April 20, 2014

International Trade Commission Rules Lack of Domestic Industry Results in a Termination of Investigation

The International Trade Commission (ITC) is an independent, quasi-judicial agency that adjudicates the importation of products that allegedly infringe U.S. intellectual property rights. The ITC can halt the importation of goods that infringe U.S. patents and/or trademarks, and thus is an effective tool for obtaining a relatively rapid determination of infringement (one year) and an exclusion order. One of the requirements for such an order is to prove harm to a domestic industry. The following case (ITC investigation 337-TA-874) is an example of one way that such an investigation can be defeated.

In a recent decision, the ITC ordered an investigation into whether certain laminated products infringed the claims of a nonpracticing entity’s (NPE) patent. In initiating the investigation, the ITC ordered the administrative law judge (ALJ) overseeing the investigation to hold a preliminary hearing and to issue a decision as to whether the NPE has the required domestic industry in the United States to bring an investigation before the ITC. A finding of a lack of domestic industry would result in a termination of the investigation, as the NPE would not have standing with the ITC. This is a departure from current ITC practice, and it may provide an effective tool for preventing NPEs from bringing frivolous suits before the ITC.

Under 19 U.S.C. § 1337(a), the ITC has jurisdiction to hear matters in which a party alleging infringement (the complainant) has, or is in the process of establishing, a domestic industry in the United States. The determination of domestic industry is a two-prong test. The first prong, referred to as the “technical prong,” requires the complainant to show that it is practicing a valid claim of each asserted patent in a product sold in the United States. The analysis of the technical prong is similar to an infringement analysis, in which each claim is compared to the domestic product.1 The second prong of the test, referred to as the “economic prong,” requires the complainant to demonstrate “(a) a significant investment in plant and equipment, (b) significant employment of labor and capital, or (c) a substantial investment in its exploitation, including engineering, research and development, or licensing.”2

The complaint in the present investigation (337-TA-874) was brought by Lamina Packaging Innovations, an NPE, against a group of companies including Hasbro, John Jameson Import Company, Cognac Ferrand USA, Inc. and Camus Wines & Spirits Group. In the investigation, Lamina Packaging alleged that the respondents were infringing two of Lamina’s patents directed to a packaging material. In initiating the investigation, the ITC ordered the ALJ to issue an initial determination as to whether Lamina has satisfied the economic prong of the domestic industry requirement. Further, the ITC stated that the initial determination would become the ITC’s final determination 30 days after the date of service of the initial determination. Accordingly, a finding of no domestic industry by the ALJ would result in a termination of the investigation. The ITC ordered the ALJ to issue a decision on domestic industry within 100 days from the institution of the investigation.

Typically, lack of domestic industry is an affirmative defense presented by a respondent. The new ruling by the ITC may allow respondents to terminate ITC investigations early, opposed to the current practice that requires respondents to endure a summary judgment motion or a trial before a domestic industry decision is rendered. As more NPEs file complaints with the ITC in an attempt to “test run” future district court cases, this recent decision may greatly reduce the number of NPE cases filed with the ITC.

1 Alloc, Inc. v. Int’l Trade Comm’n, 342 F.3d 1361, 1375 (Fed. Cir. 2003).

2 19 U.S.C. § 1337(b).

© 2014 Vedder Price

About the Author

 Timothy M. Nitsch, Intellectual Property Attorney, Veddar Price Law Firm

Timothy M. Nitsch is an Associate at Vedder Price and a member of the firm’s Intellectual Property group.

Mr. Nitsch represents individual inventors and small, midsized and large corporations. He has experience in technology-related industries such as computer software, computer networking, automation systems, electrical circuits, mechanical systems and business methods.

Prior to practicing law, Mr. Nitsch was a building automation engineer. He also has experience as a senior research engineer at a large network infrastructure manufacturer.

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