Source: https://patentlyo.com/patent/inducement
Timestamp: 2019-04-25 05:56:14+00:00

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Although the USITC handles plenty of patent cases, it actually derives its power from the Tariff Act, 19 U.S.C. § 1337(a)(1)(B). That provision indicates that the government agency can prohibit the import or sale-after-import of “articles . . . that (i) infringe a valid and enforceable United States patent” The Tariff Act does not further define patent infringement and so the ITC has generally referred to Section 271 of the Patent Act for guidance. As with district court patent litigation, ITC merits decisions are also appealed to the Court of Appeals for the Federal Circuit.
Here, Cross Match’s asserted patent covers a fingerprint-scan methodology that includes both hardware and software components. The hardware is manufactured abroad and imported by Suprema and then, once in the US, combined by Mentalix with the software to make a product used to infringe. 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).
On appeal, the Federal Circuit reversed that judgment — holding instead that the USITC’s power only extends to block articles that are themselves infringing at the point of importation. The result for this case is that the inducement theory of infringement could not stand because it requires both additional steps to complete the infringement as well as a particular mens rea. Oddly, however, the majority did find that the USITC may still have power when the cause of action is contributory infringement rather than inducement. This distinction was based upon the notion that inducement is focused on the “conduct of the inducer” and “is untied to an article.” Judge O’Malley penned the Federal Circuit opinion and was joined by Judge Prost. Judge Reyna wrote in dissent.
Whether the United States International Trade Commission (“ITC”) has authority to find a Section 337 violation—and issue an exclusion or cease and desist order—where it finds that an importer actively induced infringement of a patented invention using its imported articles but the direct infringement occurred post-importation.
Cross Match argues that the question is largely answered by Young Eng’rs, Inc. v. ITC, 721 F.2d 1305 (Fed. Cir. 1983); Vizio, Inc. v. ITC, 605 F.3d 1330 (Fed. Cir. 2010); and Disabled Am. Veterans v. Sec’y of Veterans Affairs, 419 F.3d 1317 (Fed. Cir. 2005).
(1) Did the panel contradict Supreme Court precedent in Grokster and precedents of this Court when it held that infringement under 35 U.S.C. § 271(b) “is untied to an article”?
(2) Did the panel contradict Supreme Court precedent in Grokster and this Court’s precedent in Standard Oil when it held that there can be no liability for induced infringement under 35 U.S.C. § 271(b) at the time a product is imported because direct infringement does not occur until a later time?
(3) When the panel determined the phrase “articles that . . . infringe” in 19 U.S.C. § 1337(a)(1)(B)(i) does not extend to articles that infringe under 35 U.S.C. § 271(b), did the panel err by contradicting decades of precedent and by failing to give required deference to the U.S. International Trade Commission (“the Commission”) in its interpretation of its own statute?
(4) Did the panel misinterpret the Commission’s order as a “ban [on the] importation of articles which may or may not later give rise to direct infringement” when the order was issued to remedy inducement of infringement and when the order permits U.S. Customs and Border Protection to allow importation upon certification that the articles are not covered by the order?
The USITC argues that these questions are fully answered (in its favor) by Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 940 n.13 (2005); Standard Oil Co. v. Nippon Shokubai Kagaku Kogyo Co., 754 F.2d 345, 348 (Fed. Cir. 1985) (Rich, J.); Crystal Semiconductor Corp. v. TriTech Microelectronics Int’l, Inc., 246 F.3d 1336, 1351 (Fed. Cir. 2001); Vizio, Inc. v. Int’l Trade Comm’n, 605 F.3d 1330, 1343-44 (Fed. Cir. 2010); The Young Engineers, Inc. v. U.S. Int’l Trade Comm’n, 721 F.2d 1305, 1310, 1317 (Fed. Cir. 1983); Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984); and Enercon GmbH v. Int’l Trade Comm’n, 151 F.3d 1376, 1381 (Fed. Cir. 1998).
The accused infringers here argued that the fingerprint scanning hardware they are importing are simple staple goods that cannot themselves infringe even if their intended use is infringing.
In many ways, this is another divided infringement inducement case. The Supreme Court is currently deciding that issue in Akamai and a decision is expected within the next four weeks. The Federal Circuit may do well to delay its briefing in this case until Akamai is decided.
Parallel Process: Despite its “international” name, the USITC is actually a branch of the U.S. government charged with protecting U.S. industry and U.S. goals in international trade. The USITC’s jurisdiction focuses solely on border-crossing issues and, in the patent context, investigates infringing imports. It turns out that district courts can also block the importation of infringing goods. There are some differences in remedy and process, but the basic patent policy question is whether the additional parallel procedure offered by the USITC fills an important gap in district court adjudication. And, if so, why does that gap exist?
Administrative Law: Moving from patent policy, the issues here also focus on a continued power struggle between the various branches of government. One question here is the level of deference that should be given to the USITC in carrying out its mandate.
A California jury found Qualcomm liable for infringing or inducing infringement of three Broadcom patents covering 3G mobile phone technology. (US Pat. Nos. 6,847,686, 5,657,317, and 6,389,010). On appeal, the Federal Circuit has invalidated one of the patents, but left the judgment and injunction standing.
Seagate and Inducement: Like willfulness, inducing infringement requires proof of culpability. In Seagate, the Federal Circuit altered the standard for willful infringement – making it more difficult for a patentee to obtain treble damages. Consequently, in the willfulness context, there is no longer an “affirmative duty of due care” to avoid infringement. Here, Qualcomm argued (unsuccessfully) that the evidence available to prove inducement should be changed as well.
The evidentiary argument was whether – for its inducement decision – the jury could consider Qualcomm’s decision to seek advice of counsel as circumstantial evidence of intent. The appellate panel saw such evidence as fair game.
Too Broad: Prosecutors are typically careful to ensure that claims will be given a broad interpretation during litigation. If the claim is too broad, however, it will likely be found invalid. Here, Broadcom’s ‘686 patent digital video signal processor. The district court found that a ‘global controller’ was required for operation of the processor, but the Federal Circuit could not find that limitation in the claims or any justification from the specification. Without that limitation, the claim was invalid as anticipated.
Injunctions: District courts issue injunctions while sitting ‘in equity.’ This typically gives the court discretionary power to shape and craft relief in a way that best achieves the right result. Here, the district court pushed enforcement of the injunction back to January 31, 2009. In the meantime, Qualcomm pays mandatory damages and Broadcom has now power to stop continued infringement in this period.
In the parallel Broadcom v. ITC, last week the Federal Circuit vacated the ITC’s non-infringement finding of another Broadcom patent. The ITC will reconsider that issue.
A third parallel case, Kyocera v. ITC, is pending appeal at the Federal Circuit. In that case, the cell phone companies are appealing the ITC’s exclusion order regarding yet another Broadcom patent.

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