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Federal Circuit Limits the ITC's Authority to Address Post-Importation Induced Infringement

By Mary Schnoor  – Edited by Mengyi Wang Suprema, Inc. v. Int'l Trade Comm'n, No. 12-1170 (Fed. Cir. Dec. 13, 2013) Slip Opinion [caption id="attachment_4202" align="alignleft" width="180"] Photo By: John Leech - CC BY 2.0[/caption] In October 2011, the International Trade Commission ("ITC") issued an exclusion order blocking the importation of Suprema, Inc.'s ("Suprema") fingerprint scanners after it determined that Suprema induced its customers' direct infringement of various U.S. method patents. In December 2013, the United States Court of Appeals for the Federal Circuit vacated and remanded the ITC’s order, holding that the ITC's authority to exclude extended only to "articles that ... infringe a valid and enforceable United States patent at the time of importation," and that the ITC's restriction on importing Suprema's scanners should thus be revised to reflect the limited scope of that authority. Suprema, slip op. at 4. The ITC and Cross Match, Inc. ("Cross Match"), whose patents the ITC found infringed, have petitioned for a rehearing en banc of the Federal Circuit's December 2013 ruling. Combined Petition for Panel Rehearing and Rehearing En Banc of Appellee International Trade Commission, Suprema, hosted by Patently-O; Intervenor’s Combined Petition For Rehearing and Rehearing En Banc, Suprema, hosted by Patently-O. Patently-O provides an overview of the Federal Circuit's ruling and the ITC’s petition for a rehearing en banc. Mondaq thoroughly reviews the decision, and the Baker Botts IP Report gives a summary and advice for patent practitioners litigating method patents in the ITC. Suprema's fingerprint scanners did not directly infringe U.S. Patent No. 7,203,344 (“the ’344 patent”), which covers both hardware and software. However, when Mentalix, Inc., one of Suprema's U.S. customers, loaded its domestically developed software onto Suprema's scanners in the United States, it allegedly directly infringed Cross Match's ’344 patent. Suprema, slip. op. at 5. The ITC, upon finding Suprema liable for induced infringement, barred the importation of its fingerprint scanners into the United States. Id. The ITC based its exclusion order on a violation of 19 U.S.C. § 1337(a)(1)(B)(i) (“Section 337”), which gives the ITC the authority to bar importation of “articles that . . . infringe a valid and enforceable United States patent.” Id. at 16. However, the Federal Circuit concluded that Section 337 only applies when the articles potentially subject to an exclusion order directly infringe a U.S. patent at the time of importation. Id. at 17. According to the court, there can be no induced infringement of a patent without an underlying act of direct infringement. Id. at 20. Thus, the ITC “may not invoke inducement to ban importation of articles which may or may not later give rise to direct infringement . . . based solely on the alleged intent of the importer.” Id. at 25. Judge Reyna would have upheld the ITC’s authority to predicate a Section 337 violation on a theory of induced infringement where the direct infringement occurs after importation. Suprema, slip op. at 11 (Reyna, J., concurring in part and dissenting in part). In his view, the majority opinion “overlooks the Congressional purpose of Section 337, the long established agency practice by the Commission of conducting unfair trade investigations based on induced patent infringement, and related precedent by this Court confirming this practice.” Id. at 4. In particular, Judge Reyna criticized the majority for "legaliz[ing] the most common and least sophisticated form of circumvent[ing]" ITC exclusion orders – importing articles in a disassembled state. Id. at 13. The majority's controversial decision limits the ITC’s authority to banning the importation of articles that directly infringe a U.S. patent at the time of importation, thereby making more difficult the establishment of a Section 337 violation based on induced infringement. Patently-O notes that the Federal Circuit, by requesting briefing from the accused infringers, has signaled its interest in rehearing the case en banc.