An initial determination at the International Trade Commission in X-ray Breast Imaging Devices recently found respondent FUJIFILM in violation of Section 337 of the Tariff Act of 1930 for inducing post-importation infringement. Section 337 prohibits “[t]he importation into the United States . . . of articles that . . . infringe a valid and enforceable United States patent.”
The complainant in that investigation, Hologic, owns a series of patents related to the operation of specialized X-ray machines to perform mammograms. The respondent, FUJIFILM, does not import X-ray machines; rather, it assembles its machines in the United States using various components. Some of those components (including the exposure unit and compression paddles) are imported from Japan, while others are acquired domestically from third-party suppliers.
The ITC found that FUJIFILM’s customers directly infringe Hologic’s patents by using the assembled machine, and that FUJIFILM indirectly infringes those patents by inducing that infringement.
The ITC’s authority to block imports based on post-importation conduct was upheld by the Federal Circuit in Suprema v. ITC (2015). In that case, the court held that the Section 337 term “articles that infringe” includes “goods that were used by an importer to directly infringe post-importation as a result of the seller’s inducement”—that is, a company can violate the statute by inducing infringement even if the articles, as imported, don’t directly infringe a patent.
Biometric Scanning Devices—the ITC investigation that led to the decision under appeal in Suprema—involved imported fingerprint scanners that, when combined with software in the United States, directly infringed a U.S. patent. The ITC found that the foreign seller of the fingerprint scanners violated Section 337 even though the scanners were not infringing at the time of importation because supplying the scanners induced the buyer's infringement.
The Federal Circuit’s opinion in Suprema upholding that ITC decision left a number of practical questions unanswered about the extent to which post-importation inducing actions must be related to the importation or to the articles as imported.
In the face of this uncertainty, respondents in subsequent investigations involving post-importation inducement have tried to distinguish their cases from Biometric Scanning Devices.
For example, in X-ray Breast Imaging Devices, FUJIFILM has asked the Commission to review the initial determination against it, arguing that Suprema does not extend to situations where, as in its own case, the imported products must be combined with other components in the United States before they can be used to infringe the patent. Specifically, FUJIFILM is arguing that a Section 337 violation cannot be “based on articles that are combined post-importation with other articles to create an infringing device or on acts of inducement that occur following importation with respect to these combined articles.”
The question here is whether inducing activity can lead to a Section 337 violation even when the imported product must undergo physical transformation in the United States before it can infringe. Does it depend on the degree of transformation?
Last December, the ITC rejected a different Suprema-related challenge in Digital Video Receivers I. In that investigation, the ITC issued an exclusion order against imported cable boxes. The respondent in that case, Comcast, purchases imported cable boxes to provide a broad range of cable services. One of these services—letting its customers use a mobile app to schedule DVR recordings over the internet—induces its customers to infringe a patent.
Can the cable boxes be considered “articles that infringe” even though there is almost no connection between their importation and the inducing activity? How much distance can there be between the importation and the inducement?
The ITC is apparently untroubled by these questions. In its opinion dismissing Comcast’s challenge, the Commission claimed a Section 337 violation merely “requires importation of articles, proof of direct infringement, and proof of inducement.” In essence, the ITC is claiming that there does not need to be any connection at all between the inducing activity and the importation or the articles as imported. That formulation is under appeal at the Federal Circuit right now in Comcast v. ITC.
In a recent R Street Policy Study, Charles Duan and I elaborate on the dangers of the ITC’s broad interpretation of Suprema and urge the Federal Circuit to limit the reach of the ITC’s patent powers in cases involving induced infringement.
In cases where the alleged infringer is a domestic or multinational company acting in the United States, there isn’t any special need for a trade-based remedy; the patent owner can just sue the infringer in court. Allowing the ITC to judge those cases will lead to the improper imposition of trade sanctions in purely domestic patent cases—including cases in which the fact that something was imported is entirely incidental to the dispute.
As FUJIFILM notes in its arguments at the ITC, any infringement that leads to a violation of Section 337 “must be based on the articles as imported.” This is true not only because the law applies explicitly to “articles that infringe,” but also because the ITC’s import exclusion order becomes an arbitrary remedy for patent infringement if the infringement and the importation are unrelated.
So even if the Federal Circuit allows the ITC to include the products in X-ray Breast Imaging Devices and Digital Video Receivers I as “articles that infringe,” it needs to clarify what limitations do exist on the ITC’s authority to block imports as a remedy for domestic infringement. If it does not, we will continue to see more appeals from respondents battling exclusion orders on imports that are increasingly disconnected from the infringing conduct.