On May 8, 2015, Administrative Law Judge Lord issued an Order denying summary determination that the economic prong of the domestic industry requirement had been met in Certain Communications Or Computing Devices And Components Thereof, Inv. No. 337-TA-925, Order No. 30 (May 8, 2015).
Complainant EST’s alleged domestic industry investments were based on a declaration from an employee of third-party licensee Microsoft, the manufacturer of the Surface 2 and Surface Pro 2 (which EST identified as the exemplary domestic industry products). Id. at 3; see also Complaint at 46. The Microsoft declaration provided the numbers of U.S. employees working on R&D, sales and marketing, and general administration related to the Surface 2, as well as related payroll and equipment expenses. Order at 3-4.
However, in denying EST’s motion, Judge Lord held that EST had inappropriately relied on expenses covered only under section 337 (a)(3) subsection (C) (i.e. “engineering” and “research and development” expenses) to attempt to satisfy the requirements of the domestic industry under subsections (A) or (B) (i.e. “plant and equipment” and “labor and capital” expenses respectively). Looking to the structure of statute and its history, Judge Lord concluded that activities covered by subsection (C) must not be included in a domestic industry under subsections (A) and (B):
The structure and the history of section 337(a)(3) compel the conclusion that expenses of the kind that are described in subsection (A) and (B), but arise solely as a result of activity covered under subsection (C), must be identified and counted under subsection (C) or not at all.
See id. at 5.
Because EST had not presented sufficient evidence to allocate Microsoft’s investments to the different activities conducted, Judge Lord found that EST had failed to meet the statutory domestic industry requirements. Id. at 6. Judge Lord found this evidentiary failure particularly significant in the case at hand because “many of the claimed expenditures may have been incurred as the result of activities that constitute a domestic industry only under subsection (C).” Judge Lord noted that EST would have the opportunity at the hearing to make a factual showing as to why the expenses relied on could be properly covered subsection (A) and (B). See id. at 6 n. 2.