ITC Litigation: Domestic Industry Requirement

One aspect of ITC litigation that is unique to Section 337 actions and not present in typical IP litigation is the "domestic industry" requirement. This often taken-for-granted part of ITC litigation can be minor speedbump or a major hurdle the plaintiff or complainant may face when trying to take advantage of (or avoid) the unique features of ITC litigation. What is this domestic industry requirement? What are ways that it can be satisfied (or how can you fight it)?

As mentioned in a previous post, a Section 337 complainant must show that a domestic industry exists or is in the process of being established in the United States.[1] A successful complainant can obtain an exclusion order, for example, to prevent the importation of goods into the United States. However, these and other remedial orders are reserved for those companies that have a domestic industry to be protected.

For investigations based on alleged infringement of a patent, as well as some other IP rights, the domestic industry requirement is statutorily imposed under Sections 337(a)(3)(A), (B), and (C) of the Tariff Act of 1930, as amended and codified under 19 U.S.C. 1337.[2] These sections define what a complainant needs to show to establish a domestic industry. Specifically, a complainant can establish domestic industry by showing:

. . . . with respect to the articles protected by the patent, copyright, trademark, mask work or design concerned

1. significant investment in plant and equipment;
2. significant employment of labor or capital; or
3. substantial investment in its exploitation, including engineering, research and development, or licensing.

19 U.S.C. 1337(a)(3). Complainant can choose some or all of these subsections to assert a domestic industry, but typically will assert all three.

Traditionally, the ITC describes the domestic industry requirement as laid out in 1337(a) as having two "prongs": (1) the technical prong (i.e., whether there is an article "protected by the patent") and (2) the economic prong (i.e., whether there is sufficient domestic economic activity with respect to that article).[3] Depending on the case, some parties may use experts to explain why a complainant has satisfied the economic and technical prongs of the domestic industry requirement. These "prongs" are explained in more detail below.

Technical Prong

The technical prong requires the complainant to show that the economic activity on which the complainant is relying relates to an article protected by the patent.[4]

Under all three subsections of 337(a)(3), a complainant can demonstrate this relationship by proving that the protected articles practice at least one claim in each asserted patent. The Commission has ruled that because the language of the technical prong refers to articles protected by "the patent" and not to only claims found to infringe, the requirement is satisfied if the complainant's article practices any claim of the patent.[5] In other words, the patent claim used to satisfy the technical prong does not have to be the same as the patent claim the complainant alleges is infringed by a respondent.[6]

If you are a complainant, demonstrating satisfaction of the technical prong means that you will need to create a chart showing the presence of every element of a claim in the asserted patent exists in your product. In some cases, this may require creating charts mapping a claim against a licensee's product.[7]

Economic Prong

The next step is determining whether the economic activity for the protected article is adequate to warrant protection under section 337. The economic prong focuses on the nature of an investment in the protected product and whether it is "significant" or "substantial" under subsections 337(a)(3)(A), (B), and (C). The different subsections are standalone bases for satisfying this prong.

But how much is "significant" or "substantial?" These terms are not clearly defined, and when you are a large global corporation, you could have a multi-million dollar manufacturing plant in the United States that might not be "significant" to your business.

It is no surprise that the ITC uses a "flexible approach" and considers both quantitative and qualitative factors when assessing whether investments are "significant" or "substantial" under Section 337. Quantitative factors refer to, numerically, how much money is being spent on a particular activity or asset,[8] and qualitative factors refer to other considerations that may not be captured by quantitative measurements. For example, an administrative law judge should consider the importance of the claimed investments in the context of the relevant industry.[9] Additionally, the claimed quantitative data may relate to a product that has been discontinued so it may not be qualitatively as important.[10] Past expenditures may also be considered to support DI, so long as those investments are sufficiently connected to the protected articles and a complainant continues to make qualifying investments at the time a complaint is filed.[11]

This flexible approach with many different considerations commonly leads to arguments both for and against the domestic industry requirement. Parties, moreover, usually quibble over the types of expenses that may properly be included in a subsection 337(a)(3)(A), (B), or (C) analysis. In some instances, these assessments have bubbled up to the Federal Circuit, resulting in at least one decision holding that the Commission cannot find a domestic industry exists based on qualitative factors, alone.[12]

The analysis of economic activity for purposes of subsections 337(a)(3)(A) and (B) is straightforward - as of the date the complaint was filed, how much had the complainant invested in plant and equipment used to make the protected article? How much labor or capital did it employ for the same? In addition to these considerations, subsection 337(a)(3)(C) requires showing a nexus between the complainant's investments in engineering, R&D, or licensing and the asserted patent that is, a complainant must show the investments exploit the patented technology.[13] The nexus showing, however, does not require a patent-by-patent allocation of investments.[14] Although some earlier Commission opinions have suggested that investments under subsection (a)(3)(C) may not need to show a product exists under the technical prong to demonstrate exploitation of the patent, the Commission has more recently required that investments under subsection (a)(3)(C) must still be tied to an article protected by the patent.[15] The protected article, however, need not be manufactured in the U.S. For example, the Commission has deemed domestic pre-manufacturing investments in R&D satisfied this subsection where the protected article was manufactured abroad.[16]

There are no clear boundaries for what types of investments fall into each subsection and each section is analyzed individually. Thus, investments presented by a complainant under subsections 337(a)(3)(A) and (B) which traditionally have always included manufacturing expenses may also include activities traditionally associated with 337(a)(3)(C), such as engineering, R&D, and licensing, so long as such investments bear a relationship to a DI product.[17] As an example, consider an engineer who is working in a lab incorporating the patented technology in a product. Elements of a domestic industry can be found under all three subsections. The lab is an investment in a plant under subsection (A), the engineer is an employment of labor under subsection (B), and the two combined are part of the investment in the exploitation of the patent under subsection (C).

