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Article: October 2015: ITC Update

Business Litigation Reports

Suprema: Restoring the Reach of Section 337. On August 10, 2015, the Federal Circuit resolved the largest challenge to the International Trade Commission’s (“ITC”) jurisdictional reach in recent years: whether 19 U.S.C. § 1337 (“Section 337”) allows the ITC to issue remedies over induced infringement of method claims, and whether Section 337’s broad language encompasses articles that do not directly infringe method claims of an asserted patent at the time of importation, but only after the article is combined or modified domestically—in this case by having software installed on the imported device.

Background. Cross Match Technologies, Inc. filed a complaint with the ITC on May 11, 2010, alleging that Suprema, Inc.’s imported fingerprint scanners infringed Cross Match’s patents, either by themselves or when combined post-importation with software created and installed by Mentalix, Inc. See Suprema, Inc. v. Int’l Trade Comm’n, No. 2012-1170, at 4-5 (Aug. 10, 2015) (“Suprema II”); see also Certain Biometric Scanning Devices, Components Thereof, Associate Software, and Products Containing the Same, Inv. No. 337-TA-720, Comm’n Op. at 3-4 (Nov. 10, 2011) (“Scanning Devices”). Former Chief Administrative Law Judge Luckern found that the combination of Suprema’s imported devices with Mentalix’s domestic software directly infringed the asserted claims and that Suprema induced this infringement by, inter alia, providing a software development kit to Mentalix; therefore finding a violation of Section 337, which the Commission upheld on review. See generally Scanning Devices, Comm’n Op.; Scanning Devices, Initial Determination (June 17, 2011).

Suprema and Mentalix appealed several of the Commission’s findings to the Federal Circuit, including the finding of direct infringement by Mentalix and indirect infringement by Suprema of claim 19 (a method claim) of U.S. Patent No. 7,203,344. Suprema II, No. 2012-1170 at 10. A divided three-judge panel of the Federal Circuit reversed, finding that Section 337 has a temporal requirement – that the ITC’s jurisdiction over “articles that infringe” requires accused products to be infringing at the time of importation. See Suprema, Inc. v. Int’l Trade Comm’n, 742 F.3d 1350, 1363 (Fed. Cir. 2013) (“Suprema I”). The panel’s December 13, 2013 opinion concluded that the ITC’s authority did not reach articles that only infringed asserted method claims following post-importation activities. See Suprema I, 742 F.3d at 1353 (“[A]n exclusion order based on a violation of § 337(a)(1)(B)(i) may not be predicated on a theory of induced infringement where no direct infringement occurs until post-importation.”). The panel’s decision was vacated in May 2014, when the Federal Circuit granted an en banc hearing, reinstating Suprema and Mentalix’s appeals.

The En Banc Decision. Circuit Judge Reyna wrote the opinion for the court, with four of the ten-Judge panel dissenting. The Court applied a Chevron analysis to find the ITC’s interpretation of Section 337 was “consistent with the statutory text, policy, and legislative history of Section 337.” Suprema II at 20; see also Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The Federal Circuit held that Section 337 was designed to be “broad enough to prevent every type and form of unfair practice” and that the ITC’s jurisdiction “should not be limited to, or by, technical definitions of those types of acts.” Suprema II at 21-22 (emphasis in original) (citations omitted).

Indeed, the Court expressly protected the ITC’s right to investigate violations of Section 337 involving induced infringement, holding:

“The panel’s interpretation of Section 337 would eliminate relief for a distinct unfair trade act and induced infringement. There is no basis for curtailing the Commission’s gap-filling authority in that way. Indeed, the practical consequence would be an open invitation to foreign entities (which might for various reasons not be subject to a district court injunction) to circumvent Section 337 by importing articles in a state requiring postimportation combination or modification before direct infringement could be shown.”

Id. at 25. In so finding, the Federal Circuit held that Section 337 did not unambiguously exclude induced infringement related to post-importation activities from the ITC’s jurisdiction, see id. at 12-19, and that the ITC’s interpretation of Section 337 was consistent with both Congress’s intent and the statute’s text. See id. at 19-26.

Going Forward. The ITC still faces significant questions as to how far-reaching Section 337’s jurisdiction truly is, such as in the recently-argued ClearCorrect case, in which the ITC interpreted the definition of “articles” under Section 337 to include electronic transmissions, thus holding that Section 337 grants the ITC jurisdiction over digital models and data that were uploaded from Pakistan to a computer server in the U.S. ClearCorrect Operating, LLC v. Int’l Trade Comm’n, 2014-1527 (Fed. Cir. 2015). Nevertheless, the Federal Circuit’s protection of Section 337’s ability to remedy post-importation infringement ensures that the ITC will remain an important venue for litigating method patents.