infringement, ITC, Patent Infringement, Patent Litigation, Patents, Section 337

Published In: Antitrust & Trade Regulation Updates, Civil Procedure Updates, General Business Updates, Intellectual Property Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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