ITC Domestic Industry Requirement

The International Trade Commission (the ITC) is an agency charged to assist U.S. industry in avoiding unfair competition, particularly from overseas entities. The only relief available to parties who win such disputes is an “exclusion order” which requires U.S. Customs to interdict any products that are impacted by the associated exclusion order at the border.

These kinds of cases have consistently risen in popularity, despite damages being unavailable as a remedy should a given complainant succeed in such a claim. Most recently, Apple made headlines for a Notice of Final Initial Determination on violation of Section 337 indicating that Apple’s Apple Watch infringed five of Complainant Masimo’s patents (e.g. this one) related to the use of particular wavelengths of light for detecting physiological aspects of a human wearer. In short, Apple’s implementation of its heart rate monitor lights in some of its watches were found to infringe.

An unusual requirement for the ITC is the requirement of “Domestic Industry.” This requirement is found in 19 U.S.C. 1337(a)(2)-(3) and is as follows:

(2) Subparagraphs (B), (C), (D), and (E) of paragraph (1) [authorizing interdiction or destruction of goods] apply only if an industry in the United States, relating to the articles protected by the patent, copyright, trademark, mask work, or design concerned, exists or is in the process of being established.
(3)For purposes of paragraph (2), an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned—
(A) significant investment in plant and equipment;
(B) significant employment of labor or capital; or
(C) substantial investment in its exploitation, including engineering, research, and development, or licensing.

This requirement is generally construed by the ITC and the Federal Circuit as encompassing two components: (1) an economic prong and (2) a technical prong. The economic prong is generally regarded as actual sales or manufacturer of products that practice the asserted patents, R&D related to products that practice the asserted patents; or licensing efforts for the asserted patents. These activities must be “significant or substantial” enough to satisfy the economic prong. The technical prong requires that the complainant shows that the patented article practices at least one claim of the asserted patent, using the same inquiry as an infringement analysis. So, the complainant must have a product that is covered by its own patent manufactured within the U.S.

It is sometimes suggested that IP development entities and other non-practicing entities cannot use the ITC because they lack domestic industry. However, non-practicing entities can show domestic industry. See below.

Below are two cases exploring the requirements for domestic industry.

In the Commission Opinion in In re the Matter of Certain Percussive Massage Devices, Inv. No. 337-TA-1206 on January 3, 2022 (see pages 10-15 particularly), the Commission found that Hyperice satisfied the domestic industry economic prong through continued growth in employees and IP development employees and the continued growth of R&D expenses, even though Hyperice primarily manufactured in China and spent considerably more money in China than in the U.S. The Commission also emphasized that Hyperice’s growth in the U.S. was consistent and considerable – enough to satisfy the U.S. domestic industry requirement’s economic prong.

In the Federal Circuit opinion Interdigital Communications, LLC et al. v. ITC, 690 F.3d 1318 (Fed. Cir. 2012), the Federal Circuit carefully considered the domestic industry requirement for a near-non-practicing entity Interdigital. Here, they agreed with the ITC determination that significant licensing activities in the cellular telephonic industry (related to Interdigital’s patents on the code division multiple access data transmission) were sufficient to qualify as domestic industry. The Federal Circuit carefully considered the amendments adding section (C) in 1988 and found that investment in research in the U.S. was sufficient, despite non-domestic manufacture or limited manufacturing in the U.S. In particular, manufacturing need not be shown at all in the U.S. if there are sufficient investment or R&D activities in the U.S.

So, the ITC may be available to many more potential complainants than one might expect. “Domestic industry” is a broad concept  in the ITC. Consider the ITC as an option in cases where the particular pressure afforded by an exclusion order may be sufficient to accomplish one’s client’s goals.

Jonathan Pearce, the author of this post, will lead a discussion of these issues at our weekly SoCal IP Institute Meeting on January 8, 2023 which will qualify for 1 hour of MCLE for the State Bar of California and is available via the internet for those who would like to participate.