In a recent and controversial decision, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) introduced a temporal requirement to the theory of induced infringement under the Tariff Act of 1934 (19 U.S.C. § 1337(a)(1)(B)(ii)) (“Section 337”). Specifically, on December 13, 2013, the Federal Circuit inSuprema, Inc. and Mentalix, Inc. v. ITC and Cross Match Technologies, Inc., No. 2012-1170, vacated a decision by the U.S. International Trade Commission (“ITC”) finding induced infringement of a method claim in a situation where direct infringement only occurs when the accused product is combined with domestically developed software. The Federal Circuit concluded that an exclusion order based on a violation of Section 337 may not be predicated on a theory of induced infringement under 35 U.S.C. § 271(b) where direct infringement does not occur until after importation of the articles the exclusion order would bar.
In May 2010, Cross Match Technologies, Inc. (“Cross Match”) filed a complaint with the ITC asserting that Suprema, Inc. (“Suprema”) and Mentalix, Inc. (“Mentalix”) infringed Cross Match’s patent directed to a method for capturing and processing a fingerprint image. Suprema, a Korean company, imported scanners designed for scanning fingerprints to a number of U.S. customers, including Mentalix. Once imported, Mentalix loaded their own software onto Suprema’s scanners. The ITC found that Mentalix directly infringed Cross Match’s patented method when it combined Suprema’s products with its own software, and that Suprema had induced infringement of the patented method under 35 U.S.C. § 271(b), which formed the basis for a Section 337 violation.1Based on these findings, the ITC issued a limited exclusion order, in addition to a related cease and desist order, directed to certain scanning devices imported by or on behalf of Suprema and Mentalix.
Federal Circuit Decision
In determining whether the ITC had the authority to grant an exclusion order addressed to Suprema’s scanners, the Federal Circuit first looked to the language of Section 337, which states:
(1) Subject to paragraph (2), the following are unlawful, and when found by the Commission to exist shall be dealt with, in addition to any other provision of law, as provided in this section:
(B) The importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that—
(i) infringe a valid and enforceable United States patent or a valid and enforceable United States copyright registered under title 17; or ....
19 U.S.C. § 1337(a) (emphasis added). To determine whether the imported goods are “articles that ... infringe,” the Federal Circuit turned to 35 U.S.C. § 271, and specifically to the language of § 271(b) defining induced patent infringement.2 In addition, reasoning that “[t]o prevail on inducement, ‘the patentee must show, first that there has been direct infringement,’”3 the Federal Circuit panel concluded that inducement is not completed under § 271(b) until there has been a direct infringement. Thus, emphasizing that Suprema’s fingerprint scanners were found to be infringing only afterimportation into the U.S. and after being combined with Mentalix’s scanning software, the Federal Circuit held that the statutory grant of authority in Section 337 does not extend to the conduct proscribed in § 271(b) where the acts of underlying direct infringement occur post-importation. Accordingly, the Federal Circuit vacated the exclusion order.
In a strongly critical dissent, Judge Reyna opined that the majority’s opinion ignores that Section 337 is a trade statute designed to provide relief from specific acts of unfair trade, including acts that lead to the importation of articles that will result in harm to a domestic industry by virtue of infringement of a valid and enforceable patent (i.e., “the sale for importation”). Judge Reyna noted that, for decades, the ITC found Section 337 violations where respondents actively induced direct infringement in the United States in situations where infringement did not occur until after importation of the articles involved.4 He also noted that the Federal Circuit has recognized the ITC’s authority to premise a Section 337 violation on a finding of induced infringement on numerous occasions.5 Judge Reyna further criticized the majority’s holding as a means for allowing importers to circumvent Section 337 liability for indirect infringement, in addition to almost all forms of method patent infringement6 not involving product-by-process claims, resulting in further limits to the remedies available to patent holders.
In view of this decision, the Federal Circuit appears to be limiting the phrase “articles that ... infringe” of Section 337 as referencing the status of the articlesat the time of importation. However, we believe that the ITC will seek en bancreview of this decision, and thus further review of this ruling is likely in the near future. In the meanwhile, patent practitioners litigating method patents in the ITC would be well advised to consider the Federal Circuit’s Suprema, Inc. v. ITC decision when determining the viability of ITC litigation on a theory of induced infringement where the direct infringement does not occur until after the infringing articles are imported.