In a likely preemptive effort to guard against the potential ramifications of an adverse decision for the ITC in the pending en banc Federal Circuit appeal in Suprema Inc. and Mentalix Inc. v. ITC and Cross Match Technologies, Inc.(Suprema), complainant Andrea Electronics Corp. (“Andrea”) recently withdrew and re-filed a Section 337 complaint to add an alternative basis for violation under 19 U.S.C. § 1337(a)(1)(A):
- Unfair methods of competition and unfair acts in the importation of articles which threaten to, or do, destroy or substantially injure an industry in the United States, prevent the establishment of such an industry, and/or restrain or monopolize trade and commerce in the United States.
See Certain Audio Processing Hardware and Software and Products, DN-3055, Complaint at 128 (filed Feb. 9, 2015). In the complaint, Andrea alleges a violation of Section 337 based on induced infringement of claims of its asserted patents. Such claims might not stand if the en banc Federal Circuit in Suprema embraces the now-vacated panel opinion that a violation of Section 337 “may not be predicated on a claim of induced infringement where the attendant direct infringement of the claimed method does not occur until post-importation.” Suprema, Inc. v. ITC, 742 F.3d 1350, 1353 (Fed. Cir. 2013). As discussed below, Andrea’s additional basis for violation – unfair competition under Section 1337(a)(1)(A) – may provide a work-around if the en banc court reinstates the original panel’s holding in Suprema.
Background of Andrea’s Two Complaints
Andrea originally filed a complaint with the ITC on January 23, 2015, alleging violations of Section 337 arising from the importation, sale for importation, and/or sale after the importation into the United States of certain audio processing hardware and software and products that infringe one or more claims of five asserted patents. See DN-3053. On February 9, 2015, Andrea withdrew the January 23 complaint and filed a new complaint alleging violations of Section 337 based on the previously alleged activity and asserted patents. See DN-3055.
The primary difference between the withdrawn and the current complaints is the additional basis for violation of Section 337 under subsection (a)(1)(A). In support of this additional basis, Andrea added paragraphs 434-447 to the complaint, alleging that the proposed respondents’ unfair methods of competition and unfair acts, including the importation and sale of articles used by end users to practice one of more claims of the asserted patents, violates Section 337. Specifically, Andrea alleged that respondents’ indirect infringement of the asserted patents injures Andrea’s domestic industry as “Respondents have unfairly and wrongfully derived a substantial and wrongful commercial advantage at the expense of Andrea’s domestic industry.” Complaint at 123.
Federal Circuit Panel Decision in Suprema and the en banc Review
On December 13, 2013, the Federal Circuit panel in Suprema overturned the underlying Commission decision in 337-TA-720 and held that the ITC does not have power over imported articles that allegedly induce infringement of a patent, but do not directly infringe at the time of importation into the United States. Suprema at 1357. Specifically, the court found that because Section 337 is violated by “articles that . . . infringe a valid and enforceable United States patent,” the ITC may only exercise its power against articles that are “already in an infringing state at the time of importation,” not those that would only infringe post-importation under 35 U.S.C. § 271(b). Judge Reyna dissented from the panel majority’s opinion, noting that “Section 337 is a trade statute designed to provide relief from specific acts of unfair trade, including acts that lead to the importation of articles that will result in harm to a domestic industry by virtue of infringement of a valid and enforceable patent.” Id. at 1372 (Reyna, J., concurring-in-part and dissenting-in-part).
On May 13, 2014, the Federal Circuit granted petitions for rehearing en banc and oral argument was held on February 5, 2015. During the oral argument, it was suggested that prior to the 1988 amendments to the statute, a violation under Section 337 may have included imported articles associated with acts of induced infringement that caused injury to a domestic industry (under current subsection (a)(1)(A)). As of March 12, the appeal is still pending.
