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IP Alert: Federal Circuit Clarifies Meaning of "Articles That Infringe" and "Importer" in 337 Actions

March 9, 2020

On March 2, in an appeal of an action brought under section 337 of the Tariff Act of 1930 in the International Trade Commission (ITC) and captioned Comcast Corp. v. U.S. Int’l Trade Comm’n, the Federal Circuit held that products are “articles that infringe” under section 337 if they are designed to be, and are, used with other products after importation as part of a system that infringes a U.S. patent. The court also held that an entity that is involved in the design, manufacture, and importation of articles that infringe is an “importer,” even if it does not physically import the infringing articles. Finally, the court held that foreign manufacturers, even if they do not themselves infringe or violate section 337, can be subject to a limited exclusion order for product imported “on behalf of” an entity found to infringe and violate section 337.

The ITC and complainants Rovi Corporation and Rovi Guides, Inc. (collectively “Rovi”) brought a section 337 action against several Comcast, ARRIS, and Technicolor entities for infringement of Rovi’s U.S. Patent Nos. 8,006,263 (“the ’263 patent”) and 8,578,413 (“the ’413 patent”). The ’263 and ’413 patents are directed to systems for selecting and recording television programs using a local interactive television program guide and a remote mobile device for accessing a program guide over the internet and selecting programs to be recorded by the local interactive television program guide. The Comcast entities (collectively “Comcast”) designed accused set-top boxes (“STBs”) and set up manufacture of the STBs by overseas vendors ARRIS and Technicolor, who imported the STBs into the U.S. The STBs were designed so that users in the U.S. would undisputedly infringe the patents-in-suit when the STBs were used with Comcast servers and remote mobile devices so that users could remotely select television programs for recording.

The ITC found that Comcast violated section 337 and issued a limited exclusion order preventing importation of the accused STBs by Comcast and also by ARRIS and Technicolor, “to the extent they import such products on behalf of [Comcast].” The ITC also issued cease and desist orders directed to Comcast.  

On appeal, the Federal Circuit rejected Comcast’s argument that its accused products are not “articles that infringe” under section 337 because they do not infringe at the time of importation but infringe later when used by consumers with the Comcast servers and mobile devices. Following its earlier en banc decision in Suprema v. U.S. Int’l Trade Comm’n, the court held that section 337 applies to articles that infringe after importation when they are used in an infringing system. The court quoted this passage from Suprema: “the Commission’s interpretation that the phrase ‘articles that infringe’ covers goods that were used by an importer to directly infringe post-importation as a result of the seller’s inducement is reasonable.” 

Further, the court agreed with the ITC’s final decision that Comcast designed the accused STBs to be “used in an infringing manner” and “directed their manufacture overseas,” as well as that “§ 271(b) applies to extraterritorial conduct,” and therefore “Comcast’s inducing activity took place overseas, prior to importation; it took place at importation; and it took place in the United States, after importation.”

The court noted that it is “undisputed that direct infringement of the ’263 and ’413 patents occurs when the imported X1 set-top boxes are fitted by or on behalf of Comcast and used with Comcast’s customers’ mobile devices,” and therefore “the X1 set-top boxes imported by and for Comcast for use by Comcast’s customers are ‘articles that infringe’ in terms of Section 337.” Thus, the court interestingly found the imported STBs alone to be “articles that infringe” under section 337. This was so even though the patents-in-suit claimed a system that required more than an STB, i.e., a remote mobile device. The court did not explain this apparent inconsistency between its infringement finding under section 337 and the claim language that specifies more than an STB.

The Federal Circuit rejected Comcast’s arguments that it is not an “importer” under section 337 because it does not physically import the infringing product, it does not exercise control over the process of importation, and it only takes title to the products after they are imported into the U.S. by the ARRIS and Technicolor entities (collectively “ARRIS” and “Technicolor”). The court held that Comcast is an importer because of its involvement in design, manufacture, and importation of the accused products, including requiring adherence to Comcast’s specifications and acceptability standards, restricting ARRIS’s ability to sell the products without Comcast’s permission, providing technical documents to ARRIS and Technicolor so that the STBs will operate in Comcast’s network, requiring delivery to Comcast delivery sites in the U.S., controlling the volume of accused products that enter the U.S., and requiring ARRIS and Technicolor to handle importation formalities. The court found that the ITC’s findings of importation “by or for Comcast” of articles “for infringing uses” was supported by substantial evidence and therefore affirmed the determination that Comcast was an importer that violated section 337.

Regarding ARRIS and Technicolor, the court held that including products imported by ARRIS and Technicolor in the limited exclusion order was proper even though they were found not to infringe, because the ITC “has discretion in selecting a remedy that has a reasonable relation to the unlawful trade practice” and “the exclusion order is limited to articles imported on behalf of Comcast.” The court rejected the argument that products imported by ARRIS and Technicolor should not be included in the exclusion order because section 337 limits exclusion orders to articles imported by parties violating section 337.

An interesting nuance in the case relates to the fact that the patents-in-suit expired after issuance of the final exclusion order by the ITC and during the course of the appeal to the Federal Circuit. In denying a motion to dismiss the appeal as being moot due to the expiration of the patents, the Federal Circuit held that the appeal was not moot because the court’s decision would have “collateral consequences” in ongoing actions for infringement of other Rovi patents involving the same accused products.  

This Federal Circuit decision is significant for parties in the ITC who are dealing with importation into the U.S. of non-infringing component parts that are designed to be used in a system that induces direct infringement in the U.S. A designer of an infringing system who orchestrates the manufacture and importation of a component part of the system may be considered an “importer” of an “article that infringes” under section 337. It is no defense to argue that direct infringement does not occur until the component parts enter the U.S. and are put into the infringing system. The decision also confirms the propriety of including importers of the component parts as respondents even though the respondents themselves do not infringe the patents involved or violate section 337. 

For more information on this ruling, please contact Fitch Even partner Karl R. Fink, author of this alert.

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