On December 13, 2013, the U.S. Court of Appeals for the Federal Circuit issued its opinion in Suprema v. ITC (2012-1170) and Cross Match Tech., Inc. v. ITC (2012-1026, -1024). This was an appeal by Suprema, Inc. (“Suprema”) and Mentalix, Inc. (“Mentalix”) and a cross-appeal by Cross Match Technologies, Inc. (“Cross Match”) from a final determination in Certain Biometric Scanning Devices, Components Thereof, Associated Software, and Products Containing the Same (Inv. No. 337-TA-720).

In the opinion, the Federal Circuit affirmed the Commission’s final determination of no violation of Section 337 by Suprema and Mentalix with respect to certain claims of U.S. Patent No. 7,277,562 (the ‘562 patent) and the Commission’s final determination that Suprema violated Section 337 with respect to certain claims of U.S. Patent No. 5,900,933 (the ‘933 patent). The Federal Circuit also vacated and remanded the Commission’s final determination that Suprema and Mentalix violated Section 337 with respect to certain claims of U.S. Patent No. 7,203,344 (the ‘344 patent).

The ‘562 Patent

According to the opinion, the Commission fully adopted the ALJ’s initial determination regarding the ‘562 patent. The ALJ found that Cross Match failed to prove that any accused Suprema products infringed the asserted claims of the ‘562 patent. On appeal, Cross Match challenged the ALJ’s interpretation of the term “capture” as it appears in the asserted claims of the ‘562 patent. 

At the ITC, Cross Match proposed to the ALJ that “capture” meant “acquiring, by the scanner, for processing or storage.” The ALJ adopted this construction and relied on it when reaching his initial determination. On appeal, however, Cross Match suggested that the ALJ’s construction of “capture” was wrong and that “acquiring, by the scanner, for processing or storage” does not require the scanner to perform all of the steps of the claimed “capturing” process, and that, instead, the scanner only needs to be involved in the process.

In reviewing the claim construction, the Federal Circuit concluded that the ALJ’s construction of the term “capture” was correct and that the ALJ’s finding of infringement was supported by substantial evidence. The Federal Circuit found that there was no real dispute over the construction because the ALJ adopted Cross Match’s proposed construction, and that both the claim language and the specification plainly supported the construction. As such, the Federal Circuit affirmed the Commission’s determination that the ‘562 patent was not infringed and that there was no violation of Section 337. 

The ‘933 Patent

According to the opinion, the Commission adopted the ALJ’s initial determination and found that certain products that Suprema imports infringed certain claims of the ‘993 patent. On appeal, Suprema challenged the ALJ’s claim construction, the infringement finding based on that construction, and the holding that the ‘993 patent was valid and would not have been obvious to a person skilled in the art. 

The claim construction dispute related to the phrase “said second lens unit being on the image side of the first lens unit.” Suprema argued that the claimed lens system excluded “non-lens elements” and “off-axis optics,” and that therefore, there cannot be “non-lens elements” between the “lens units.” After analysis, the ALJ held that the “optical system” “could include non-lens elements, distortion correction prisms, holographic optical elements, and off-axis optics.” The ALJ relied on the patent’s written description as well as Suprema’s concession that the “optical system” could include the supposedly excluded items and that it was only the lens system that could not include those items. 

On review, the Federal Circuit looked to the specification of the ‘993 patent and found that the written description only seemed to disclaim prisms, holographic optical elements, and off-axis optics when used as the means to correct distortion. Suprema’s only non-infringement argument based on the disputed claim term was that its mirrors located between the lens elements in its products precluded a finding of infringement. The Court found, however, that Suprema never contended that the mirrors corrected distortion. Therefore, the Federal Circuit concluded that the ALJ’s finding of infringement was supported by substantial evidence.

Additionally, the Federal Circuit reviewed the ALJ’s finding that the ‘993 patent was not obvious in light of prior art. The Federal Circuit affirmed the Commission’s holding that Suprema failed to adduce clear and convincing evidence of a motivation to combine the two prior art patents, and that the asserted claims of the ‘993 patent would not have been obvious to a person skilled in the art. Therefore, the Federal Circuit affirmed the Commission’s holding that Suprema directly infringed the ‘993 patent, and left intact the exclusion order regarding the two optical systems that infringed the ‘993 patent. 

The ‘344 Patent

According to the opinion, the Commission found that Suprema was (1) wilfully blind to the ‘344 patent, (2) studied and emulated Cross Match’s products before willfully blinding itself to the infringing nature of Mentalix’s activities, and (3) actively encouraged Mentalix’s infringing activities. Therefore, the Commission found that Suprema had induced infringement under 35 U.S.C. § 271(b) and that inducement formed a basis for a finding of a Section 337 violation.

On appeal, Suprema contended that it does not import infringing articles because the articles do not directly infringe the method of claim 19 of the ‘344 patent at the time of importation, as the alleged infringement only occurs when the scanners are combined with Mentalix’s domestically developed software. Suprema, therefore, argued that the allegations of induced infringement did not adequately connect the fact of importation to the ultimate infringement. 

On review, the Federal Circuit conducted a statutory analysis to determine the scope of the Commission’s authority to issue exclusion orders. The Federal Circuit found that under Section 337, the focus of the Commission’s authority is on the infringing nature of articles at the time of importation, not on the intent of the parties with respect to the imported goods. Additionally, the Court found that while an inducing act must precede the infringement act it induces, it is not a completed inducement under 35 U.S.C. § 271(b) until there has been a direct infringement. Therefore the Federal Circuit held that the statutory grant of authority under Section 337 does not extend to the conduct proscribed in § 271(b) where the acts of the underlying direct infringement occur post-importation. The Court further held that, for inducement, the only pertinent articles are those that directly infringe at the time of importation. 

Because the Federal Circuit found that the Commission had no authority to premise an exclusion order on inducement when the direct infringement occurred after importation the court vacated the finding of infringement of the ‘344 patent. The Court also vacated both the cease and desist order and limited exclusion order in part, and remanded the case so that the orders could be revised.

Judge Reyna Dissenting Opinion

Although agreeing with the majority opinion in most respects, Judge Reyna wrote a dissenting opinion based on his belief that the Commission does have the authority to stop induced infringement at the U.S. border. Specifically, Judge Reyna stated that the majority ignored the fact that Section 337 is a trade statute designed to provide relief from specific acts of unfair trade, including those acts that lead to the importation of articles that will result in harm to a domestic industry by infringing a valid and enforceable patent. Therefore, Judge Reyna believed that the majority erred in using § 271 to introduce a temporal limitation on the moment that infringement liability must be complete for the purposes of the Commission’s authority to remedy violations of Section 337.