In LELO Inc. v. ITC, Appeal No. 2013-1582, the Federal Circuit reversed the ITC’s determination that qualitative factors alone are sufficient to satisfy the domestic-industry requirement of § 337 of the Tariff Act of 1930 (19 U.S.C. § 1337).
Standard Innovation filed a § 337 complaint, alleging LELO imported kinesiotherapy devices that infringed Standard Innovation’s patent. A claimant asserting patent rights under § 337 must satisfy the “domestic industry” requirement with respect to the articles protected by the patent. The statute sets forth three prongs for satisfying the domestic-industry requirement: (A) significant investment in plant and equipment; (B) significant employment of labor or capitol; or (C) substantial investment in its exploitation, including engineering, research and development, or licensing.
Standard Innovation does not manufacture its kinesiotherapy devices in the United States. Nevertheless, Standard Innovation argued it satisfies the domestic industry requirement because it purchases four of the device components from U.S. suppliers. An ITC ALJ rejected this argument, but the Commission reversed the ALJ’s determination, finding “Standard Innovation has satisfied the domestic industry requirement based on its expenditures on components produced domestically that are critical to [its devices].”
The Federal Circuit reversed the Commission’s determination, holding the domestic requirement cannot be satisfied by qualitative factors alone. The Federal Circuit emphasized (1) the language in § 337 (“significant” and “substantial”) indicates the statute requires a quantitative analysis, and (2) prior ITC cases have based the domestic industry determination on quantitative factors. The Federal Circuit found “[t]he purchase of so called ‘crucial’ components from third-party U.S. suppliers” does not satisfy the domestic industry requirement “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.”