The Relationship Between the Economic and Technical Prongs of the Domestic Industry Requirement

Welcome to the latest issue of the Section 337 Update. This newsletter is designed to provide you with practical updates and developments on Section 337 proceedings before the US International Trade Commission.

To prevail in a Section 337 proceeding, a complainant must establish that an industry “relating to the articles protected by the patent... exists or is in the process of being established” in the United States. 19 U.S.C. § 1337(a)(2). This domestic industry requirement consists of two prongs: an economic prong and a technical prong. The relationship between the two prongs was recently reaffirmed in an order issued by Judge Rogers of the US International Trade Commission (“ITC”) in Certain Printing and Imaging Devices and Components Thereof (Inv. No. 337-TA-690, Order No. 26, April 22, 2010). The order is available online.

To satisfy the economic prong of the domestic industry requirement, a complainant must show that one of the economic activities set forth in subsection 19 U.S.C. § 1337(a)(3) has taken place or is taking place with respect to articles protected by the asserted patents. The relevant economic activities are (A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in exploitation, including engineering, research and development, or licensing. 19 U.S.C. § 1337(a)(3). The first two categories of economic activity generally require the complainant to show that significant manufacturing-related activities are taking place in the United States, while the third addresses other activities that may be considered in situations where there usually is no US manufacture of articles covered by the patents in suit.

Generally, to satisfy the technical prong of the domestic industry requirement, a complainant must establish that it has a domestic product that practices at least one claim of each asserted patent. "The test for satisfying the 'technical prong'... is essentially [the] same as that for infringement, i.e., a comparison of domestic products to the asserted claims." Alloc, Inc. v. Intl Trade Comm'n, 342 F.3d 1361, 1375 (Fed. Cir. 2003). However, the ITC's jurisprudence long ago clarified that the claim used to establish a domestic industry need not be one of those alleged to be infringed. Certain Microsphere Adhesives, Process for Making Same and Products Containing Same Including Self-Stick Repositionable Notes, Inv. No. 337-TA-366, USITC Pub. 2949 (Jan. 1996). That concordance between the domestic product and the asserted claims is not required is supported both by the statutory language of Section 337, which refers only to patents, not patent claims, that have been violated, as well as by the legislative history, which made clear that “Congress intended the 1988 amendments to liberalize the domestic industry requirements.” Id.

Although concordance is not required between the domestic products and the asserted claims, it is required as between the domestic products which form the bases for the two domestic industry prongs. See, e.g., EPROM, EEPROM, Flash Memory, and Flash Microcontroller Semiconductor Devices and Products Containing Same, Inv. No. 337-TA-395, Initial Det. (Mar. 19, 1998) (“The technical prong requires that the articles relied on for a domestic industry be covered by the asserted patent while the economic prong requires that the specified activities in the United States exist with respect to the articles identified by the technical prong.”).

In Certain Printing and Imaging Devices and Components Thereof, Judge Rogers confirmed that, where the complainant relies upon the manufacture of particular domestic products to satisfy the economic prong, the technical prong analysis must be based upon the same domestic products. In this investigation, the complainant identified two specific products upon which it was relying to establish the economic prong of the domestic industry requirement. The respondent sought summary determination that the complainant had failed to establish the existence of a domestic industry because the complainant’s experts did not provide technical analysis on one of the identified products. Although Judge Rogers recognized that the same products must be used for the economic and technical prong analyses, he held that a mere lack of expert testimony does not automatically mean that a complainant will not be able to meet its burden to show that its identified products practice the asserted patents. Notably, in finding that the lack of expert analysis was not necessarily fatal to a technical prong domestic industry claim, Judge Rogers relied on infringement case law, since the two types of analyses are essentially the same. As such, Judge Rogers held that summary determination was inappropriate and denied the respondent’s motion. However, this case reaffirms that a lack of concordance between the products underlying the economic and technical prong analyses may form the basis for a determination of no domestic industry.

Where a complainant relies upon its licensing activities to satisfy the economic prong, the technical prong cannot be based upon any specific domestic product. Rather, the complainant must show that the licensing activities themselves have a sufficient nexus to the asserted patents. The complainant is not required to show that either it or its licensees domestically manufacture a product covered by the patents. Accordingly, in such cases, concordance should presumably not be an issue.

We will periodically provide you updates on developments relating to Section 337 litigation. If you have any questions or for further information, please feel free to contact Charles Schill at 202.429.8162; Alice Kipel at 202.429.6743; or Steve Barber at 202.429.6430. (Special thanks to Tiffany Miller for her assistance in preparing this Newsletter.)