Further to our July 5, 2013 post, on July 12, 2013, ALJ Theodore R. Essex issued the public version of the Initial Determination (“ID”) (dated July 5, 2013) on the Economic Prong of the Domestic Industry Requirement in Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof (Inv. No. 337-TA-874).

By way of background, the Complainant in this investigation is Lamina Packaging Innovations LLC (“Lamina”).  In its complaint and amended complaint, Lamina alleged a violation of Section 337 in the importation into the U.S. and sale of certain products having laminated packaging, laminated packaging and components thereof that infringe one or more claims of U.S. Patent Nos. 6,207,242 and 7,348,067.  See our February 21, 2013 post for more details on Lamina’s complaint.

The Notice of Investigation in this case instructed the presiding ALJ to “hold an early evidentiary hearing, find facts, and issue an early decision, as to whether the complainant has satisfied the economic prong of the domestic industry requirement.”  Further, the ITC stated that it expected “the issuance of an early ID relating to the economic prong of the domestic industry requirement within 100 days of institution, except that the presiding ALJ may grant a limited extension of the ID for good cause shown.”  Significantly, the Notice of Investigation further noted that the “issuance of an early ID finding that the economic prong of the domestic industry requirement is not satisfied shall stay the investigation unless the Commission orders otherwise; any other decision shall not stay the investigation or delay the issuance of a final ID covering the other issues of the investigation.”  See our March 25, 2013 post for more details on the ITC’s notice of investigation.

According to the ID, on May 16, 2013, Lamina filed an objection to the Commission’s order set forth in the notice of investigation, arguing that it was “arbitrary and capricious” and not in accordance with the law.  Lamina argued that the special procedures set forth in the notice of investigation prejudiced Lamina and violated Lamina’s rights under the Administrative Procedure Act (APA).  Thus, Lamina requested that the hearing on the economic prong of the domestic industry requirement be postponed and rescheduled to take place later in the investigation and in accordance with normal ITC practice.  At the evidentiary hearing, ALJ Essex overruled Lamina’s objection and ordered the hearing to proceed. 

However, in the ID, ALJ Essex stated that upon further review, he had decided to change his ruling on Lamina’s objection to the Commission’s order.  Specifically, the ID states that “[i]n the case before the ITC, the Commission has sought to deviate from its rules to achieve a desired result; however the Commission has not articulated what the desired result is.”  Further, “[t]his deviation is without a justification that the cause of justice requires it, nor is any other explanation offered as to why the Commission has abandoned its rules.”  Thus, “[w]ithout such an explanation, and adherence to the APA, the deviation is fatal to the cause.”  Accordingly, “[a]bsent the instructions contained in the Notice in this matter, the judge would find the proceedings as conducted to be in violation of law and would proceed to hearing consistent with the rules of the ITC and APA.”

Nevertheless, ALJ Essex further stated that if the Commission should disagree with his ruling on Lamina’s objection, then he finds in the alternative that Lamina has not satisfied the economic prong of the domestic industry requirement.  In particular, the ALJ found that the domestic industry product is limited to the packaging only and does not include the products contained within those packages.  He found that the laminated packaging was not “integral” to the products as a whole and thus that the products as a whole should not be considered for purposes of the economic prong analysis.  Moreover, even if the laminated packaging was an essential component of the products, Lamina had failed to allocate the amount of money spent on that component as opposed to other components.  Thus, Lamina had failed to show that its domestic licensees had made significant investments in plant and equipment or labor and capital related to the domestic industry products (i.e., the packaging alone), or had made substantial investments in the exploitation of the asserted patents.

In addition, ALJ Essex rejected Lamina’s argument that its licensing activities satisfied the economic prong of the domestic industry requirement under 19 U.S.C. § 1337(a)(3)(C).  While Lamina had established a sufficient nexus between its licensing activities and the asserted patents and a nexus to the U.S., Lamina had failed to establish a sufficient nexus to licensing itself.  In particular, the ALJ found that there was insufficient evidence to clearly show that all of the investments made by Lamina were costs that were linked to licensing efforts.  Moreover, even assuming that Lamina had established a nexus to licensing, ALJ Essex further found that Lamina had failed to show that its own investments in exploiting the asserted patents were substantial.  ALJ Essex also rejected an argument by Lamina that it was improper to consider whether Lamina was in the process of establishing a domestic industry (as opposed to a domestic industry already existing) in the present phase of the investigation.

Accordingly, ALJ Essex found that Lamina had failed to satisfy the economic prong of the domestic industry requirement.