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Suprema, Inc. and Mentalix, Inc. v ITC, 2012-1170, Federal Circuit, (12/13/2013)‎

An ITC exclusion order may not be predicated on a theory of induced infringement under 35 USC § ‎‎271(b) where direct infringement does not occur until after importation.‎

A split panel of the Federal Circuit ruled that the Commission’s authority under section 1337 only reaches ‎‎”articles that . . . infringe a valid and enforceable United States patent” at the time of importation. ‎Because there can be no induced infringement unless there has been an act of direct infringement, ‎however, there are no “articles . . . that infringe” at the time of importation when direct infringement has ‎yet to occur. The ITC’s exclusion order was thus revised to bar only those articles that directly infringed at the time of importation.‎

The patents in suit include method and apparatus claims directed to fingerprint image capture and ‎processing. Cross Match, the complainant, is a global provider of fingerprint acquisition technology ‎based in Florida. One respondent is Suprema, a Korean company that manufactures and imports ‎hardware and software for scanning fingerprints. A second respondent, Mentalix, is a domestic importer ‎of Suprema scanners that integrates the scanners with its own software in the U.S. Cross Match ‎contended that its system claims are directly and indirectly infringed by Suprema’s optical systems, and ‎that the method claims are infringed when Suprema’s scanners are used in combination with the Mentalix ‎software. ‎

The Commission determined that the term “capture” within the meaning of the asserted claims, cannot ‎occur until after the print quality and number of prints have been determined and detected, which occurs ‎only after the Suprema system is integrated with the Mentalix software in the U.S. However, the Commission held that because ‎Suprema induced infringement of the patented method under 35 USC § 271(b), this formed the basis for a section 337(a)(1)(B)(i) exclusion. ‎

The majority of the Circuit panel first determined that only a few of the Suprema designs directly infringed the system ‎claims. Because most of the equipment being imported required integration with software, the panel ‎looked to see if Suprema might have been guilty of contributory infringement as to that equipment. ‎However, because the Suprema equipment was capable of substantial non-infringing uses, there could ‎be no contributory infringement under 35 USC § 271(c). The panel then turned to the induced infringement ‎argument. The Commission had held that because Suprema began encouraging and aiding and abetting ‎Mentalix’s infringement well before importation, Suprema was already indirectly infringing at the time of ‎importation. The Circuit panel agreed that the inducement analysis must focus on the intent of the ‎inducer, citing its recent en banc decision in Akamai Techs., Inc. v. Limelight Networks, Inc. 692 F.3d ‎‎1301, 1307-08 (Fed.Cir. 2012). However, the panel held that because there is no complete inducement ‎under section 271(b) until there has been a direct infringement, there can be no “articles . . . that infringe” ‎at the time of importation under section 337. The ITC ruling was thus affirmed only as to those Suprema ‎units that directly infringed the patents in suit.‎

In a dissent, Judge Reyna argued that the majority ignores that section 337 is a trade statute designed to ‎provide relief from specific acts of unfair trade and patent infringement, including acts that lead to the ‎importation of articles that will result in harm to a domestic industry. According to Judge Reyna, to ‎negate both a statutory trade remedy and its intended relief the majority overlooks the Congressional ‎purpose of section 337, “creating a fissure in the dam of the U.S. border through which circumvention of ‎section 337 will ensue.‎”

CBT Flint Partners, LLC v. Return Path, Inc., 2013-1036, Federal Circuit, 12/13/2013‎

The district court ruled against the patentee CBT on the merits and then awarded defendants their ‎costs, most of which were for e-discovery service providers, ruling that such costs were “the 21st ‎Century equivalent of making copies.” A split Federal Circuit panel held that the district court erred in ‎its interpretation of ‎28 U.S.C. § 1920(4) in awarding such costs. This case is of interest because it ‎discusses the allocation of such costs and because of pending legislation providing for a broad shifting ‎of costs to the prevailing party.‎

After the district court construed the patent claims at issue, CBT stipulated to noninfringement of the ‎asserted claims of one of the patents in suit, and the court granted summary judgment of ‎indefiniteness of claims of the other patent. The Commission awarded both defendants costs under 28 U.S.C. ‎‎§ 1920, amounting to $33,858 and $234,453, that they had paid to e-discovery service ‎providers. In an earlier appeal the Federal Circuit reversed the summary judgment of indefiniteness ‎and therefore vacated the award of costs. On remand the district court granted summary judgment of ‎noninfringement, and defendants were again awarded costs. The Federal Circuit thus had to ‎determine, under Federal Rule of Civil Procedure 54(d)(1) and 28 USC ‎§1920(4)‎, applying Eleventh ‎Circuit law, whether the district court’s interpretation of the statute was correct.‎

Section 1920(4) was amended in 2008 to encompass electronically-stored information as well as ‎information on paper. Section 1920(4) now covers “[f]ees for exemplification and the costs of making ‎copies of any materials where the copies are necessarily obtained for use in the case.” The Eleventh ‎Circuit had not addressed section 1920(4) since it was amended. The Eleventh Circuit’s pre-‎amendment precedent, however, expressed the general principle that section 1920(4) “allows ‎recovery only for the reasonable costs of actually duplicating documents, not for the cost of gathering ‎those documents as a prelude to duplication.” The panel stated that it would interpret the scope of ‎amended section 1920(4) in accordance with that principle, making necessary allowances for the ‎inherent differences between paper and electronic documents.‎

The panel first reviewed the legislative history of section 1920(4), concluding that Congress intended only modest ‎changes to the statute, leaving larger-scale shifting of litigation expenses to future legislation. The ‎panel then turned to Federal Circuit precedent, which acknowledged the applicability of section ‎‎1920(4) to electronic documents, but only to those documents produced to a requester, not those a ‎party creates for its own litigation or other use. The panel concluded that recoverable costs under ‎section 1920(4) are those costs necessary to duplicate an electronic document “in as faithful and ‎complete a manner as required by rule, by court order, by agreement of the parties, or otherwise.” To ‎the extent a party is obligated to produce (or obligated to accept) electronic documents in a ‎particular format or with particular characteristics intact (such as metadata, 2-color, motion, or ‎manipulability), the costs to make duplicates in such a format or with such characteristics preserved ‎are recoverable as “the costs of making copies . . . necessarily obtained for use in the case.” But only ‎the costs of creating the produced duplicates are included, not a number of preparatory or ancillary ‎costs commonly incurred leading up to, in conjunction with, or after duplication.‎

CBT also contested the district court’s award of costs for prior-art searches. The panel noted ‎that nothing in section 1920 covers research costs, and the Eleventh Circuit has confirmed that fees for ‎computerized legal research, an analogous expense, are not recoverable. Accordingly, the panel ‎reversed the district court’s award of costs for prior art searches.‎

In dissent, Judge O’Malley agreed with much of what the majority said, but thought that the majority ‎went too far in granting some of the costs that were not strictly for duplication of documents to be provided to the opposing party. ‎

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