ITC can ban goods that may induce patent infringement, says Federal Circuit
The US International Trade Commission (ITC) can interpret section 337 of the 1930 Tariff Act to halt the importation of goods it believes may induce patent infringement once they enter the US border, a divided appeals court has ruled.
Yesterday, August 10, the US Court of Appeals for the Federal Circuit ruled in a 6-4 decision that the ITC can interpret rule 337 to “cover the importation of goods that, after importation, are used by the importer to directly infringe at the inducement of [the] goods’ seller”.
Section 337 of the act enables the ITC to stop the importation of “articles that infringe a valid and enforceable patent”.
But the wider question at issue, on whether the ITC can stop the importation of a product under the grounds of induced infringement, was raised in an ITC complaint filed in 2010 by technology company Cross Match Technologies (CMT) against Korean-based biometrics company Suprema.
CMT complained that fingerprint scanning devices manufactured by Suprema infringed its US patent number 7,203,344, which covers the method of generating a fingerprint image on a device.
Suprema manufactured its own scanning devices abroad and sold them to a US-based distributor called Mentalix.
Suprema’s scanning devices do not work unless they are connected to a computer with the correct software. In shipping the devices, Suprema also provided a Software Development Kit (SDK).
The ITC begun its investigation in 2010 and an administrative law judge (ALJ) ruled that there had been a “violation” of section 337 and that the ‘344 patent had been infringed when the devices were used with the SDK.
In June 2011, the ITC reviewed the ALJ’s decision and determined that Mentalix was liable for direct infringement for distributing the products within US borders and that Suprema was liable for induced infringement by enabling Mentalix to sell them.
Suprema, the ITC said, had “wilfully blinded” itself to infringement of the patent in selling the products to Mentalix.
Both Suprema and Mentalix appealed against the decision at the federal circuit and initially found success in 2013.
A divided panel had determined that the ITC had overstepped its mark in interpreting section 337 to “issue an exclusion order predicated on induced infringement” and vacated the ITC’s direct and induced infringement findings.
CMT requested an en banc hearing and yesterday the court reversed its ruling on the issue of induced infringement.
Judge Jimmie Reyna, writing the majority opinion, said the term “infringe” in the act “does not narrow section 337’s scope to any particular subsections”.
“Infringement,” he added, “is a term that encompasses both direct and indirect infringement.”
Reyna concluded that because section 337 does not directly “answer the question before us”, the ITC is entitled under the Chevron USA v Natural Resources Defense Council decision to interpret the law under a “permissible construction”.
Under Chevron, a government body can interpret the law under such a “construction” when Congress has not “directly spoken to the precise question at issue”.
But Judge Kathleen O’Malley, writing the dissenting opinion, said allowing the ITC to use Chevron opens a “Pandora’s box.”
She added that the “plain language” of section 337 “reveals that Congress did not grant permission to issue an exclusion order based solely on a finding of induced infringement.”
The case will now return to the original three-judge panel to enter a verdict consistent with the majority en banc opinion.
Neither Darryl Woo, partner at law firm Vinson & Elkins and representing Suprema, nor Clark Cheney, attorney advisor at the ITC, had responded to a request for comment at the time of publication but we will update the story should either party get in touch.
