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ITC Can Exclude Goods Used for Post-Importation Patent Infringement, Court Rules

Wednesday, August 26, 2015
Sandler, Travis & Rosenberg Trade Report

In a split decision, the Court of Appeals for the Federal Circuit recently ruled that the International Trade Commission has authority to issue exclusion orders banning imports of articles that induce patent infringement after importation. Press sources indicate that the ruling, which could affect a broad range of imported goods, may be appealed to the Supreme Court. In addition, the court is considering in a separate case whether to extend its reasoning to digital transmissions as well as tangible goods.

The CAFC decision in Suprema Inc. v. International Trade Commission dealt with fingerprint scanners exported by Suprema to the U.S. Some of these scanners were sold to a U.S. company that loaded them with software that enabled the scanners to function in a way that violated a method patented by Cross Match Technologies Inc. The ITC ruled that Suprema induced this infringement because it was aware of, or willfully blind to, the patent and encouraged the U.S. company to use its scanners in a way that would violate it. The ITC then issued a limited exclusion order prohibiting imports of the infringing scanners and associated software.

In an en banc decision, the CAFC overturned an earlier panel ruling that the ITC had no authority to take this action because the scanners were not infringing at the time they were imported. Finding that Section 337 of the 1930 Tariff Act itself contemplates post-importation infringement and that the term “articles that infringe” in this law is ambiguous, the majority deferred to the ITC’s longstanding interpretation of this phrase as allowing it to prosecute induced infringement even if it occurs after importation. Among other things, the CAFC pointed out that Congress has consistently broadened the ITC’s authority and that the courts have generally upheld the ITC’s exercise of authority over post-importation actions.

However, the dissenting justices criticized the majority ruling for “manufacturing ambiguity” in Section 337 and asserted that this statute clearly restricts the ITC’s authority to physical objects that are infringing at the time of their importation. Instead, they said, the majority’s decision burdens the ITC and/or U.S. Customs and Border Protection with having to determine infringement based on intent. One result, the dissent warned, could be a substantial and unfair expansion of the number of products prohibited from importation.

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