Articles that Infringe Only after Importation can be Excluded by the ITC
The Federal Circuit recently affirmed the International Trade Commission’s (“ITC” or “Commission”) Opinion in Certain Digital Video Receivers and Hardware and Software Components Thereof, holding that the ITC’s authority to exclude products from the United States is not limited to “articles that infringe” at the time of importation, but can include articles that infringe after importation. This decision is currently the subject of a petition for writ of certiorari to the Supreme Court. While the merits of the decision have been debated, a reversal could provide unscrupulous parties with a way to avoid liability under Section 337, namely, by modifying foreign-manufactured products to infringe after importation.
Rovi Corporation and Rovi Guides, Inc. (collectively “Rovi”) filed a complaint against sixteen respondents (“Respondents”) on April 6, 2016 alleging infringement of one or more claims of U.S. Patent Nos. 8,006,263; 8,578,413; 8,046,801; 8,621,512; 8,768,147; and 8,566,871 (the “asserted patents”). Rovi asserted that Respondent Comcast induces its customers to infringe the asserted patents when the customers use the accused Comcast television set-top boxes (“STBs”) in accordance with instructions provided by Comcast. Rovi also asserted that Respondents ARRIS and Technicolor manufacture and import the accused STBs for Comcast. As a remedy for violating Section 337, Rovi requested a Limited Exclusion Order (“LEO”) and Cease and Desist Order (“CDO”) against all Respondents.
Administrative Law Judge Shaw’s (the “ALJ”) May 26, 2017 Initial Determination (“ID”) found a violation of Section 337. The violation was based on a finding that Comcast induces its customers to directly infringe the asserted patents. The ALJ determined that ARRIS and Technicolor did not infringe the asserted patents, either directly or indirectly, even though they manufactured and imported the accused STBs. On June 9, 2017, the ALJ recommended that a Limited Exclusion Order (“LEO”) and Cease and Desist Order (“CDO”) issue against Comcast. The ALJ also indicated that the LEO can be enforced against ARRIS and Technicolor, but only with regard to their manufacture and/or importation of accused STBs on behalf of Comcast and not with regard to other STBs – even though they did not infringe the asserted patents or participate in the post-importation modification of Comcast’s STBs. The Commission reviewed the ALJ’s ID and modified certain aspects of it, but agreed that there was a violation of Section 337. The Commission also agreed that an LEO and CDO should issue against Comcast, and that in view of the ITC’s in rem jurisdiction, the LEO could be enforced against ARRIS and Technicolor, but only with regard to their manufacture and/or importation of accused STBs on behalf of Comcast.
Federal Circuit Decision
On appeal, Comcast did not dispute that its customers directly infringe the asserted patents and did not dispute that it induces its customers to infringe. Instead, Comcast argued that it did not violate Section 337 because all of its actions were domestic and occurred after importation of the accused STBs. Comcast argued that the accused STBs were not “articles that infringe” under Section 337 because the Commission’s authority under Section 337 is limited to articles that infringe at the time of importation. The Federal Circuit was unpersuaded and affirmed the Commission Opinion. The Federal Circuit held that the term “articles that infringe,” as used in Section 337, is properly interpreted to cover articles that infringe after importation. The Federal Circuit also noted that the Commission found that Comcast designed the accused STBs to be used in an infringing manner, directed the overseas manufacture of the STBs, and directed the importation of the STBs, in addition to instructing its customers on the use of the STBs in the United States
On appeal, ARRIS and Technicolor argued that the LEO should not apply to their activities because the Commission found that they did not infringe the asserted patents and they did not violate Section 337. ARRIS and Technicolor argued that Section 337 limits LEOs to articles imported by persons who have violated Section 337. The Federal Circuit was again unpersuaded and affirmed the Commission Opinion. The Federal Circuit noted that the LEO is specifically limited to ARRIS’s and Technicolor’s importations of Comcast articles that infringe the asserted patents. The LEO applies only to articles imported on behalf of Comcast and does not apply to the importation of articles for other entities. The Federal Circuit further noted that the LEO is within the Commission’s discretion to take reasonable actions to stop importation related to infringing activities.
Petition for writ of certiorari to the Supreme Court
On March 25, 2020, Comcast filed a petition for writ of certiorari to the Supreme Court presenting several arguments. The focus is likely to be whether the Commission exceeded its authority by holding that the STBs, which do not infringe at the time of importation, are “articles that infringe” under Section 337. The Commission’s time to respond to the petition has been extended to May 26, 2020, but several Amici Curiae have already filed briefs in support of Comcast on this potentially significant issue.
TAKEAWAY: For now, this case affirms that the Commission’s broad powers under Section 337 to issue remedial Exclusion Orders to contend with infringement of intellectual property rights is not limited to excluding “articles that infringe” at the time of importation, but also extends to articles that are modified to infringe after importation. Given the recent Amici Curiae filings, this is an important issue that will be closely watched.