United States: Federal Circuit Upholds ITC Interpretation Of § 337 To Cover Induced Infringement

Suprema, Inc. and Mentalix Inc. v. Int'l Trade Comm'n, Case No. 12-1170 (Fed. Cir. Aug. 10, 2015) (Reyna, J.) (O'Malley, Proust, Lourie, and Dyk JJ., dissenting).

By way of background, appellee Suprema manufactures hardware for scanning fingerprints. The scanners must be connected to a computer running custom-developed software. Suprema does not provide the software but, instead, provides software-development kits so its customers can create their own software. Suprema imported these scanners into the United States and sold them to Mentalix, which developed the customized software.

Cross Match Technologies filed a complaint at the International Trade Commission (ITC)  alleging that Suprema's scanners operating with Mentalix's software infringed one of Cross Match's patents. Cross Match also alleged that Suprema induced infringement by encouraging Mentalix to combine its scanners with the Mentalix software after importation. The full Commission, on review of the Administrative Law Judge's decision, found that the combination of Suprema's scanners and Mentalix's software infringed Cross Match's patent, that Suprema had induced infringement and issued a limited exclusion order (LEO) barring Suprema from importation of the accused scanners, with or without the additional software. Suprema appealed, arguing that § 337 of the Tariff Act did not permit entry of an exclusion order under a theory of induced infringement, where the infringing activity does not occur until after importation, because the scanners, as imported (i.e., without the software), did not infringe Cross Match's patent.

In the initial appeal, a three-judge panel of the U.S. Court of Appeals for the Federal Circuit (Judges Kathleen M. O'Malley, Sharon Prost and James V. Reyna) agreed with Suprema and reversed the Commission's entry of an exclusion order by a 2-1 ruling, with Judge O'Malley writing the opinion and Judge Reyna dissenting. IP Update, Vol. 16, No. 12. In the panel decision, the Federal Circuit noted that the combination of scanner and software was not imported, sold for importation or sold after importation, and therefore that product was not subject to an LEO. The panel then found the Commission's authority to issue an exclusion order under § 337 was limited to "articles that ... infringe," and that under § 271(b) (the inducement provision of the Patent Act), "[p]rior to the commission of any direct infringement, for purposes of inducement of infringement, there are no 'articles that ... infringe'—a prerequisite to the Commission's exercise of authority" under § 337. The panel reasoned that because the scanners without software did not directly infringe, the Commission could not exclude them based solely on Suprema's intent to induce.

On the ITC's petition for en banc review, the full Federal Circuit vacated the panel opinion and granted re-hearing en banc to consider the question "whether the Commission correctly concluded that unfair trade acts covered by Section 337 include the importation of articles used to infringe by the importer at the inducement of the articles' seller." IP Update , Vol. 17, No. 5.

In its en banc decision, the Federal Circuit has now found in favor of the ITC, with Judge Reyna now writing for the majority and Judge O'Malley for the dissent. The majority and dissent parted ways over whether the phrase "articles that...infringe" in § 337 was sufficiently ambiguous that the ITC's interpretation should be granted deference under the Supreme Court of the United States' 1984 Chevron case.

The majority concluded that the phrase "articles that...infringe" introduced textual uncertainty into § 337, due to the difference between the in rem language of § 337 and the in personam language of § 271. In other words, under the Patent Act, persons infringe a patent, but under the Tariff Act, use of the language "articles that...infringe" attempts to apply the same analysis to products. As such, the majority found that "the phrase 'articles that infringe' does not map onto the Patent Act's definition of infringement." This textual uncertainty, the majority ruled, "requir[ed] resolution by the agency charged with Section 337's enforcement"—the ITC. Given the majority's finding that the ITC's interpretation that "articles that...infringe" encompassed products where induced infringement could be proven, even if the corresponding act of direct infringement occurred post-importation, was not an unreasonable resolution of the uncertainty, the Federal Circuit upheld the ITC's interpretation, applying the Chevron deference standard. The majority buttressed its conclusion explaining that Congress had historically vested the Commission with broad enforcement authority to remedy unfair trade acts; that the phrase "articles that...infringe" was added to § 337 as part of an amendment expanding the Commission's authority; that the Commission had consistently interpreted § 337 as providing it with authority to grant exclusion orders based on induced infringement; and the ITC's interpretation of its authority furthered its statutory mandate to safeguard United States commercial interests at the border.

The Dissent

According to the dissent, the phrase "articles that...infringe" in § 337 is unambiguous, and, therefore, the ITC's interpretation deserved no deference.  In the dissent's view, the phrase "articles that...infringe," combined with the limitation of liability under § 337 to goods imported into the United States, sold for importation into the United States, or sold after importation in the United States, was a clear statement by Congress that the ITC's jurisdiction is limited temporally to only acts of infringement that occurred at the time of importation. Thus, a product that does not infringe an asserted patent at the time of importation cannot be the subject of a LEO, regardless of whether the intent to induce infringement after importation already exists, because the article itself does not infringe the patent. In the view of the dissent, the ITC is powerless to take action against such products, and the proper place to seek relief in such cases is in the district court. The dissent rejected the majority's argument that the Commission had consistently interpreted its authority to cover induced infringement, arguing that no case had ever presented the issue of a limited exclusion based solely on induced infringement—in every prior case where induced infringement was at issue, there was a corresponding case of direct infringement by the imported article. Finally, the dissent noted that permitting an exclusion order to issue based solely on induced infringement would require U.S. Customs Service officers to determine whether or not a non-infringing product was imported in order to later be used in an infringing manner and with the intent necessary for a finding of induced infringement—a task for which the Customs Service is ill-suited. The dissent also argued that the majority's ruling exposed importers to potentially harsh liability for violations of an exclusion order, even if the importer provided a bona fide certification statement, based on a post hoc determination of intent.

Practice Note

Judges Kimberly A. Moore and Kara F. Stoll did not take part in this decision.  Given that the Federal Circuit was nearly evenly divided, and that the two additional judges could have changed the outcome, it is highly likely that Suprema will file a writ of certiorari in this case. Both sides seem to agree that the Tariff Act provides no express guidance on the precise issue presented. Because a resolution of the issue essentially hinges on statutory interpretation, the likely issue for a certiorari petition is whether the lack of a clear statutory proscription in connection with allegations of inducement should negate any attempt by the ITC to interpret the statute to expand its jurisdiction to include allegations of inducement.

Federal Circuit Upholds ITC Interpretation Of § 337 To Cover Induced Infringement

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
 
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