The International Trade Commission and Cross Match Technologies Inc. requested rehearing of the December panel decision of the U.S. Court of Appeals for the Federal Circuit in Suprema Inc. and Mentalix Inc. v. U.S. International Trade Commission.1  InSuprema, the panel concluded that the ITC has no authority under Section 337 to find induced infringement of method claims where the articles at issue do not directly infringe the claims at the time of importation.2  As a result, the Federal Circuit vacated an exclusion order barring the importation of Suprema’s fingerprint scanners based on the ITC’s finding that Suprema induced infringement of Cross Match’s method patent claim.

The ITC Investigation

In the underlying ITC case, Certain Biometric Scanning Devices,3 the Complainant, Cross Match, alleged that the Respondent’s, Suprema, biometric (fingerprint) scanners infringed Cross Match’s fingerprint scanning method patent when they were imported into the U.S., subsequently combined with Co-Respondent Mentalix’s proprietary software, and then operated.  The ITC issued an exclusion order based on a finding that Suprema induced infringement when direct infringement took place after the scanners were imported into the U.S. and subsequently combined with Mentalix’s software.  It is worthwhile noting that Suprema’s scanners were not found to infringe Cross Match’s patent when combined with software developed by other customers.

The Federal Circuit Decision

On appeal, the Federal Circuit concluded that “[f]or inducement, the only pertinent articles are those which directly infringe—at the time of importation.”4  Therefore, because infringement could only occur after importation into the U.S. when the scanners were combined with Mentalix’s software, the Court determined that the ITC lacked the authority to enter an exclusion order directed to Suprema’s scanners on the premise that Suprema induced the infringement of the method claimed in the patent after importation.

Judge Reyna dissented by reasoning that the majority’s holding ignored that the ITC was created to protect U.S. businesses from unfair trade and “created a fissure in the dam of the U.S. border through which circumvention of Section 337 will ensue, thereby harming holders of U.S. patents.”5  Judge Reyna noted that, by limiting the ITC’s power to exclude articles that “already” infringe, the panel majority has created a loophole that may allow importers to “import disassembled components of a patented machine, or import an article capable of performing almost all of the steps of the patented method, but reserve final assembly of the last part or performance of the last step for the end-user in the United States and . . . fall outside the Commission’s reach.”6

Potential Implications

Suprema may fix the scope of the ITC’s authority over the induced infringement of method claims by limiting the “articles that . . . infringe” phrase of Section 337 to only those articles that infringe at the time of importation.  In its combined petition for panel rehearing and rehearing en banc, the ITC argued that “the panel not only overturned decades of commission practice affirmed by the courts, but also upended the law of induced infringement.”  Cross Match argued in its petition that the panel’s decision “drastically curtails” the reach of Section 337 of the Tariff Act.

In response to the ITC and Cross Match petitions, the Federal Circuit requested briefing from Suprema.  Thus, it appears that the Federal Circuit is interested in potentially rehearing the case.  Suprema responded to the Federal Circuit’s request by arguing that overturning the ruling would “impermissibly expand” the ITC’s authority.  Suprema noted that “the commission is not, and should not be, the default venue for all patent infringement claims with some international connection.”  It contended that “[w]here there is no importation of an infringing article, Congress has dictated that the federal courts are the proper venue in which to seek a remedy.”

For now, patent litigants should closely consider the viability of ITC litigation that is based on a theory of induced infringement of a method claim.  Although the Federal Circuit clarified that it was not divesting the ITC of authority to deal with indirect infringement by an “inducer,” the Court emphasized that such authority would be limited to situations “where the article itself directly infringes when imported” rather than when the imported article may or may not later give rise to direct infringement.7

Patent litigants should also continue to monitor the Suprema decision as it either continues to make its way through the appeal process at the Federal Circuit or as it is applied to subsequent cases at the ITC.  These developments will help Complainants understand the scope and nature of their ability to pursue induced infringement claims before the ITC under Section 337.