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Import Loophole Harms U.S. Patents

Federal Circuit
Considers closing loophole
In patent cases

The full Federal Circuit Court of Appeals has agreed to review a panel decision that found the US International Trade Commission (ITC) may not hear certain cases involving induced patent infringement.

The ITC and the owner of the US patent at issue petitioned for an en banc hearing of a December ruling that the ITC lacked the authority to exclude imports into the US of products that do not infringe US patents at the time they’re imported but only infringe once they’re in the US.

The panel had ruled that the ITC’s Section 337 on exclusion orders did not cover imports of fingerprint scanners made by Suprema Inc., a company based in South Korea.

Suprema’s scanners were found not to infringe a US patent on their own but only when used in combination with software made by Mentalix Inc., a US company which imports the scanners.

The panel said that the ITC can ban items imported by a person or entity that “induces” patent infringement only if the imported product, standing alone, directly infringes a US patent.

The panel then vacated the ITC’s order excluding the scanners.

The dispute was initiated by Cross Match, a US company that holds a patent it claims was infringed by the scanners when used with the software.

Unless reversed by the full court, the panel’s decision may help the importers of devices like smartphones and tablets that incorporate infringing features that can be “turned off” before import into the US and then reactivated before sale in the US market.

Judge Jimmie Reyna of the Federal Circuit dissented from the majority’s decision, writing that it “created a fissure in the dam of the U.S. border through which circumvention of Section 337 will ensue, thereby harming holders of U.S. patents.”

He noted that for many years the ITC decided cases in which induced infringement didn’t occur until after items were imported.

He said that the Federal Circuit had affirmed some of those previous rulings.

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