Further to our October 26, 2011 post, the International Trade Commission (the “Commission”) on November 10, 2011, issued the public version of its opinion modifying the final initial determination (“ID”) issued by former Chief ALJ Paul J. Luckern on June 17, 2011, finding a violation of Section 337 in Certain Biometric Scanning Devices, Components Thereof, Associated Software, and Products Containing the Same (Inv. No. 337-TA-720).
By way of background, the Complainant in this investigation is Cross Match Technologies, Inc. (“Cross Match”) and the Respondents are Suprema, Inc. (“Suprema”) and Mentalix, Inc. (“Mentalix”) (collectively, the “Respondents”). Cross Match asserted that Suprema manufactures and imports hardware and software for scanning fingerprints. Suprema’s accused scanners are provided with software development kits (SDKs) that allow customers to create their own scanner operating software, and Mentalix integrates its own proprietary FedSubmit software with Suprema’s scanners. In the ID, ALJ Luckern determined that a violation of Section 337 had occurred by Suprema through its infringement of one or more of claims 10, 12, and 15 of U.S. Patent No. 5,900,993. ALJ Luckern also found a violation of Section 337 by reason of infringement of claim 19 of U.S. Patent No. 7,203,344 (the ‘344 patent). The ALJ found no violation of Section 337 with respect to U.S. Patent No. 7,277,562. See our June 21, 2011 post for more details. Cross Match, the Respondents, and the Commission Investigative Staff (“OUII”) each filed a petition for review of the ID. On August 18, 2011, the Commission determined to review the ID with respect to it’s finding of a violation of Section 337 based on infringement of claim 19 of the ‘344 patent and requested briefing on (1) who infringes claim 19 of the ‘344 patent and what type of infringement occurred, and (2) whether there is a sufficient nexus between the infringer’s unfair acts and importation to find a violation of section 337. See our August 24, 2011 post for more details.
Infringement of Claim 19 of the ‘344 Patent
ALJ Luckern’s ID found that several of Suprema’s RealScan products infringe claim 19 of the ‘344 Patent, but identified neither the infringer nor whether the infringement was direct or indirect. Cross-Match and the OUII argued that Mentalix directly infringed claim 19 of the ‘344 patent, at least when Mentalix integrated its own FedSubmit software with the Suprema scanner units and tested the products in the U.S. Respondents do not contest that Mentalix directly infringed claim 19 through such testing but contend there is an insufficient nexus between these acts and the importation of Suprema’s scanners to support finding a violation of section 337. Cross Match further asserted that Suprema indirectly infringed claim 19 through inducement and contributory infringement, while OUII argued only for inducement.
The Commission first determined that Mentalix indeed directly infringed claim 19 when it integrated its FedSubmit software with the imported Suprema scanners and SDK software to produce a scanner system that practices claim 19. The Commission further determined that the required nexus between this infringement and the importation of scanners was provided by the evidence discussed below regarding Suprema’s induced infringement of claim 19.
With respect to inducement, the Commission determined that Suprema aided and abetted Mentalix’s direct infringement by collaborating with Mentalix to import the scanners and helping to adapt Mentalix’s FedSubmit software to work with Suprema’s imported scanners and SDK to practice claim 19 of the ‘344 patent. The Commission further found that Suprema “willfully” blinded itself to the infringing nature of Mentalix’s activities and deliberately avoided acquiring knowledge of the ‘344 patent by (1) not acting on the numerous references to the ‘344 patent within the ‘562 patent, including separate incorporations by reference on at least three occasions; (2) the fact that the ‘562 patent and ‘344 patent have the same assignee, Cross Match; (3) both patents have overlapping inventors; and (4) not obtaining an opinion of counsel that would have undoubtedly uncovered the ‘344 patent.
Regarding contributory infringement, the Commission determined that Cross Match failed to prove that the accused products had no substantially non-infringing uses. In particular, the Commission found it inconsistent that Cross Match alleged that several third parties directly infringed certain claims of the ‘562 and/or ‘344 patents, but Suprema chose not to allege that any of these third parties specifically infringed claim 19 of the ‘344 parties. The Commission further determined that the operation of Suprema’s scanners and SDK requires development of unique end-user software, and that these scanners and SDK are capable of substantial non-infringing uses with third-party customers other than Mentalix.
Based on the above, the Commission determined to modify-in-part the ID to find that (1) Mentalix directly infringed claim 19 of the ‘344 patent; (2) Suprema induced infringement of claim 19; and (3) Suprema did not infringe claim 19 through contributory infringement.
Remedy and Bonding
The Commission determined that the appropriate remedy for the violation was a limited exclusion order prohibiting the unlicensed entry of biometric scanning devices, components thereof, associated software and products containing the same that infringe one or more of claims 10, 12, and 15 of the ‘993 patent and claim 19 of the ‘344 patent. The Commission also determined that based on Mentalix’s “commercially significant” inventory of accused scanner systems using the FedSubmit software, it is appropriate to issue a cease and desist order prohibiting Mentalix from importing, selling, marketing, advertising, distributing, offering for sale, transferring (except for exportation), and soliciting U.S. agents or distributors for such infringing devices, components, software, and products. The Commission clarified, however, that a cease and desist order directed to Suprema, a foreign entity, was not warranted, based on long-standing precedent and the difficulty in enforcing such an order. The Commission further determined there was no need for an order excluding electronic importation, since Suprema’s SDK software, by itself was not found to infringe directly or indirectly, and enforcing such provisions is impractical. The Commission also agreed with the ALJ that Cross Match would be subject to a reporting requirement with respect to the ‘993 patent to ensure that it continues to exploit the patent while the remedy is in place. Finally, the Commission determined that the public interest factors did not preclude this relief and that a 100% bond should be required during the period of Presidential review.