by Dennis Crouch

In Suprema, Inc. v. USITC (en banc), the Federal Circuit sitting en banc has overturned the prior-panel decision – now holding that the US International Trade Commission (USITC) has the power to issue an exclusion order to block importation based upon an inducement theory of infringement — even though the imported products themselves are not infringing.

Here, the patents at issue belongs to Cross Match and a fingerprint-scan methodology that uses both hardware and software components. (See U.S. Patent Nos. 7,203,344). The hardware is manufactured abroad and imported by Suprema. Once in the US, the hardware is loaded with software by another company (Mentalix) with the software to make a product used to infringe the claimed methods. Of importance, the imported hardware does not – by itself – directly infringe the patent. However, the USITC found that Suprema was liable for inducing infringement under 35 U.S.C. 271(b).

The original panel rejected the USITC analysis — finding that the government agency’s power extends only to block importation of articles that are infringing at the point of importation. In that case, inducement doesn’t work because it requires an additional step (the underlying infringement) before infringement is complete.

In the en banc rehearing, the Federal Circuit found the statute lacking — finding that the USITC’s enabling statute “Section 337 does not answer the question before us” but instead simply states that the agency can take action against “articles that . . . infringe” a US patent. This provision appears to favor the panel’s opinion – because it focuses on whether the good being imported infringes, but that is less true when considering the goal here is “curbing unfair trade practices that involve the entry of goods into the U.S. market via importation.”

At this point, most patent law readers would expect for the Federal Circuit to weigh the statutory language and consider which of the argued interpretations is correct. Somewhat surprisingly, that is not the approach taken.

Unlike the USPTO, the USITC was given (by Congress) substantive authority to interpret its governing statute – the Tariff Act. This means that the USITC’s interpretations of its power are given deference (here Chevron deference) and as such, a reasonably interpretation by the agency (even if not what the court would have decided) will not be overturned on appeal. Here, the court found that the interpretation is reasonable and consistent with Section 337 and the Congressional mandate “to safeguard United States commercial interests at the border.” Result here is the potential of a significant expansion of USITC power over patents focused on novel methods of use.

This decision effectively reinstates the USITC opinion. I expect a petition for writ of certiorari on this issue. In the original panel, Judge Reyna wrote in dissent. Here, he authored the 6-4 majority opinion. Both Judges O’Malley and Prost wrote in dissent. Decision could have gone the other way if Judges Moore and Stoll had participated (and sided with the dissent).