United States: Landmark Decision Limits The Authority Of The International Trade Commission

The United States Court of Appeals for the Federal Circuit in Suprema, Inc., et al. v. International Trade Commission, Nos. 2012-1170, 2012-1026, -1124, Slip Op. December 13, 2013, issued a landmark decision limiting the statutory authority of the International Trade Commission ("ITC") to remedy indirect infringement, holding "that an exclusion order based on a violation of 19 U.S.C. § 1337(a)(1)(B)(i) may not be 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." Slip Op. at 4 (emphasis in original). The Court's holding effectively renders patent infringement claims based purely on alleged inducement of infringement beyond the authority of the ITC.

The International Trade Commission, as an agency under the executive branch, derives its authority to ban unlawful importation from 19 U.S.C. § 1337 (often referred to as simply, "Section 337"), which authorizes the Commission to issue exclusion orders preventing "[t]he importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that... infringe a valid and enforceable United States patent... ." 19 U.S.C. 1337(a)(1)(B) (emphasis added). The issue considered by the Federal Circuit, one that "ha[d] never [before] been presented to or decided by" the Court, was whether, in light of the Commission's statutory authority being limited to importation of "articles... that infringe," the Commission is authorized to issue an exclusion order preventing importation of a product on an inducement theory where the article being excluded does not infringe at the time of importation (i.e. where direct infringement does not occur until after the article crosses the border into the United States).

In the underlying ITC Investigation (Certain Biometric Scanning Devices, Components Thereof, Associated Software, and Products Containing Same, U.S.I.T.C. Inv. No. 337-TA-720), the Complainant, Florida-based Cross Match Technologies, Inc. ("Cross Match"), alleged that biometric (fingerprint) scanners sold by Respondent Suprema, Inc. of South Korea ("Suprema") infringed Cross Match's '344 patent related to fingerprint scanning technology when combined with software created by fellow Respondent Mentalix, Inc. of Plano, Texas ("Mentalix"). Suprema sold its fingerprint scanners in the United States through distributors such as Texas-based Mentalix, which packaged the scanners with a general purpose computer and fingerprint scanning software for sale to end-customers. Suprema did not provide the end-user software, but did provide a Software Development Kit ("SDK") that allowed its customers and distributors to create their own software to operate the scanner. Suprema's scanners, as well as its SDK—the only "articles" that were actually imported—were found not to infringe the '344 patent when combined with software developed by other customers. Hence, the ITC concluded these items had substantial non-infringing uses, and did not contributorily or directly infringe. After a hearing and post-hearing briefing, the ITC found infringement of the '344 patent as to Suprema, solely on the basis of inducement of infringement, where the claimed direct infringement took place only after importation into the U.S. Based on this finding, the ITC issued a limited exclusion order.

On appeal, Suprema argued, among other things, that the ITC had exceeded its statutory authority, as the "allegations of induced infringement d[id] not adequately connect the fact of importation to the ultimate infringement." Slip Op. at 14. The Federal Circuit agreed.

In its discussion of Section 271(b) of the Patent Act governing inducement, and Federal Circuit case law interpreting the statute, the Court noted that "while the inducing act must of course precede the infringement it induces, it is not a completed inducement under § 217(b) until there has been a direct infringement." Slip Op. at 21. The Court held that "[f]or inducement, the only pertinent articles are those which directly infringe—at the time of importation." Id. at 25. The Court therefore found "that the Commission lacked the authority to enter an exclusion order directed to Suprema's scanners premised on Suprema's purported induced infringement of the method claimed in the [Cross Match '344] patent." Id. The Court clarified that it was not divesting the ITC of authority to deal with indirect infringement by an "inducer"—but such authority would be limited to situations "where the article itself directly infringes when imported," rather than when the imported article may or may not later give rise to direct infringement. Id.

In a 15 page opinion concurring in part and dissenting in part from the three judge panel's majority opinion, Judge Reyna expressed concern that the majority's opinion was "enabling circumvention of the legitimate legislative objective of Section 337 to stop, at the border, articles involved in unfair trade." Judge Reyna noted that under the majority's opinion, an importer could avoid the reach of Section 337 by importing disassembled components of an infringing article, or an article practicing all but one step of a patented method, and reserving the final assembly of the last part or performance of the last step of the patented method, until after importation. Judge Reyna worried that such a holding would "create a fissure in the dam of the U.S. border through which circumvention of Section 337 will ensue... ."

The majority addressed Judge Reyna's concerns, writing that "virtually all of the mischief the dissent fears can be addressed by the ITC via resort to § 271(a) or § 271(c), or even to § 271(b) where the direct infringement occurs pre-importation."

While historically, the ITC was used by domestic companies to address infringement by foreign importers, given the practical realities of the cost of manufacturing high technology products, domestic companies now face exposure to potentially costly ITC proceedings based on their sale of devices manufactured abroad and imported into the United States. The ITC has become a popular forum for patent-holders, both because of the considerable expense of ITC proceedings and the speedy, statutorily-mandated time to resolution.

Makers of devices such as tablets, computers, and smartphones, are particularly vulnerable to claims that their general purpose devices infringe when combined with certain software or apps. Often this combination only occurs once the devices are put into use after importation into the U.S., such as when an app is loaded onto a smartphone or tablet. The Court's holding in Suprema effectively removes the ITC as a forum for such disputes, where the only potential claim is for alleged inducement of infringement.

Fenwick & West LLP, through a trial and appellate team led by Litigation Group Chair Darryl M. Woo, and including team members Jae Won Song, Ilana Rubel, Bryan Kohm, David Lacy Kusters, Erin Simon, Lauren Whittemore and Ravi Ranganath, is pleased to have brought about this result for its clients, Suprema, Inc. and Mentalix, Inc.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
22 Jan 2018, Conference, California, United States

During this three-day event, attendees learn from regulators who write the new regulations, judges who interpret the law to resolve complex disputes, and prominent practitioners who guide their clients through the maze of new legislation, regulations, and jurisprudence.​

25 Jan 2018, Seminar, California, United States

2017 brought several employment law developments that will undoubtedly affect your workplace. The Fenwick & West Employment Practices Group invites you to attend its annual complimentary briefing to learn more about the most important developments from 2017

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions