United States: Suprema, Inc. v. ITC: Inducement Of Post-Importation Infringement

In an appeal from an investigation before the U.S. International Trade Commission (ITC or the "Commission"), the Federal Circuit held that inducing infringement does not violate 19 U.S.C. § 1337 if the underlying direct infringement only occurs post-importation. Slip Op. at 4. The court's opinion impacts the relief available to patentees of method claims before the ITC.

The underlying ITC investigation involved fingerprint scanners. The complainant, Cross Match Technologies, Inc. ("Cross Match"), a U.S. company, provides fingerprint acquisition technology. Cross Match asserted infringement against Suprema, Inc. ("Suprema"), a Korean manufacturer and importer of fingerprint scanners, and Mentalix, Inc. ("Mentalix"), a U.S. company that imports Suprema's scanners and combines them with its own software.

In the investigation, Cross Match asserted method claims of U.S. Patent Nos. 7,203,344 ("the '344 patent") and 7,277,562 ("the '562 patent") against Suprema scanners using Suprema and Mentalix software, and it asserted system claims of U.S. Patent No. 5,900,993 ("the '993 patent") against Suprema scanners. The Commission found that respondents violated Section 337, as Mentalix directly infringed the '344 patent by combining its software with imported Suprema scanners and executing that software, and as Suprema induced Mentalix's direct infringement. The Commission also found a violation for the '993 patent, as the asserted claim was infringed by Suprema scanners and was not rendered obvious by certain prior art. And the Commission found no violation as to the '562 patent, as neither Suprema scanners, nor Suprema scanners combined with Mentalix software, infringed.

The Commission issued limited exclusion and cease-and-desist orders based on the Section 337 violations for the '344 and '993 patents. Suprema appealed the Commission's violation findings. Cross Match appealed the Commission's noninfringement finding for the '562 patent.

In the consolidated appeals, the Federal Circuit panel majority (Judges Prost and O'Malley) agreed that Suprema had not violated Section 337 as to the '344 patent. The majority held that that an exclusion order based on a violation of Section 337 "may not be predicated on a theory of induced infringement where no direct infringement occurs until after postimportation." Slip Op. at 6. The court noted that Section 337(a) (1)(B), which defines "unlawful" acts, concerns "articles that . . . infringe." Id. at 16 (citation omitted). It explained that the text's "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." Id. (quotation marks omitted). The court also relied on Section 337(d)(1), which grants the ITC authority to exclude "the articles concerned" for violations of Section 337. Id. at 17 (citation omitted). The court held that, because "the articles concerned" refers to the "articles that infringe" of Section 337(a)(1)(B)(i), exclusion orders "pertain only to the imported goods and are necessarily based on the infringing nature of those goods when imported." Id.

To determine whether goods imported to induce infringement are "articles that infringe," the majority turned to 35 U.S.C. § 271. Id. at 18. It reasoned that Section 271(a)'s and (c)'s definitions of direct and contributory infringement are tied to articles, whereas Section 271(b)'s definition of inducement is not. Id. at 19. Instead, Section 271(b) focuses on the infringer's acts, not particular articles. According to the court, an inducement is not complete until a direct infringement occurs, and an inducing act becomes tied to an article only through an underlying direct infringement. Id. at 20. The court therefore concluded that inducing infringement of method claims cannot violate Section 337 in circumstances in which there are no direct infringement occurs before importation. Id. at 21. Because Mentalix's direct infringement occurred only after it imported Suprema's scanners, Suprema's inducement of Mentalix's post-importation direct infringement did not violate Section 337.

Judge Reyna dissented from this part of the court's opinion. According to Judge Reyna, "the majority overlooks the Congressional purpose of Section 337, the long established agency practice by the Commission of conducting unfair trade investigations based on induced patent infringement, and related precedent by this Court confirming this practice." Dissent at 4. He explained: "I see no distinction between importing an article that meets all limitations of an apparatus claim as it crosses the border, and actively inducing infringement by importing an article and encouraging another to use that article to practice a patented method. In both cases, a patented invention is practiced within the country without authority as a result of importation." Id. at 14.

In addition, the court affirmed the ITC's finding of a violation for the '993 patent. The court found that the patent's written description does not disclaim optical systems including nonlens elements, such that the presence of mirrors within Suprema's scanners did not avoid infringement. It also found that the respondents failed to prove that a person of ordinary skill in the art would have been motivated to combine two prior art optical systems. The court explained that expert testimony stating that a skilled artisan "could very well" combine these systems was not clear and convincing evidence that the artisan would "specifically seek" to do so. Id. at 35. That one of the prior art optical systems was "well suited for photographic cameras, not fingerprint scanners," further supported nonobviousness for the '993 patent. Id. (quotation marks omitted).

Finally, the court affirmed the Commission's noninfringement finding for the '562 patent. It agreed with the Commission's construction of the claim term "capture" as requiring image processing to be performed before the image is "captured." Because Suprema's scanners perform the image-processing steps only after "capture," they do not infringe. Id. at 37-41. On February 21, 2014, the Commission and Cross Match filed petitions for rehearing en banc on the issue of whether a Section 337 violation may be based on inducement where the underlying direct infringement occurs after importation. According to the Commission's petition, "the panel not only overturned decades of Commission practice affirmed by the courts, but also upended the law of induced infringement." Comm'n Pet. for Reh'g at 7. The Commission and Cross Match argue that consideration of the issue by the full court is warranted because the majority's holding is contrary to (1) the text of Section 337, which does not support the majority's distinction between induced infringement and contributory infringement, and which by its terms reaches postimportation activity; (2) longstanding Commission practice, to which the majority should have deferred; and (3) the legislative history, which shows that Congress endorsed the Commission's practice of issuing exclusion orders to remedy induced infringement of method claims.

Suprema is an important decision for Section 337 practice. The ITC assesses whether an article infringes at the time of importation, but an article capable of performing a claimed method may not directly infringe a claimed method until after importation. Suprema's holding makes it more difficult to establish a Section 337 violation based on induced infringement of method claims in such circumstances.

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.

© Morrison & Foerster LLP. All rights reserved

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