In a recent Order, Judge Lord denied Complainant Macronix’s motion for summary determination that the economic prong of the domestic industry requirement has been met.  Certain Non-Volatile Memory Devices and Products Containing Same, Inv. No. 337-TA-1046, Order No. 26Although the order is heavily redacted, Judge Lord’s analysis appears to focus on the fact that the products relied upon to meet the domestic industry requirement were not manufactured until after the date the complaint was filed.

The domestic industry requirement under Section 337 arises from the statutory language governing patent-based proceedings in subsection 337(a)(2), which requires that a complainant establish that an industry “relating to the articles protected by the patent … exists or is in the process of being established” in the United States. 19 U.S.C. § 1337(a)(2).  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.

In its motion, Macronix asserted a domestic industry based on the research and development of “new” products that went into production shortly after the complaint was filed.  Although the Commission Investigative Staff supported Macronix’s motion, ALJ Lord determined that such products cannot form the basis of an extant domestic industry.  She noted that “Section 337(a)(3) requires that the domestic industry relate to “articles protected by the patent,” and the Commission has held that “[i]f a complainant cannot demonstrate the existence of articles protected by the patent, the complainant must instead show a domestic industry ‘is in the process of being established.’”  Macronix relied on Certain Optoelectronics Devices which found a domestic industry based on research and development that was unrelated to manufacturing.  See Inv. No. 337-TA-860, Initial Determination at 208-215 (Dec. 13, 2013). However, Judge Lord held that Certain Optoelectronic Devices  was distinguishable as the domestic industry products in that investigation existed at the time of the complaint.

Judge Lord accordingly held that Macronix’s R&D expenditures for products that did not exist at the time of the complaint can only be used to show that a domestic industry was in the process of being established—but not to prove the existence of a domestic industry.  She further noted that such a showing “requires evidence of the necessary tangible steps to establish such an industry in the U.S. and that there is a significant likelihood that the industry requirement will be satisfied in the future.”  Judge Lord concluded that Macronix’s evidentiary showing did not meet this standard and denied the motion.

Takeaway

The ITC has firmly established that the domestic industry requirement in a patent-based Section 337 investigation requires a showing of articles protected by the patent (i.e., the technical prong).  It has also firmly established that the domestic industry requirement must be met as of the date of the complaint.  It was not clear, however, whether investments in R&D made before the complaint can form the basis of a domestic industry if the products are not produced until after the complaint is filed.  Judge Lord has provided some clarity by establishing that such investments may only be used to show a domestic industry in the process of being established.

The following two tabs change content below.
Jones Day's ITC trial lawyers located around the world represent both complainants and respondents in these fast-paced, high-stakes cases. Please see our contacts page for more information.