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Appeals Court Greenlights USITC's Exclusion of Goods Used for Post-Importation Patent Infringement

In a split decision, the U.S. Court of Appeals for the Federal Circuit recently ruled that the U.S. 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 United States. 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 USITC ruled that Suprema induced this infringement because it was aware of, or wilfully blind to, the patent and encouraged the U.S. company to use its scanners in a way that would violate it. The USITC 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 USITC 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 USITC's long-standing 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 USITC's authority and that the courts have generally upheld the USITC's exercise of authority over post-importation actions.

However, the dissenting justices criticised the majority ruling for "manufacturing ambiguity" in Section 337 and asserted that this statute clearly restricts the USITC's authority to physical objects that are infringing at the time of their importation. Instead, they said, the majority's decision burdens the USITC and/or CBP 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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