On August 10, 2015, the U.S. Court of Appeals for the Federal Circuit issued its en banc opinion in Suprema Inc. v. Int'l Trade Comm'n (2012-1170). In the opinion, the Federal Circuit determined to uphold the U.S. International Trade Commission's (the "Commission" or "ITC") position that allegations of induced infringement are actionable at the ITC even where the underlying direct infringement does not occur until after importation.
By way of background, this was an appeal from the Commission's final determination in Certain Biometric Scanning Devices, Components Thereof, Associated Software, and Products Containing the Same (Inv. No. 337-TA-720) finding a violation of Section 337 by Suprema, Inc. and Mentalix, Inc. In reaching its final determination, the Commission had held that the statutory language making unlawful the importation of "articles that ... infringe a valid and enforceable United States patent" covered the importation of goods that, after importation, are used by the importer to directly infringe at the inducement of the goods' seller. On appeal, a Federal Circuit panel disagreed with the Commission's conclusion on this issue, reasoning that there are no "articles that infringe" at the time of importation when direct infringement does not occur until after importation. See our December 19, 2013 post for more details. The Federal Circuit subsequently granted rehearing en banc and vacated the panel decision.
In the en banc opinion, the Federal Circuit first determined that it needed to review the Commission's determination on the inducement issue pursuant to the Supreme Court's framework set forth in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under this framework, a court reviewing an administrative agency's construction of a statute administered by the agency must ask two questions. The first is "whether Congress has directly spoken to the precise question at issue." If the answer to this first question is no, then the second question is "whether the agency's answer [to the precise question at issue] is based on a permissible construction of the statute."
The Federal Circuit then proceeded to apply the Chevron analysis to the question at hand. First, the court determined that "Congress has not directly answered whether goods qualify as 'articles that infringe' when the Commission has found that an importer used such goods, after importation, to directly infringe at the inducement of the goods' seller." Since Congress had not answered the question, the Federal Circuit then turned to the second step of the analysis, i.e., whether the Commission's interpretation of the statute was reasonable. The court then found that the Commission's interpretation was indeed reasonable because it was consistent with the statutory text at issue, with the text of Section 337 as a whole, and with Section 337's legislative history.
Accordingly, the court held that the Commission's interpretation that the phrase "articles that infringe" covers goods that are used by an importer to directly infringe post-importation as a result of the seller's inducement is reasonable. The court then remanded the appeal to the original panel for further proceedings consistent with the en banc opinion.
Judge O'Malley issued a dissenting opinion, which was joined by Chief Judge Prost and Judges Lourie and Dyk. In her dissent, Judge O'Malley argued that Section 337 unambiguously fails to provide the Commission with the authority to enter an exclusion order on the basis of infringement of a method claim when the underlying direct infringement occurs post-importation. Judge Dyk also issued a separate dissenting opinion.