On Thursday, February 5, the Federal Circuit sat en banc to hear oral arguments in Suprema v. ITC, involving the authority of the ITC to issue exclusion orders under Section 337 based solely on a theory of induced infringement of method claims. Questioning from the bench indicated that the court is split not only on whether to reinstate the panel’s majority opinion, but also on the precise analysis that should be used to decide this case.

The case involves optical scanners that the ITC excluded despite the fact that the scanners only infringe, if at all, after they have been loaded with a particular software post-importation.  In December 2013, a split panel of the Federal Circuit partially vacated the ITC’s decision on the grounds that the scanners did not constitute “articles that infringe” under § 337(a)(1)(B)(i) at the time of importation.

Ambiguity and Deference to the ITC

The parties spent much of the time fielding questions regarding whether the relevant term from section 337—“articles that infringe”—is ambiguous, and whether the ITC’s interpretation of that term is reasonable. Judge Taranto suggested that the term might be shorthand for something broader than its simple textual meaning. Judge Reyna, author of the prior opinion’s dissent, questioned why Suprema would invoke legislative history to clarify the meaning of the term if it was not ambiguous. Both judges noted that, if ambiguous, the analysis should proceed to the reasonableness of the ITC’s interpretation under the Chevron doctrine. A number of the judges also seemed troubled about an interpretation of “articles that infringe” that would exclude large categories of products (i.e., products made by patented methods that are not completed until after importation), that would carve out a recognized basis of infringement liability in 35 U.S.C. § 271, or that would make it easier for parties to easily circumvent liability in the ITC.

Judge O’Malley seemed to disagree with the notion that the statute was inherently ambiguous. She mentioned that this is a case of statutory interpretation and indicated that ambiguity does not lie simply because the parties disagree with the court’s statutory interpretation. Chief Judge Prost who, along with Judge O’Malley comprised the panel majority of the prior opinion, also seemed to have trouble finding any ambiguity.

Chief Judge Prost further questioned whether granting the ITC’s construction deference would lead to unreviewable import decisions made at the discretion of individual Customs border agents. Several other judges including Judge Newman also questioned the reasonableness of excluding all of the articles in question when only a portion might be used to infringe the patent.

ITC Precedent

Judge Dyk took issue with Appellees’ contention that the Commission’s ruling aligned with its prior decisions.  In particular, he pointed out that all other cases involving a Section 337 exclusion orders based on theories of indirect infringement either involved articles that lacked substantial non-infringing uses or articles that were shipped with instructions on how to infringe.  This case has neither.  Judge Newman probed whether the Commission should look to whether it is feasible to determine if there will be future induced infringement to support an exclusion order based on induced infringement.

When discussing whether the ITC should look to the intent of the importing party, Judge Wallach offered that it already does so when reviewing criminal cases.

Judge O’Malley pointed out that the ITC has already agreed that it lacks the authority to issue exclusion orders under a theory of direct infringement of a method claim and only a method claim is at issue in the present case. Judge Lourie also questioned how an “article” could infringe a method patent, which requires performance of all the steps.

Remedies

Several judges probed the parties to explain the feasibility of parties seeking certification to avoid the exclusion order. Judge Chen asked the parties what Suprema must assert to remove its perceived willingness to induce. Judge O’Malley suggested that certification did not remove all dangers since a party could still be held in contempt if the commission found that they acted with willful blindness.  Judge Chen also questioned whether Section 337 was a violation/liability statute or a remedies statute and proposed that the ITC’s interpretation was looking to past acts to justify excluding current or future imports.

A decision is expected within the next several months.