By: Alex Li and Vishal Khatri – In a recently issued Initial Determination, ALJ McNamara ruled that beer containers imported into the U.S. satisfied the domestic industry requirement when the Complainants were able to show significant domestic value-add.  Certain Beverage Dispensing Systems and Components Thereof, Initial Determination, Inv. 337‑TA‑1130 (September 5, 2019).

This Investigation involves two well-known beer brewery groups: the Complainants Heineken International B.V., Heineken Supply Chain B.V., and Heineken USA Inc. (“Heineken”), and the Respondents Anheuser-Busch InBev S.A., InBev Belgium N.V., and Anheuser-Busch, LLC (“ABI”), whose brands include Budweiser, Stella Artois, Becks, and Corona.  Heineken alleged to the Commission that ABI had infringed U.S. Patent No. 7,188,751, a beer dispenser patent.

Heineken argued that it satisfied the economic prong of the domestic industry requirement through its licensee, Hopsy.  Heineken explained that the Californian startup Hopsy had made significant domestic investments in plants and equipment (Section 337(a)(3)(A)) and labor and capital (Section 337(a)(3)(B)) in a beer dispensing product, the SUB.  ABI, however, seized on the fact that the SUB was not manufactured in U.S. and characterized Hopsy to the Commission as a mere importer.  ABI cited Schaper Manufacturing Co. v. Int’l Trade Comm’n, in which the Commission explained that “Congress . . . did not mean to protect American importers . . . who cause the imported item to be produced for them abroad and engage in relatively small nonpromotional and non-financing activities in this country . . . .” 717 F.2d 1368, 1373 (Fed. Cir. 1983).

To bolster its argument, Heineken offered a value-add analysis conducted by Heineken’s economic expert, in which the expert calculated how much value was added to the SUB by Hopsy’s domestic activities relative to the value contributed by overseas components.  In the expert’s calculation, the domestic value-add amounted to as much as 85%.  ALJ McNamara noted the value-add analysis, which according to Commission precedent is “a useful tool for evaluating whether a domestic industry exists,” and reasoned that the high percentage of domestic value-add weighed in favor of Heineken establishing a domestic industry.  ALJ McNamara also noted the fact that the beer used to fill the containers came from Hopsy’s domestic brewery partners, and concluded that “Hopsy’s success as a company is inextricably linked to the creation of value in the U.S. marketplace over time.”  For this and other reasons, ALJ McNamara found that Heineken satisfied the domestic industry requirement.

Takeaway

While parties sometimes forego the use of an economic expert, this case highlights that, in some instances, the use of an economic expert (and an economic analysis) can be beneficial.  Complainants and Respondents should continue to assess whether an economic expert would be beneficial in their specific circumstance.

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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).