On a final note, not all economic activity "counts" for the domestic industry analysis. When Congress amended Section 337 in 1988, laying out the now-familiar three subsection test, it said in the legislative history that "marketing and sales in the United States alone" would not satisfy the domestic industry requirement.[18] If a complainant's activities are exclusively or predominantly sales and marketing activities, the Commission will not deem them an industry for purposes of section 337. And some judges have not included such activities in the domestic industry analysis at all.[19]

More questions? Contact the authors or visitFish's Intellectual Property Law Essentials.

[1] "ITC Litigation: How Do I file an ITC Complaint?," April 23, 2020.

[2] This article only discusses the domestic industry requirements for articles protected by patent, copyright, registered trademark, mask work, or vessel hull design. 19 U.S.C. 1337(a)(2). The domestic industry analysis differs for other 337 investigations such as those for trade secret misappropriation.

[3] The requirement may be satisfied by examining the activities of the complainant (and its subcontractors) and/or its licensees. For ease of reference, we will refer to the "complainant" in this article.

[4] Again, this article focuses on domestic industry for Section 337 investigations involving patents. The technical prong differs for other types of intellectual property. For example, when the investigation relates to trademark infringement, the complainant must have products that bear the trademarks at issue. See Certain Hair Irons and Packaging Thereof, Inv. No. 337-TA-637, ID at 9-11 (Mar. 10, 2009), aff'd, Comm'n Decision Not to Review an ID (Apr. 23, 2009).

[5] Certain Microsphere Adhesives, Process for Making Same, and Products Containing Same, Including Self-Stick Repositionable Notes, Inv. No. 337-TA-366, Comm. Op. at 16 (Dec. 8, 1995).

[6] Certain Soft-Edged Trampolines and Components Thereof, Inv. No. 337-TA-908, Comm'n Op. at 54 (May 1, 2015).

[7] Certain Computers and Computer Peripheral Devices, and Components Thereof, and Prods. Containing the Same, Inv. No. 337-TA-841, Comm'n Op. at 40 (Jan. 9, 2014).

[8] See, e.g., Certain Carburetors and Prods. Containing Such Carburetors, Inv. No. 337-TA-1123, Comm'n Op. at 15 (Oct. 28, 2019).

[9] See, e.g., Certain Printing and Imaging Devices and Components Thereof, Inv. No. 337-TA-690, Comm'n Op. at 27 (Feb. 17, 2011).

[10] See, e.g., Certain Automated Teller Machines, ATM Modules, Components Thereof and Prods. Containing Same, Inv. No. 337-TA-972, Final ID at 191 (Feb. 1, 2017) (public version).

[11] See Certain Marine Sonar Imaging Devices, Including Downscan and Sidescan Devices, Prods. Containing the Same, and Components Thereof, Inv. No. 337-TA-921, Comm'n Op. at 55-56, 64 (Jan. 6, 2016).

[12] Lebo Inc. v. Intl Trade Comm'n, 786 F.3d 879, 885 (Fed. Cir. 2015).

[13] See, e.g., Certain Elec. Imaging Devices, Inv. No. 337-TA-850, Final ID at 208-09 (Sept. 30, 2013) ("Certain Elec. Imaging"), aff'd, Comm'n Op. at 95-96 (Apr. 21, 2014).

[14] Id.

[15] Certain Computers and Computer Peripheral Devices, and Components Thereof, and Prods. Containing the Same, Inv. No. 337-TA-841, Comm'n Op. at 40 (Jan. 9, 2014) (relying on InterDigital Commc'ns, LLC v. Int'l Trade Comm'n, 707 F.3d 1295 (Fed. Cir. 2013) and Microsoft Corp. v. ITC, 731 F.3d 1354 (Fed. Cir. 2013)).

[16] See, e.g., Certain Integrated Circuits, Processes for Making Same, and Prods. Containing Same, Inv. No. 337-TA-450, USITC Pub. No. 3624, ID at 151-52 (May 6, 2002) (citing Certain Microcomputer Memory Controllers, Components Thereof and Prods. Containing

Same, Inv. No. 337-TA-331, ID (Jan. 8, 1992), unreviewed, 57 Fed. Reg. 5170 (Feb. 12, 1992)).

[17] Certain Solid State Storage Drives, Stacked Electronics Components, and Prods. Containing Same, Inv. No. 337-TA-1097, Comm'n Op. at 8-14 (June 29, 2018).

[18] Certain Television Sets, Television Receivers, Television Tuners, & Components Thereof, Inv. No. 337-TA-910, Comm'n Op. at 73 (Oct. 30, 2015) (citing H.R. Rep. No. 100-40, Pt. 1, at 157 (1988)); see "ITC Litigation: The Rise in Popularity of Section 337," May 26, 2020.

[19] Certain Sleep-Disordered Breathing Treatment Systems and Components Thereof, Inv. No. 337-TA-890, ID at 173-174 (Sept. 16, 2014); Certain Video Game Systems and Controllers, Inv. No. 337-TA-743, ID at 13 (Feb. 11, 2011).