Suprema, Inc v ITC: Federal Circuit holds en banc hearing

On February 2 2015 the en banc Federal Circuit heard oral argument in Suprema, Inc v International Trade Commission (ITC) (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 USC § 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.

Facts
The case originated when the patent owner, Cross Match Technologies, Inc, filed a patent infringement complaint against Suprema, Inc and Mentalix, Inc at the US ITC under 19 USC § 1337. Suprema was a Korean-based company that manufactured fingerprint scanners in Korea that were then imported into the United States. Mentalix, Inc was a Texas-based supplier of fingerprint scanning systems that purchased Suprema's scanners, integrated its own software into the scanners in the United States and thereafter sold 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. In the ITC investigation that ensued (Certain Biometric Scanning Devices, Components Thereof, Associated Software, and Products Containing the Same, Inv 337-TA-720), the ITC determined that the accused combination sold by Mentalix directly infringed the asserted claims and that Suprema had induced this infringement. The ITC issued exclusionary orders prohibiting the import 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 USC § 1337 cannot be predicated on a theory of induced infringement where direct infringement did not occur until after the import of the articles at issue (Suprema, Inc v ITC, 742 F 3d 1350 (Fed Cir 2013)). In the panel's view, the statute authorises the ITC to issue remedial orders based on induced infringement only if the requisite direct infringement occurred before or at the time of import. However, the decision was vacated by the full court in May 2014 when it granted en banc rehearing and reinstated the appeal. 

Primary arguments
During the hearing, Suprema and Mentalix argued that the term 'articles that infringe' in 19 USC § 1337 is unambiguous and limits the ITC's remedial authority to exclude only "articles that infringe" at the time of import, and does not extend to all forms of patent infringement recognised under 35 USC § 271, such as induced infringement. They also argued in the alternative that the ITC's interpretation of the statute to authorise exclusionary orders directed to prohibit the import of non-infringing staple articles of commerce was unreasonable.

The ITC argued that:

• the statute is ambiguous;
• induced infringement constitutes patent infringement; and
• Supreme Court and Federal Circuit precedent ties liability for inducing infringement to supplying articles used to directly infringe a patent claim.

Cross Match argued that the term 'articles that infringe' is not ambiguous and is consistent with infringement described in 35 USC §§ 271 (a), (b) and (c). It also pointed out that if 19 USC § 1337 were strictly limited to 'articles that infringe' at the time of import, the ITC would have no authority to remedy infringement of method claims or contributory infringement claims, which historically it has done without question. In the alternative, it argued that the ITC's interpretation was reasonable in light of the text, history and purpose of 19 USC § 1337.

The United States, as amicus curiae, participated in the hearing and argued that the term 'articles that infringe' is not defined in either 19 USC § 1337 or 35 USC § 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.

Judges' questions
The en banc court was very engaged. Questions from a number of judges – including Judges Reyna, Lourie and Dyk – suggested that they viewed 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, Reyna, who wrote a strong dissent in the Federal Circuit's panel decision, noted that Suprema had conceded during oral argument that neither 19 USC § 1337 nor 35 USC § 271 defines 'articles that infringe', and that the parties had cited the legislative history in its briefing in interpreting the term. 

Questions from Judge O'Malley, who authored the panel opinion, suggested that she still held the view that the term 'articles that infringe' is not ambiguous and that the statute did not authorise the ITC to issue exclusionary orders based on inducement where the articles in question did not infringe at the time of import. A number of judges, including Chief Judge Prost and O'Malley, also expressed concern regarding US 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 authorise a remedy only for 'articles that infringe' at the time of import, as Suprema urged, the ITC would have no 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.

Comment
The oral argument suggested 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 import of non-infringing staple items of commerce in this case as a reasonable interpretation of the statute.