By: Yury Kalish and Vishal Khatri  Administrative Law Judge Lord held the economic prong can be satisfied even when the percentage of complainant’s domestic investments in the patented products is small in relation to its overall domestic investments. In re Certain LED Lighting Devices, LED Power Supplies, And Components Thereof, Inv. No. 337-TA-1081, Order No. 54. In a recent post, we discussed how the ITC made it easier for some complainants to meet the technical prong of the domestic industry requirement. This Order also makes it easier for complainants to meet the economic prong of domestic industry.

This investigation was instituted on November 8, 2017 based on a complaint by Philips Lighting North America Corp. and Philips Lighting Holding B.V. (“Philips”). The remaining respondents include Feit Electric Company, Inc., Feit Electric Company, Inc., Lowe’s Companies, Inc., LG Sourcing, Inc., and Satco Products, Inc. (collectively “Respondents”). On June 15, 2018, Respondents filed a motion for summary determination, arguing that with respect to each of the asserted patents the amount of domestic industry investment alleged by Philips is de minimis, and therefore are not “significant” or “substantial,” as required by statute.

By statute a complainant must establish that “an industry in the United States, relating to the articles protected by the patent, copyright, trademark, mask work, or design concerned, exists or is in the process of being established.” 19 U.S.C. § 1337(a)(2). The statute further clarifies that:

(3)   For purposes of paragraph (2), an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned –

(A)  significant investment in plant and equipment;

(B)  significant employment of labor or capital; or

(C)  substantial investment in its exploitation, including engineering, research and development, or licensing.

19 U.S.C. § 1337(a)(3) (emphasis added). Accordingly, the “economic prong” of the domestic industry requirement is satisfied when a complainant can prove significant or substantial economic activities and investments set forth in one of the subprongs of subsection 337(a)(3).

Judge Lord explained that “whether an investment is significant or substantial is not measured in the abstract or in an absolute sense, but rather is assessed with respect to the nature of the activities and how they are ‘significant’ to the articles protected by the intellectual property right.” Order 54 at 5. (internal quotations omitted). Judge Lord reminded the parties of the Commission’s guidance that “determining satisfaction of the economic prong is a flexible exercise.” Id. at 6. She concluded that “[u]nder this flexible approach, it is recognized that investments made by a large entity may appear less significant when subjected to a strictly mathematical comparison with overall expenditures, but such investments may be deemed substantial nevertheless.” Id. Furthermore, “a domestic industry is not determined by reference to absolute numbers.” Id. at 7.

Based on this rationale, Judge Lord rejected Respondents’ arguments that “the percentage of Philips’s domestic investments in the patented products is too small in relation to its overall domestic investments (to say nothing of its worldwide investments) to be significant” and that “there is a level of relative investment below which it is impossible to ‘credibly establish’ significant investments.” Id. at 6. In the context of the summary determination motion, Judge Lord concluded that “Philips has presented sufficient evidence to place its investments in context,” and “it should be permitted to develop the facts and arguments in support of its allegations of significance at a hearing.” Id. at 7.

Takeaway

This Order serves as a reminder that determining whether the economic prong is met is a flexible exercise, and a domestic industry is not determined in reference to absolute numbers. The fact that patent-related investments are small in comparison to overall investments is not, by itself, fatal to meeting the economic prong of the domestic industry requirement. This ruling may make it easier for certain complainants to initiate an investigation at the ITC. Respondents to such complaints may be better off focusing their critique on the nature of the complainant’s activities related to patent protected articles rather than the relative size of patent related investments compared to the complainant’s overall domestic investments.

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Vishal Khatri is an intellectual property lawyer with more than 15 years of experience representing clients in high stakes, bet-the-company patent litigation and procurement matters around the world. He routinely represents clients in matters before U.S. district courts, the United States International Trade Commission (ITC), and the United States Patent and Trademark Office (USPTO), including Inter Partes Review (IPR) proceedings before the Patent Trial and Appeal Board (PTAB).