ITC Can Stop Imports of Articles That Infringe Only After Importation When Foreign Sellers Induce That Infringement

Authored by D. Brian Kacedon, John C. Paul, and Kevin D. Rodkey

Abstract

The International Trade Commission has the power to stop importation of articles that infringe a valid U.S. patent. In a recent en banc decision, the Court of Appeals for the Federal Circuit upheld the ITC's statutory interpretation that it can stop imports of articles that do not infringe until after importation where a foreign seller induces the post-importation infringement. This decision confirms that the ITC may stop products that do not infringe at the time of importation. It provides potent relief to patent owners, allowing them to exclude products that do not infringe before they enter the U.S., rather than needing to wait to seek relief until after the products enter the U.S. and the infringement begins.

Under 19 U.S.C. § 1337, the International Trade Commission has the power to stop importation of "articles that infringe" a valid United States patent. Recently, in Suprema, Inc. v. ITC,¹ the en banc Federal Circuit upheld the ITC's statutory interpretation that it can exclude articles that do not infringe until after importation where a foreign seller induces the post-importation infringement. The court also upheld the ITC's exclusion order of certain fingerprints-canning devices made by Suprema, Inc. that, when used with certain software after importation, infringed the asserted patent. This decision confirms that the ITC may stop products that do not infringe at the time of importation. It provides potent relief to patent owners, allowing them to exclude products that do not infringe before they enter the U.S., rather than needing to wait to seek relief until after the products enter the U.S. and the infringement begins.

Background

Suprema, Inc., a Korean company, makes hardware for fingerprint scanners, which require a use of a computer and software in order to work. Suprema does not make or sell the software. Instead it ships a software development kit (SDK) used to develop computer programs to make the scanners function. Mentalix, Inc. purchases and imports Suprema's scanners and writes custom software using Suprema's SDK to control and operate the scanners, which it then resells within the United States.

Cross Match Technologies filed a complaint with the ITC against Suprema and Mentalix, alleging that certain fingerprint scanners, sold by Suprema and combined with software developed by Mentalix after importation, infringe U.S. Patent No. 7,203,344 ("the '344 patent"). The ITC instituted an investigation and found that Mentalix's integration of the scanners and software directly infringed the '344 patent. The ITC also found that Suprema had induced this infringement. The ITC issued a limited exclusion order covering the infringing scanners, associated software, and products containing the same that were manufactured overseas by, or imported by or on behalf of, Suprema or Mentalix.

On appeal, a panel of the Federal Circuit reversed, finding that the statutory language "articles that infringe" requires infringement at the time of importation and did not cover induced infringement in this case. The Federal Circuit then granted a petition to hear the case en banc to decide whether the ITC correctly concluded that it has authority to exclude articles used to infringe by an importer at the inducement of the articles' seller.

The Majority Decision

A majority of the en banc court upheld the ITC's interpretation that "articles that infringe" in § 337 covers articles used by an importer to infringe post-importation as a result of the seller's inducement. In reaching this conclusion, the court applied the framework from Chevron, Inc. v. Natural Resources Defense Council, Inc., to determine first whether Congress had addressed the specific question at issue and, if not, whether the ITC's interpretation was reasonable and should be upheld.

Examining the language of the statute, the court determined that Congress had not directly answered the question whether "articles that infringe" includes goods that, after importation, directly infringe at the inducement of the goods' seller. Specifically, according to the court, the phrase "articles that infringe" in § 337 does not unambiguously exclude inducement of infringement post-importation.

Because the statute did not answer the particular question at hand, the court next turned to the second step of the Chevron analysis to determine whether the ITC's interpretation of the statute was reasonable. In the court's view, the ITC's interpretation comported with the statutory text and recognized that "acts necessary for induced infringement, including acts of direct infringement, may not occur simultaneously at the time of importation." Examining the statutory language, the court noted that § 337 defines unfair trade acts to include "sale . . . after importation," supporting the ITC's interpretation that it can look to post-importation activity to identify the completion of infringement. Further, the ITC's interpretation, the court explained, aligned with the "fundamental purpose" of § 337 to prevent importation of infringing articles. According to the court, this purpose might be circumvented if foreign entities could avoid liability by importing articles that require post-importation combinations or modifications. Thus, the court upheld the ITC's interpretation that "articles that infringe" in § 337 covers articles used by an importer to directly infringe post-importation as a result of the seller's inducement.

Strategy and Conclusion

This case confirms that the ITC can stop imports of articles that infringe only after importation when foreign sellers induce that infringement. It may impact the scope of the ITC's authority to exclude imports in other situations as well. For example, at oral argument in ClearCorrect v. ITC on Aug. 11, 2015, a three-judge panel asked the parties how the Suprema decision impacts the ITC's authority to exclude digital transmissions under § 337.

Endnotes

¹ The Suprema opinion can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2015/Suprema%20v.%20ITC.PDF.