Analysis and Key Takeaways
Given the timing of Andrea’s withdrawn complaint (filed Jan. 23), the en banc oral argument in Suprema (heard Feb. 5), and the refiled complaint (filed Feb. 9), it appears that the new basis of violation alleged in Andrea’s pending complaint was to guard against the possibility of the en banc majority upholding the reasoning of the underlying panel opinion. In particular, if the en banc court maintains that an imported article must directly infringe at the time of importation in order to trigger a violation under subsection (a)(1)(B), it is still arguable that importation of articles associated with the infringement of a patent (i.e., articles that induce infringement) would be a basis for relief under subsection (a)(1)(A). Thus, the alternative basis for violation of Section 337 asserted in Andrea’s new complaint appears to be a preemptive effort to create another avenue to address articles associated with an act of infringement (that also harms a domestic industry) at the ITC, pending the Federal Circuit’s en banc decision in Suprema.
It is unclear whether the Commission will accept Andrea’s subsection (a)(1)(A) basis (unfair competition harmful to domestic industry) for violation related to induced patent infringement. Subsection (a)(1)(A) holds unlawful:
(A) Unfair methods of competition and unfair acts in the importation of articles (other than articles provided for in subparagraphs (B), (C), (D), and (E)) into the United States, or in the sale of such articles by the owner, importer, or consignee, the threat or effect of which is—
- (i) to destroy or substantially injure an industry in the United States;
- (ii) to prevent the establishment of such an industry; or
- (iii) to restrain or monopolize trade and commerce in the United
Comparatively, Subsection (a)(1)(B) holds unlawful:
(B) The importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that—
- (i) infringe a valid and enforceable United States patent or a valid and enforceable United States copyright registered under Title 17; or
- (ii) are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent.
Subsection (a)(1)(A) of the statute may have a broader scope than subsection (a)(1)(B), as patent infringement may fall within the general prohibition against “unfair competition.” The requirement of injury notably differs under subsection (a)(1)(A), which requires proof of harm to an industry in the United States. By contrast, where the accused unfair trade practice is based on infringement of a statutory U.S. intellectual property right (patent, copyright, and trademark) pursuant to section (a)(1)(B), a showing of harm to domestic industry is not required.
On the other hand, the Commission may interpret Section 337 as requiring all patent-based claims to be plead under subsection (a)(1)(B), in light of the specific language referencing patent infringement under subparagraph (i): “infringes a valid and enforceable United States patent . . .” Moreover, subsection (a)(1)(A) specifically excludes articles provided for in subparagraphs (B), (C), (D), and (E); as noted above, patent infringement explicitly falls under subparagraph (B). This reading of the statute may indicate that violation of Section 337 based on allegations relating to an act of infringement of a U.S. patent can only be established under subsection (a)(1)(B), and not under (a)(1)(A) as pleaded in Andrea’s refiled complaint.
Overall, this remains an issue to watch, given that Andrea’s alternative basis for violation of Section 337 may open another door to alleging a violation based on acts associated with patent infringement. Of course, Andrea’s newly asserted basis of violation under subsection (a)(1)(A) may be mooted if the en banc Federal Circuit rejects the original panel’s reasoning and finds that a violation of Section 337 can occur based on induced infringement where direct infringement occurs only after importation of the article into the United States.
Update: The Commission Institutes the Complaint Without the Subsection (a)(1)(A) Basis for Violation
On March 12, the Commission instituted Andrea’s complaint as Inv. No. 337-TA-949. The ITC instituted the investigation only pursuant to subsection (a)(1)(B). See Certain Audio Processing Hardware and Software and Products Containing Same; Institution of Investigation, 80 Fed. Reg. 14159 (March 18, 2015). This could be a signal that the Commission will not entertain a patent-based Section 337 complaint under subsection (a)(1)(A), although the Commission did not comment on that issue. Alternatively, this may be due to the posture of the pending appeal in Suprema, discussed above. Specifically, as the original panel opinion in Suprema was vacated, there currently is no binding decision that holds that induced infringement cannot be the basis for a violation under subsection (a)(1)(B). Therefore, there is, at the moment, no reason for the Commission to recognize subsection (a)(1)(A) as an alternative basis for patent-based claims. Should the en banc court embrace the now-vacated panel opinion in Suprema, it remains to be seen whether the Commission will accept patent-based claims pursuant to subsection (a)(1)(A).