In Section 337 actions before the International Trade Commission (“the Commission”), the complainant must establish that a domestic industry for articles protected by the asserted patent(s) exists or is in the process of being established. 19 U.S.C. § 1337(a)(2). The domestic industry requirement consists of two prongs: an economic prong and a technical prong.
To satisfy the economic prong of the domestic industry requirement, a complainant must show that one of the economic activities set forth in subsection 19 U.S.C. § 1337(a)(3) has taken place or is taking place. These economic activities include: significant investment in plant and equipment; significant employment of labor or capital; or substantial investment in exploitation, including engineering, research and development, or licensing. The first two categories of economic activity generally require the complainant to show that significant manufacturing-related activities are taking place in the United States, while the third addresses other activities that may be considered in situations where there usually is no domestic manufacture of articles covered by the patents in suit.
Generally, to satisfy the technical prong of the domestic industry requirement, a complainant must establish that it practices at least one claim of each asserted patent (although it is not required to be an asserted claim). That being said, until recently, Commission precedent did not require a complainant to demonstrate the existence of articles practicing the asserted patents in order to satisfy the technical prong of the domestic industry requirement based on licensing activities. Long-standing Commission precedent on this point had relied substantially on the legislative history of the 1988 Act adding § 337(a)(3)(C).
However, the Commission recently held in Certain Computers and Computer Peripheral Devices, and Components Thereof, and Products Containing the Same (Inv. No. 337-TA-841) that proof of “articles protected by the patent” is required to satisfy the technical prong of the domestic industry requirement, even where the domestic industry allegation is based on licensing activities. In the opinion, the Commission looked to recent Federal Circuit decisions to determine whether there was an articles requirement for § 337(a)(3)(C). See ourJanuary 15, 2014 post for more details.
In InterDigital Communs., LLC v. ITC, the Federal Circuit considered this issue, and held that InterDigital Communications LLC (“InterDigital”) met the domestic industry requirement with its licensing activities. 690 F.3d 1318 (Fed. Cir. 2012) (“InterDigital I”). However, in this case, there was no dispute that InterDigital’s licensees manufactured articles that practiced the patent. In its opinion denying rehearing of this case (“InterDigital II”), the Court stated:
Applying the same analysis to subparagraph (C) of paragraph 337(a)(3) produces a parallel result that is consistent with the Commission’s and this court’s statutory construction: The “substantial investment in [the patent’s] exploitation, including engineering, research and development, or licensing” must be “with respect to the articles protected by the patent,” which means that the engineering, research and development, or licensing activities must pertain to products that are covered by the patent that is being asserted. Thus, just as the “plant or equipment” referred to in subparagraph (A) must exist with respect to articles protected by the patent, such as by producing protected goods, the research and development or licensing activities referred to in subparagraph (C) must also exist with respect to articles protected by the patent, such as by licensing protected products.
InterDigital II, 707 F.3d 1295, 1297-98 (Fed. Cir. 2013) (“InterDigital II”). See our January 14, 2013 post for more details.
Citing to InterDigital II, the Commission found that the Federal Circuit held that there is an “articles” requirement to satisfy subparagraph 337(a)(3)(C). The Commission also stated that, while InterDigital IIrequires the existence of an article practicing the patent, the article does not need to be made in the United States. The Commission found additional support for this position in Microsoft Corp. v. ITC, 731 F.3d 1354 (Fed. Cir. 2013).
The Commission applied this reasoning in overruling the ALJ’s finding of domestic industry in Certain Audiovisual Components and Products Containing the Same (Inv. No. 337-TA-837). In that case, the Commission affirmed the ALJ’s decision that the Complainant had not proved that licensed products practice any claims of the asserted patents. See our April 15, 2014 post for more details.
We will continue to monitor the Commission’s application of this requirement. Until the Federal Circuit weights in on this issue again, the implications are clear – proving domestic industry based on licensing activities has become significantly more challenging for complainants.