Suprema v. ITC: En Banc Oral Argument

The en banc Federal Circuit heard oral argument on February 5 in Suprema, Inc. v. ITC, No. 2012-117.  The Federal Circuit’s decision in this closely-watched case is expected to determine the scope of the ITC’s power to adjudicate claims for induced patent infringement.

The Suprema appeal arises from an ITC investigation in which respondent Suprema was found to have induced infringement and violated section 337 by importing scanners that, when combined with software installed in the United States, would infringe an asserted method claim.  On appeal, Suprema argued that a violation of Section 337 could not be based on the importation of a product that did not directly infringe the method claim at the time of importation.

A majority of the original panel of the Federal Circuit (Judges Prost and O’Malley) agreed with Suprema, holding that Section 337 does not cover induced infringement if the underlying direct infringement does not occur until after the product has been imported.  742 F.3d 1350, 1357-1363.  Because the method claim at issue could not be directly infringed until the product had been combined with software in the United States, there was no direct infringement at the time of importation (i.e., no “articles that infringe” had been imported) and there could be no violation of Section 337 based on induced infringement .  Id.

As articulated by the panel majority, a violation of Section 337 could not be based on a theory of induced infringement for importation of a product that would infringe a method claim only after it had been imported.  The panel opinion stated:  “We conclude that § 337(a)(1)(B)(i), by tying the Commission’s authority to the importation, sale for importation, or sale within the U.S. after importation of articles that infringe a valid and enforceable U.S. patent, leaves the Commission powerless to remedy acts of induced infringement in these circumstances.”  742 F.3d at 1357 (emphasis in original).  The panel majority further explained that “[p]rior to the commission of any direct infringement, for purposes of inducement of infringement, there are no ‘articles that … infringe’ — a prerequisite to the Commission’s exercise of authority based on § 337(a)(1)(B)(i).”  Id. at 1361.  The majority distinguished inducement from contributory infringement, saying that, like direct infringement, contributory infringement is “tied to an article,” whereas induced infringement is “untied to an article.”  (Id. at 1360.)  In a vigorous dissent on this issue,  Judge Reyna asserted that the majority had overlooked the Congressional purpose of section 337 and long-established  Commission  practice  in reaching its decision.   Id. at 1372-78. Moreover, he maintained that “Section 337 expressly applies not only to the moment of importation, but also, in the alternative, to sales occurring before and after importation that can give rise to infringement liability.”  Id. at 1375.

The ITC, complainant, and several amici petitioned for en banc rehearing, which the Federal Circuit granted, vacating the original panel decision.  No. 2012-1170 (February 24, 2015).  Daniel Woo of Fenwick and West argued on behalf of appellant Suprema.  Clark Cheney of the ITC General Counsel’s Office argued for the ITC, joined by Maximilian Grant of Latham and Watkins, representing intervenor Cross Match.  Mark Freeman of the Department of Justice, which had filed an amicus brief, also argued in support of the Commission.

Mr. Woo argued that there was no ambiguity in the statute; by its own terms, it applies solely to articles, and since an article does not infringe a method patent claim until the method is practiced, Section 337 § (a)(1)(B)(i) cannot apply.  Mr. Woo further argued that, although the term “articles that infringe” was not defined, it is common for statutes not to define every term, and there was no ambiguity in this case.  Therefore, the Court need not grant deference to the ITC’s interpretation of that term.  Mr. Woo also emphasized that Suprema’s scanners were staple articles of commerce and that standing alone they cannot be used to infringe the asserted method claim, but instead must be combined with specific software to infringe.

Mr. Cheney argued that a product used to infringe a method claim is an “infringing article” within the meaning of the statute, and that importing a product with an intent to induce infringement of that claim is an unfair trade practice that Congress intended to include within Section 337.  Mr. Cheney further argued that the Federal Circuit’s past cases agreed with this reading of Section 337, although Judge Dyk appeared to strongly disagree with this interpretation of the prior cases.

Mr. Grant argued that the statute was not ambiguous, but instead applied to articles used in conjunction with any kind of infringement provided by Section 271 (including direct, induced, and contributory infringement).  Mr. Grant pointed to instances in which the Federal Circuit had referred to products used to practice method claims as “infringing products” in support of this interpretation.

Mr. Freeman argued that the statute was ambiguous, and that given the ambiguity, the Commission’s interpretation of the statute should be accorded Chevron deference.  Mr. Freeman further argued that the ITC’s interpretation was entirely reasonable, and was consistent with the use of the term “infringe” in Section 271.