United States: Federal Circuit Authorizes ITC To Bar Imports That May Or May Not Be Used To Infringe

On August 10, 2015, the Federal Circuit extended the reach of the ITC to cover accused articles that do not directly infringe when coming into the country through customs, but are later made or used to directly infringe a method claim. Suprema, Inc. v. International Trade Commission, No. 2012-1170 (Fed. Cir. Aug. 10, 2015) (en banc). The involved article in Suprema is a finger print scanner with its associated software development kit. After importation, the software kit was used to develop custom software to operate the scanner in an infringing manner.

The Federal Circuit's decision affects not only the ITC's jurisdiction after direct infringement but indirect infringement as well. In previous cases, the ITC found indirect infringement when the imported article was accompanied by instructions detailing how to use the article in an infringing way and when the imported article was incapable of being used in a non-infringing way. The finger print scanner in Suprema, however, did not include such instructions and had other uses that do not infringe the asserted method claim. Suprema thus extends induced infringement to implicate foreign entities who sell goods into the United States that are assembled or used after importation in an infringing manner and then remain "willfully blind" to the U.S. customer's acts of direct infringement.

This ruling has wide-ranging repercussions for manufacturers of smart devices and software app developers by authorizing the ITC to maintain an action against the manufacturer for inducing the direct infringement by a domestic party. For example, manufacturers of phone handsets may now be brought before the ITC for importing their handsets, even though they were not infringing when they came through customs, if a U.S. consumer loads an app onto the phone and uses it in an infringing manner after importation, with the manufacturer's encouragement.  Any ensuing limited exclusion order could provide for the importer to certify that the products being imported will not be used to infringe the asserted patent.

Suprema does not change the underlying law of inducement, which requires that a plaintiff prove that the defendant induced acts of direct infringement, and knew or should have known that its actions would induce actual infringement. Warner-Lambert Co. v. Apotex Corp., 316 F.3d 1348, 1363 (Fed. Cir. 2003). In Suprema, the Commission found that Suprema, the finger print scanner manufacturer, had met the knowledge prong of inducement by remaining willfully blind to the direct infringement because it "failed to obtain opinion of counsel" through which the patent would have been uncovered. When the original panel considers this case again on remand, hopefully it will note that such evidence is no longer allowed to prove inducement under 35 U.S.C. § 298, which provides "[t]he failure of an infringer to obtain advice of counsel with respect to any allegedly infringed patent . . . may not be used to prove . . . that the infringer intended to induce infringement . . . ."

The Suprema en banc panel issued three opinions in a contentious 6-4 decision overturning the split decision from the initial Federal Circuit panel. In fact, the two dissenting opinions accounted for half of deeply divided en banc panel's 61-page opinion. The main controversy dividing the en banc bench was whether the ITC's statutory authority (19 U.S.C. § 1337) is ambiguous on this issue. The majority found ambiguity and, accordingly, deferred to the ITC's interpretation of its statute.1The dissent, on the other hand, argued that the statute unambiguously only covers in rem "articles that infringe." According to the dissent, the language thus denies the Commission the authority to issue an exclusion order based solely on allegations of induced infringement of a method claim, where the direct infringement of the method claim does not occur until after importation. Because of this close divide, this case could be bound for the Supreme Court. In the meantime, while the case has been remanded to the original panel for further consideration, importers of smart devices and other electronics should carefully weigh the implications of the en banc Federal Circuit's expansion of the ITC's jurisdiction."

Footnote

1. The Federal Circuit has also requested briefing on the impact of the Suprema decision in the co-pending ClearCorrect Operating LLC v. ITC, No. 14-1527.  In ClearCorrect, the Federal Circuit is considering the bounds of the term "involved article" when the "involved article" is a digital file that is "imported" into the United States and then used to create an infringing product in the United States. Similar to Suprema, the Commission, in interpreting 19 U.S.C. § 1337, found that the digital file was an article and that ClearCorrect infringed the patents by downloading digital files transmitted by a third party in Pakistan. If the Federal Circuit's decision in Suprema is any guide, it is likely that the Court will not disturb the Commission's interpretation.

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