The scope of [section] 337 post-Suprema, Inc. v. International Trade Commission: Suprema, Inc. v. International Trade Commission.

• Author: Davis, Matthew
• Position: Tariff Act of 1930

1. INTRODUCATION

   Imagine that a statute prohibits the distribution of murder weapons. Now, suppose that Gang A ("A") sends Gang B ("B") a shipment of freshly assembled, unused guns, intending to induce B to commit murders. At the moment B receives the shipment, are those guns murder weapons? If not, would you answer differently if A had already shipped B thousands of guns, all of which B ultimately used to commit murder? If not, would your answer change if law enforcement could intervene only after B commits murder?

   The Federal Circuit recently grappled with similar questions in a patent law context. In Suprema, Inc. v. International Trade Commission, (1) the court was concerned with 19 U.S.C. [section] 1337 ("[section] 337"), a provision of the Tariff Act of 1930 which proscribes the importation of "articles that infringe" a patent. (2) At issue was whether goods that did not infringe a patent in their own right could be considered "articles that infringe" based on the importer's intent to use those goods to induce infringement of a patented method. (3) One might naturally answer no. Much like a gun distributed with intent to induce murder is not yet a murder weapon at the moment of its distribution, an article imported with intent to induce infringement is not yet an article that infringes at the time of importation. (4) The Federal Circuit, however, concluded otherwise. (5) At oral argument, the court appeared to latch on to the fact that all imported articles were ultimately used to infringe the patent. (6) And through-out its opinion, the court was clearly concerned with the prospect that ruling to the contrary would prevent the International Trade Commission ("ITC") from excluding these articles. (7)

   The court began its analysis by examining the ITC's import-excluding construction under the Chevron framework. (8) After deeming the phrase "articles that infringe" ambiguous, the court concluded that the ITC's interpretation was reasonable and authorized the agency to exclude non-infringing imports that may or may not be used to induce infringement. (9) Although this broadens the ITC's jurisdiction over patents focused on novel methods of use, the court's attempt to fill a statutory gap may create far more issues. (10)

   This Note first sets forth the facts and holding of the Federal Circuit's decision in Suprema. Then, it examines the origins of the ITC, the relationship between [section] 337 and the Patent Act, and the cases that were raised in the majority and dissenting opinions. Next, it details the court's interpretation of [section] 337 under the Chevron framework. Finally, this Note appraises the court's construction, addresses the concerns underlying the decision, and assesses the harmful consequences of extending the ITC's authority to the importation of non-infringing articles intended to induce post-importation infringement.

2. FACTS AND HOLDING

   Cross Match Technologies, Inc. ("Cross Match"), a domestic supplier of fingerprint scanners and the intervenor in this action, is the assignee of a patented fingerprint scanning method. (11) Suprema, Inc. ("Suprema"), a Korean manufacturer of fingerprint scanners, and Mentalix, Inc. ("Mentalix"), a domestic importer of Suprema's scanners, are the appellants. (12) Suprema's scanners cannot function until they are loaded with custom-developed software. (13) After Mentalix imports Suprema's scanners, it loads them with its own software and then uses and sells the final products. (14) The ITC, the appellee in this action, is a quasi-judicial federal agency authorized by [section] 337 to investigate the importation of articles that infringe a patent. (15)

   In May 2010, Cross Match filed a [section] 337 complaint with the ITC, alleging that Mentalix directly infringed its patent and that Suprema induced that infringement. (16) The ITC concluded that Mentalix directly infringed Cross Match's patent by integrating its software with Suprema's scanners and using the final product within the United States. (17) The ITC also found that Suprema had induced this infringement. (18) Based on these findings, the ITC issued an exclusion order blocking the importation of Suprema's scanners and a cease-and-desist order enjoining Mentalix's distribution of the scanners. (19) Suprema and Mentalix subsequently appealed the ITC's findings to the Court of Appeals for the Federal Circuit. (20)

   On appeal, Suprema and Mentalix argued that the ITC had no authority to issue the exclusion order because the scanners could not be used to infringe until after importation. (21) A panel of the Federal Circuit agreed and vacated the ITC's ruling. (22) Because the statutory phrase "articles that infringe" references the status of the articles at the time of importation, the court reasoned that an exclusion order could not be based on induced infringement if direct infringement only occurred after importation. (23)

