ITC Monthly Wrap-Up: August 2022

In August, four complainants filed five new complaints with the Commission:

1. Purple Innovation, LLC, sued numerous respondents in Certain Pillows and Seat Cushions, Components Thereof, and Packaging Thereof, Inv. No. 337-TA-1328;
2. Google, LLC, sued Sonos, Inc., in Certain Audio Players and Components Thereof, Inv. No. 337-TA-1329;
3. Google, LLC, sued Sonos, Inc., in Certain Audio Players and Components Thereof II, Inv. No. 337-TA-1330;
4. Manufacturing Resources International, Inc., sued multiple respondents in Certain Outdoor and Semi-Outdoor Electronic Displays, Products Containing Same, and Components Thereof, Dkt. No. 337-TA-3636; and
5. Daedalus Prime, LLC, sued numerous respondents in Certain Semiconductors and Devices and Products Containing the Same, Including Printed Circuit Boards, Automotive Parts, and Automobiles, Dkt. No. 337-TA-3637.

The Commission also instituted five investigation in August.

This month's ITC Wrap-Up focuses on a Commission opinion that addresses the economic prong of the domestic industry (DI) requirement. Asymmetrical statements from Commissioners Kearns and Stayin illustrate a view that the determination of whether domestic investments are significant and substantial has become overly complicated, and that complainants should have some flexibility in terms of how they present evidence of significance.

In the 1260 investigation, Certain Toner Supply Containers and Components Thereof (II), Canon sought a GEO and CDOs against numerous respondents that import and sell infringing toner cartridges.

During discovery, all of the named respondents were terminated at Canon's request or found in default. After the last group of respondents defaulted, Canon moved for summary determination of violation. For the economic prong of the domestic industry requirement, Canon relied on its domestic manufacturing activities related to the DI products to satisfy Section 337(a)(3), subparagraphs (A) and (B). For subparagraph (A), Canon relied on the value of its Virginia facility as well as the expenses for the equipment used to make the DI products. For subparagraph (B), Canon relied on the labor expenses it incurred in engineering, making, and warehousing the DI products. Canon presented a detailed accounting of its expenses.

Because Canon makes products at its Virginia facility that do and do not practice the asserted patents, Canon allocated its investments to the DI products through two alternative methodologies. First, Canon allocated its investments through a product-based approach Canon divided the total number of domestic industry products it made in the U.S. by the total number of toner supply containers it made in the U.S. Canon then multiplied its subparagraph (A) expenses by that quotient and presented this product as its product-based allocated investments. Canon repeated the calculation for its subparagraph (B) expenses. Second, in an alternative methodology, Canon used an area-based allocation approach. Here, Canon divided the square footage of its Virginia plant that manufactures the DI products by the square footage of its Virginia campus. Canon then multiplied its expenses for subparagraphs (A) and (B) by that quotient and presented these products as its area-based allocated investments.

To satisfy the Commission's requirement that the complainant show its investments are significant in context, Canon argued that its investments are significant in relation to the total U.S. market value of the DI products, based on total sales based on average price. Canon also argued that its domestic investments are significant because a substantial percent of the DI products are manufactured in the U.S. (the exact figure is redacted) as compared to foreign production.

Chief Judge Cheney reviewed Canon's arguments, agreed with them, and issued an ID that granted Canon's motion. He then recommended that the Commission issue a GEO and CDOs.

Although no party petitioned for review of the ID, the Commission voted to review it. The Commission did not ask Canon or the Commission's Office of Unfair Import Investigations (OUII) for further briefing.

After reviewing the ID, the Commission issued an opinion that largely summarized and adopted the ID. Commissioner Kearns penned a separate footnote stating he found that Canon satisfied the DI requirement based on its domestic manufacturing. He found Canon's investments significant in relation to their total market value, and he took no position on Canon's foreign-to-domestic-production comparison. Commissioner Stayin penned a concurrence stating that the Commission's domestic industry analysis "has become overly complicated, inconsistently applied, and far afield from the inquiry Congress has instructed the Commission to undertake." Commissioner Stayin offered that the Commission does not need "to finely parse a complainant's list of purportedly qualifying investments" and suggested that complainants should frame their significance argument as they see fit.

The Commission's recent opinions that address DI issues suggest that the Commission is continuing to refine its domestic industry precedent. In this respect, Commissioner Stayin's concurrence is notable insofar as another Commissioner has critiqued the fine parsing or "line by line" examination that the Commission has undertaken in some recent investigations.