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IP Alert
IP Alert UPDATE: Federal Circuit Grants En Banc Review of Suprema, Inc. v. ITC

May 15, 2014

UPDATE: On May 13, 2014, the Court of Appeals for the Federal Circuit granted a petition to rehear the Suprema decision en banc. Fitch Even attorneys will monitor the progress of this case and will report on the outcome in a future alert.

The original alert on this case follows:

On December 13, 2013, in Suprema, Inc., and Mentalix, Inc. v. International Trade Commission and Cross Match Technologies, Inc., the Court of Appeals for the Federal Circuit addressed the standard for obtaining an exclusion order from the International Trade Commission (ITC) based on an allegation of induced infringement. The court held that an exclusion order based on a violation of the ITC implementing statute, 19 U.S.C. § 337(a)(1)(B)(i), may not be predicated on a theory of induced infringement where direct infringement does not occur until after importation of the articles the exclusion order would bar.

Cross Match Technologies, Inc., the complainant and intervenor in the underlying ITC investigation, contended that three of its patents were infringed by Suprema, Inc., and Mentalix, Inc. Suprema is a Korean company that manufactures and imports hardware and software for scanning fingerprints. Mentalix, a domestic importer of Suprema scanners, integrates these scanners with its own software in the United States. The patents at issue relate to methods of fingerprint image capture and processing. Cross Match contended that end users of Suprema’s products infringed the method claim at issue when using Suprema’s fingerprint scanners in combination with the software supplied by Mentalix.

The ITC found that Suprema violated section 337(a)(1)(B)(1) by infringing the patented method. It found that Mentalix’s software, when integrated with the imported Suprema scanners, and upon execution of the software, practiced the patented method. It further concluded that Suprema had the requisite mental state for a finding of induced infringement. Suprema appealed.

On appeal, the Federal Circuit vacated the ITC’s ruling and held that an exclusion order cannot extend to induced infringement where the acts of the underlying direct infringement occur post-importation. The court reasoned that the commission’s authority under section 337 is tied to the importation, sale for importation, or sale within the U.S. after importation of “articles that infringe” a valid and enforceable patent. According to the court, “[t]he focus is on the infringing nature of the articles at the time of importation, not on the intent of the parties with respect to the imported goods.” Here, the alleged infringement only took place after the scanners had been imported, when the scanners were combined with other software. Moreover, the imported scanners at issue were capable of multiple non-infringing uses at the time of importation. Therefore, at the time of importation, the imported scanners were not “articles that infringe” a valid and enforceable patent. 

Thus, while suggesting that Cross Match might find relief in the federal courts, the Federal Circuit vacated the ITC’s grant of the exclusion order to the extent it was based on the induced infringement theory. The court separately affirmed the portion of the exclusion order that related to a different patent, and remanded the case to the ITC to adjust the exclusion order in accordance with its opinion.

Judge O’Malley dissented in part. She opined that 19 U.S.C. § 337 is a trade statute that was passed to provide relief from specific acts of unfair trade. These acts include the importation of articles in a manner that will harm domestic industry by virtue of patent infringement. In her view, the court’s holding created a “fissure in the dam of the U.S. border through which circumvention of Section 337 will ensue, thereby harming holders of U.S. patents.” The majority, commenting on the dissent, stated, “Our holding is far narrower than the dissent asserts; as we explain, virtually all of the mischief the dissent fears can be addressed by the ITC [via other forms of infringement].”

The Suprema case is significant for those Fitch Even clients concerned with exclusion orders before the ITC. For more information, please contact Fitch Even partner Christine A. Pompa.

 

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