   After the ITC and Cross Match successfully petitioned for rehearing en banc, (24) the Federal Circuit began its analysis by examining the ITC's construction of [section] 337 under the Chevron framework. (25) Under the first step of Chevron, the court concluded that [section] 337 did not clearly address whether the ITC could base an exclusion order on the inducement of post-importation infringement. (26) In reaching this conclusion, the court cited the disparity between [section] 337's reference to infringing "articles" and the Patent Act's reference to infringing "conduct." (27) The court then proceeded to the second step of Chevron, under which it determined that the ITC's construction was reasonable. (28) In particular, the court explained that the ITC's construction was consistent with its congressional mandate "to safeguard United States commercial interests at the border" and supported by "the statutory text, policy, and legislative history of Section 337." (29) Accordingly, the court reversed the panel's decision and reinstated the ITC's ruling that non-infringing articles used to induce post-importation infringement are "articles that infringe." (30)

3. LEGAL BACKGROUND

   Part A discusses the origins of the ITC and the expansion of the agency's authority following amendments to its governing statute, [section] 337. Part B examines cases concerning induced infringement that purportedly lend support to the instant decision. Lastly, Part C discusses ITC practice consistent with the view that non-infringing imports used to induce post-importation infringement are not "articles that infringe."

   1. Origins of the ITC and Modern [section] 337

      From its inception until 1974, the ITC's authority was relatively meager. In 1916, Congress established the ITC, then known as the Tariff Commission, through the Revenue Act. (31) In its infancy, the ITC was a fact-finding agency, (32) advising Congress as it set tariff rates and the President as he administered tariff laws. (33) The ITC first acquired the authority to investigate importation when Congress enacted the Tariff Act of 1930. (34) Section 337, like its precursor, proscribed "unfair methods of competition and unfair acts in the importation of articles into the United States." (35)

      The ITC's authority broadened considerably when Congress amended [section] 337 through the Trade Act of 1974. (36) The amendment not only granted the agency final decision-making authority, but authorized the ITC to issue exclusion orders barring the importation of infringing articles and cease-and-desist orders enjoining the post-importation sale of infringing imports. (37) Because this relief allowed patentees to effectively block allegedly infringing imports, the ITC's popularity as a forum increased. (38) In an attempt to limit the scope of its jurisdiction, the ITC subsequently required "some nexus between unfair methods or acts and importation" before it had power to act. (39)

      The Omnibus Foreign Trade and Competitiveness Act of 1988 substantively amended [section] 337, rendering the nexus requirement obsolete (40) and creating the statutory scheme at issue. (41) With minor exceptions, [section] 337 splits unlawful activities into two categories: (1) unfair competition or unfair acts in the importation of articles that do not infringe intellectual property; and (2) the importation, sale for importation, or post-importation sale of articles that infringe intellectual property. (42) Section 337(a)(1)(B) proscribes the importation, sale for importation, or post-importation sale of articles that infringe a patent or are made using a patented process. (43) As used in [section] 337(a)(1)(B)(i), the word "infringe" derives its meaning from the provision defining patent infringement, 35 U.S.C. [section] 271. (44)

   2. Patent Infringement Under [section] 271

      Patent infringement may be direct or indirect. (45) One directly infringes a patent by using, making, offering to sell, selling, or importing a patented invention. (46) There are two types of indirect infringement, both of which must be predicated on an underlying act of direct infringement. (47) The first, infringement by inducement, occurs when one actively induces infringement of a patent. (48) This form of indirect infringement is often analogized to aiding and abetting a crime or tort. (49) The second, contributory infringement, occurs when one sells, offers to sell, or imports a material component of a patented invention that is substantially incapable of non-infringing use. (50)

      In Suprema, the majority opinion cited Standard Oil Co. v. Nippon Shokubai Kagaku Kogyo Co., Ltd. (51) in support of its ruling. (52) There, the issue was whether the laches period for claims of induced infringement began running at the moment of direct infringement or, instead, at the moment of the inducing act. (53) A domestic corporation ("Sohio") claimed that a foreign manufacturer incurred inducement liability by supplying an article used to infringe its patented process but filed suit more than six years after...