On July 19, 2016, Judge Lord issued the public version of her final initial determination in Certain Recombinant Factor VIII Products, ITC Inv. No. 337-TA-956, finding no violation of Section 337. Of particular note, Judge Lord found that the economic prong of the domestic industry requirement was not met because the complainant did not properly allocate domestic expenditures to the domestic industry products.
The Domestic Industry Requirement
In a patent-based proceeding, the ITC has jurisdiction over cases involving “industr[ies] 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.” 19 U.S.C. § 1337(a)(2). This requirement is met only if there is: (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. 19 U.S.C. § 1337 (a)(3). This statutory framework is generally referred to as the domestic industry requirement.
The domestic industry requirement consists of a “technical prong” and an “economic prong.” To meet the technical prong, articles must be shown to practice the asserted patent. For satisfaction of the economic prong, a complainant must show significant or substantial domestic expenditures relating to the articles protected by the patent.
Expenditures Must be Allocated to the Domestic Industry Products
In her ID, Judge Lord confirms the long-standing ITC doctrine that domestic expenditures only count towards satisfying the economic prong if they relate to articles protected by the asserted patents. The complainant, after failing to present sufficient evidence allocating domestic expenditures under subparts A and B of the DI requirement between products that do and do not practice the asserted patents, argued that the Commission has held that such allocation is not necessary citing to the recent decision in Certain Marine Sonar Imaging Devices, Including Downscan and Sidescan Devices, Products Containing Same, and Components Thereof, Inv. No. 337-TA-921 (“Marine Sonar”). In rejecting complainant’s argument, Judge Lord explained that Marine Sonar “relates to research and development on patented technology [subsection C] that is used in a variety of products…[t]hat…has no applicability to the domestic industry…under subsections (A) and (B).”
Complainants in ITC actions relying on subsections (A) or (B) of the domestic industry requirement should ensure that they establish an evidentiary record allocating expenditures to products that practice a claim of the asserted patents.