Federal Circuit Reins In ITC On Domestic Industry

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Federal Circuit Reins In ITC On Domestic Industry


It has been quite a while since we last talked about the International Trade Commission, the agency charged with protecting the United States from unfair trade practices—including intellectual property violations—in the importation of goods into the U.S. market. That is in part because the venue—with its complex rules and fast pace—appears no longer to be favored by patent trolls. But we return to the subject because of a ruling by the Federal Circuit curbing the Commission’s expansive view of its jurisdiction.

In brief, a patent–owner may file a complaint with the ITC if it believes that a patent it owns is being infringed by articles imported into the United States from abroad. In order to establish the Commission’s jurisdiction, the patent–owner must show that there is a domestic industry in the United States for the patented invention. The patent–owner does that by showing significant U.S. investment in plant and equipment; significant U.S. investment in labor or capital; or substantial U.S. investment in the exploitation (including engineering, R&D, or licensing) of articles protected by the patent.

In a May 11, 2015, opinion, the Federal Circuit reversed the ITC’s conclusion that a patent–owner had established a domestic industry by proving it had spent relatively little money in purchasing “crucial” components of its devices from U.S. suppliers. That is, the ITC found that a quantitatively small investment in a qualitatively important component was enough to establish a domestic industry. The appellate court rejected this line of argument, holding that domestic industry must be established through evidence of a significant or substantial quantity of investment ($) in the establishment of a U.S. market for the patent–protected product. To quote the court:

The purchase of so called “crucial” components from third–party U.S. suppliers are insufficient to satisfy the “significant investment” or “significant employment of labor or capital” criteria of § 337 where there is an absence of evidence that connects the cost of the components to an increase of investment or employment in the United States.

This opinion stands for the common–sense proposition that a business cannot create a domestic industry for its products just by buying important parts from U.S. suppliers.

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