But It Hasn’t Infringed Yet: En Banc Federal Circuit Upholds ITC Authority to Ban Articles that Induce Infringement After Importation

Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337) makes importing “articles that infringe” a United States patent unlawful and grants authority to the ITC to exclude these articles. In Suprema Inc. v. International Trade Commission, No. 12-1170 (Fed. Cir. Aug. 10, 2015), a divided en banc Federal Circuit held that the ITC has authority to exclude products that infringe after importation as a result of inducement by a foreign seller.

At issue were fingerprint scanners produced by Korea-based Suprema Inc., which require a computer and custom-developed software to function. Suprema does not make or sell this software, but does provide a software development kit with instructions for how to develop programs that control the scanners. During the investigation, the ITC found that Suprema induced infringement of a method claim of a U.S. patent when the customer pairs the scanners with certain software after importation. Based on this finding, the ITC issued an exclusion order preventing Suprema’s scanners from entering the United States. On appeal, a Federal Circuit panel vacated the exclusion order, limiting the ITC’s authority to goods that directly infringe at the time of importation.

The en banc court vacated the panel decision and, applying the deferential Chevron framework, upheld the ITC’s interpretation that “articles that infringe” under Section 337 include articles that were induced by a foreign seller to infringe after importation. The Court explained that although the term “infringement” is understood to encompass both direct and indirect infringement, the “articles that” language in Section 337 introduces textual uncertainty not clarified by statute or its legislative history. In light of this ambiguity, the Court found the ITC’s interpretation reasonable, relying on the accepted meaning of “infringement,” the absence of inconsistent legislative history, and a history of precedent affirming ITC determinations arising from induced infringement. The Court also found that the ITC’s “gap-filling” interpretation furthers the statutory purpose and provides relief “for a distinct unfair trade act and induced infringement” and prevents “an open invitation to foreign entities . . . to circumvent Section 337 by importing articles in a state requiring post-importation combination or modification before direct infringement could be shown.”

The dissent would have found the language “articles that infringe” to unambiguously refer to “tangible ‘articles.’” The dissent rejected the majority’s reliance on policy and considered patent holders “well protected under the patent laws” with the ability to bring infringement actions in the district courts. Judge Dyk also wrote a separate dissent, criticizing the ITC’s exclusion order because it excluded all of Suprema’s scanners regardless of whether they would eventually be used to infringe after importation.

Suprema was a closely-watched case with technology entities filing numerous amicus briefs. The Federal Circuit’s ruling reduces uncertainty regarding the scope of the ITC’s authority. The impact of Suprema is already influencing other appeals, including ClearCorrect Operating v. ITC, related to whether digital data (used to create 3D models for clear braces) constitutes an “article” under Section 337, in which the Court has requested supplemental briefing regarding Suprema.