Suprema, Inc. v. ITC Federal Circuit En Banc Hearing

Today, the en banc Federal Circuit heard oral argument in Suprema, Inc. v. International Trade Commission, No. 2012-1170. The case has significant implications for the scope of the ITC’s authority over claims of induced patent infringement. At issue in the appeal is whether the ITC has authority under 19 U.S.C. § 1337 to issue exclusionary orders to remedy induced infringement of method claims where the direct infringement does not occur until after the article is imported into the United States.

Background:
The case originated when the patent owner, Cross Match Technologies, Inc., filed a patent infringement complaint against Suprema, Inc. and Mentalix, Inc. at the U.S. International Trade Commission under 19 U.S.C. § 1337. Suprema is a Korean-based company that manufactures fingerprint scanners in Korea that are then imported into the United States. Mentalix, Inc. is a Texas-based supplier of fingerprint scanning systems that purchases Suprema’s scanners, integrates its own software into the scanners in the United States, and thereafter sells the combined scanner/software product to end users. 

Cross Match’s complaint alleged that the sale of Suprema’s fingerprint scanners combined with Mentalix’s software infringed method claims directed to the capture and processing of fingerprint images. The ITC investigation that ensued was captioned Certain Biometric Scanning Devices, Components Thereof, Associated Software, and Products Containing the Same, Inv. No. 337-TA-720. Ultimately, the ITC determined that the accused combination sold by Mentalix directly infringed the asserted claims and that Suprema induced this infringement. The ITC issued exclusionary orders prohibiting the importation of Suprema’s scanners and the sale by Mentalix of the accused combination in the United States.

In the Federal Circuit’s original decision on appeal, a split panel held that a violation of 19 U.S.C. § 1337 cannot be predicated on a theory of induced infringement where direct infringement does not occur until after the importation of the articles at issue. Suprema, Inc. v. ITC, 742 F.3d 1350 (Fed. Cir. 2013). In the panel’s view, the statute authorizes the ITC to issue remedial orders based on induced infringement only if the requisite direct infringement occurs before or at the time of importation. The decision, however, was vacated by the full court in May 2014, when it granted en banc rehearing and reinstated the appeal.

The Primary Arguments:
During today’s hearing, Suprema and Mentalix’s attorney Darryl M. Woo argued that the term “articles that infringe” in 19 U.S.C. § 1337 is unambiguous and limits the ITC’s remedial authority to exclude only “articles that infringe” at the time of importation, and does not extend to all forms of patent infringement recognized under 35 U.S.C. § 271, such as induced infringement. He also argued in the alternative that, if the statute is ambiguous, the ITC’s interpretation of the statute to authorize exclusionary orders directed to prohibit the importation of non-infringing staple articles of commerce was unreasonable.

The ITC’s attorney Clark S. Cheney argued that the statute was ambiguous, that induced infringement constitutes patent infringement, and that Supreme Court and Federal Circuit precedent ties liability for inducing infringement to supplying articles used to directly infringe a patent claim, as presented in their brief.

Cross Match’s attorney Maximilian A. Grant, argued that the term “articles that infringe” is not ambiguous and is consistent with infringement described in 35 U.S.C. §§ 271 (a), (b), and (c). He also pointed out that if 19 U.S.C. § 1337 was strictly limited to “articles that infringe” at the time of importation, then the ITC would not have authority to remedy infringement of method claims or contributory infringement claims, which it historically has done without question. In the alternative, he argued that the ITC’s interpretation was reasonable in light of the text, history, and purpose of 19 U.S.C. § 1337.

The United States, as amicus curiae, participated in the hearing as well, and U.S. Attorney Mark R. Freeman argued that the term “articles that infringe” was not defined in either 19 U.S.C. § 1337 or 35 U.S.C. § 271, and that Congress intended the ITC to have the discretion to interpret the term. As a result, the only question was whether the ITC’s interpretation was reasonable and entitled to Chevron deference.

The Judges’ Questions:
The en banc court was very engaged. Questions from a number of judges, including Judges Reyna, Lourie, and Dyk, suggested that they view the term “articles that infringe” as ambiguous, such that the issue for the court was whether the ITC’s interpretation of the term was reasonable under Chevron. For example, Judge Reyna, who wrote a strong dissent in the Federal Circuit’s panel decision, noted that Suprema had conceded during oral argument that neither 19 U.S.C. § 1337 nor 35 U.S.C. § 271 defined “articles that infringe” and that the parties had cited to the legislative history in its briefing in interpreting the term.

Questions from Judge O’Malley, who authored the panel opinion, suggested she still holds the view that the term “articles that infringe” is not ambiguous and that the statute does not authorize the ITC to issue exclusionary orders based on inducement where the articles in question did not infringe at the time of importation. A number of judges, including Chief Judge Prost and Judge O’Malley, also expressed concern regarding Customs and Border Protection’s practical enforcement of an ITC exclusion order directed to a non-infringing staple item of commerce when imported.

A number of judges also expressed concern that if the statute were interpreted narrowly to authorize a remedy only for “articles that infringe” at the time of importation as Suprema urged, then the ITC would not have authority to remedy infringement of method of use claims or contributory infringement claims, which is inconsistent with the ITC’s longstanding interpretation and application of the statute.

Conclusion:
Although far from certain, today’s oral argument would seem to suggest that the court could find the term “articles that infringe” ambiguous and continue to allow the ITC in appropriate circumstances to remedy infringement of method claims based on a theory of induced infringement. More uncertain, however, is whether the court will affirm the ITC’s orders prohibiting the importation of non-infringing staple items of commerce in this case as a reasonable interpretation of the statute.