International Trade Commission
On January 12, 2018, Judge David P. Shaw issued an order denying Complainant Wirtgen America, Inc.’s (“Wirtgen America”) motion for summary determination on the economic prong of the domestic industry requirement in Certain Road Milling Machines and Components Thereof, Inv. No. 337-TA-1067.
Wirtgen America had filed a Section 337 complaint on July 19, 2017 alleging infringement of five U.S. patents by Respondents Caterpillar Bitelli SpA, Caterpillar Prodotti Stradali S.r.L, Caterpillar Americas CV, Caterpillar Paving Products, Inc., and Caterpillar Inc. (collectively, “Caterpillar”). Wirtgen America then moved for summary determination, arguing that it met the economic prong of the domestic industry requirement as a result of its domestic activities and investments. In an ITC investigation, the complainant has the burden to show by a preponderance of the evidence that a domestic industry for articles protected by the asserted patent(s) exists or is in the process of being established. To show domestic industry, the complainant must establish that there is either: (A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in the exploitation of an article protected by a patent, copyright, or trademark, including engineering, research and development, or licensing. See 19 U.S.C. § 1337(a)(3).
In its motion for summary determination, Wirtgen America alleged that it was “the leading provider of custom-manufacturing and service of, and support for, road-milling machinery in the United States,” that it was a significant employer in the Nashville area, and that it maintained a thirty-four-acre campus in Tennessee that contains its post-importation manufacturing and repair workshop, supplies center, customer service center, customer and employee hands-on training facility, classrooms, and machine storage and demonstration grounds. Wirtgen America also provided a figure for its total “economic investments attributable to the domestic industry products across land, infrastructure, equipment, labor, and capital investments,” and a figure for its land and capital investments.
Caterpillar argued that the motion should be denied because Wirtgen America “selectively relied on inconsistent information regarding its domestic activities,” that Wirtgen America had omitted any analysis of its German affiliates’ contribution to its domestic investments, and that Wirtgen America had not provided enough context for determining the significance of its investments in the United States.
In denying Wirtgen America’s motion, Judge Shaw explained that Section 337’s requirement of “significant investment in plant and equipment” and “significant employment of labor or capital” necessitates a quantitative analysis of a complainant’s domestic activities, and that Wirtgen America had not provided a quantitative analysis of the value added by its domestic activities. For example, Judge Shaw rejected Wirtgen America’s argument that its instructional courses added significant value to the domestic industry products, finding that Wirtgen America had failed to discuss what value, if any, was added through the instructional classes. Judge Shaw further determined that Wirtgen America’s qualitative description of its post-importation manufacturing activities “[did] not provide enough context to ascertain the significance” of such activities. Additionally, Judge Shaw noted that Wirtgen America did not itself manufacture the products, but instead represented that a related German entity “had the primary role in the design, development, and manufacture of the domestic industry articles.” Judge Shaw noted that Wirtgen America had not shown that these foreign investments lacked significance. Accordingly, Judge Shaw concluded that Wirtgen America had not demonstrated that it was entitled to summary determination on the economic prong of the domestic industry requirement as a matter of law.
Judge Shaw’s Order underscores the importance of quantitative evidence in establishing the economic prong of domestic industry. A complainant can rely on both qualitative and quantitative evidence, but the Federal Circuit has expressly held that “qualitative factors alone are insufficient to show ‘significant investment in plant and equipment’ and ‘significant employment of labor or capital’ under prongs (A) and (B) . . . .” See Lelo Inc. v. Int’l Trade Comm’n, 786 F.3d 879, 884–85 (Fed. Cir. 2015) (emphasis added). Accordingly, ITC complainants should not rely on mere qualitative argument alone, but rather should provide quantitative data establishing a significant or substantial investment in the United States.