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IP Alert: En Banc Federal Circuit Confirms ITC Authority to Exclude Imported Articles Used to Induce Infringement in the U.S.

August 8, 2015

On August 10, 2015, the U.S. Court of Appeals for the Federal Circuit sitting en banc overturned a prior panel decision in Suprema, Inc., and Mentalix, Inc. v. International Trade Commission and Cross Match Technologies, Inc. A split Federal Circuit ruled that the U.S. International Trade Commission (ITC) has the authority to prevent the importation of products based on an inducement theory of infringement, even if the imported products are not covered by the patent at the time they are imported into the country. The en banc court’s majority decision overturned the prior panel holding in the case. 

Cross Match Technologies, Inc., the complainant and intervener 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, a Federal Circuit panel 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. 

In the en banc hearing, the Federal Circuit vacated the panel decision and upheld the ITC’s position. The Federal Circuit’s analysis focused on the meaning of the words “articles that infringe” contained in section 337 and whether that phrase includes products that do not infringe until after they enter the United States. The Federal Circuit reasoned that since Congress has given the ITC substantive authority to interpret the Tariff Act, the ITC’s interpretations of its power pursuant to the Tariff Act are given deference. In accordance with such deference, a reasonable interpretation by the ITC may not be overturned on appeal. In this case, the Federal Circuit found that “[t]he Commission’s interpretation of Section 337 grants it authority to prevent importation of articles that have been part of inducement as an unfair trade act is consistent with the statutory phrase ‘articles that infringe.’” The court found that the ITC’s interpretation was reasonable and consistent with section 337 and the ITC’s responsibility to safeguard the country’s commercial interests at the border. The majority opinion noted that the panel’s 2013 interpretation of “articles that infringe” weakens the ITC’s ability to prevent unfair trade acts involving infringement of U.S. patents and would have resulted in “an open invitation to foreign entities . . . to circumvent Section 337.”

In a dissenting opinion, four judges opined that the ITC lacks the authority to bar importation of articles that hold the potential to induce infringement because the language of section 337 unambiguously fails to grant such authority. One of the dissenting judges, Judge Dyk, authored a separate dissenting opinion to emphasize the difference between this case and prior section 337 cases and how the ITC’s present theory of induced infringement departs from its past practice.

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, the author of this alert.

 

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