U.S. International Trade Commission Clarifies that the Economic Prong of the Domestic Industry Requirement Under 19 U.S.C. Sections 1337(a)(3)(A) and (B) can be Satisfied on a Product-By-Product Basis
June 21, 2012

On June 8, 2012, the U.S. International Trade Commission issued the public version of its April 27, 2012, Opinion in Certain Ground Fault Circuit Interrupters and Products Containing Same, Inv. No. 337-TA-739. This investigation was instituted on October 8, 2010, based on a complaint filed by Leviton Manufacturing, Co. against numerous respondents, alleging infringement of U.S. Pat. Nos. 7,463,124; 7,737,809; and 7,764,151. On December 20, 2011, the presiding Administrative Law Judge (ALJ) issued a final Initial Determination finding no violation of Section 337 of the Tariff Act of 1930 (19 U.S.C. 1337). Specifically, the ALJ found that while the asserted patents were infringed and not shown to be invalid or unenforceable, Leviton had not satisfied the economic prong of the domestic industry requirement with respect to the three asserted patents. The Commission determined to review the ALJ’s final Initial Determination in its entirety.

In its Opinion, the Commission affirmed the ALJ’s claim construction and infringement determinations. With respect to the domestic industry requirement, the ALJ had determined that Leviton satisfied the technical prong by showing that its products practiced at least claim 1 of each asserted patent. The Commission agreed with the ALJ that Leviton’s products practiced claim 1 of each of the patents, but held that the technical prong could be met only with respect to the ’809 patent because the Commission had found that claim 1 of the ’124 patent and claim 1 of the ’151 patent were invalid. In its petition for review, Leviton argued that its products practiced other claims of the ’124 and ’151 patents, but the Commission declined to address these arguments for two reasons: (1) Leviton had waived arguments based on any claims other than claim 1 of each patent because Leviton had failed to present such arguments to the ALJ; and (2) arguments based on claims other than claim 1 of each patent were not supported by evidence in the record because Leviton’s expert had limited its technical prong analysis to claim 1 of each patent.

With respect to the economic prong of the domestic industry requirement, the Commission reversed the ALJ’s finding that Leviton had failed to show sufficient expenditures in plant, equipment, labor and capital related to articles protected by the asserted patents. The Commission found that the ALJ had applied an incorrect legal standard by requiring a showing of investments on a patent-by-patent basis. The Commission noted that the ALJ misconstrued Commission precedent in the Coaxial Cable Connectors investigation concerning section 337(a)(3)(C), which requires the Commission to analyze “substantial investments in [the patent’s] exploitation, including . . . licensing.” The statutory language regarding “exploitation” of a patent does not appear in sections 337(a)(3)(A) or (B), which concern investments in plant, equipment, labor and capital with respect to “articles protected by the patent.” Since Leviton had waived any claim to a domestic industry based on licensing of its patents, it was proper for Leviton to present domestic industry evidence organized according to “articles protected by the patent” when evaluating its plant, equipment, labor and capital expenses. In other words, the Commission clarified that it is acceptable for a complainant to present evidence regarding the economic prong of the domestic industry requirement under sections 337(a)(3)(A) and (B) on a product-by-product basis. Thus, the Commission concluded:

The foregoing record evidence demonstrates that Leviton has shown a significant investment in plant facilities and a significant employment of labor that is separately attributable to the Phase 7 products. We have previously determined that the Phase 7 products practice claim 1 of the ’809 patent. Accordingly, we determine that Leviton has shown a domestic industry with respect to articles protected by the ’809 patent, in accordance with 19 U.S.C. § 1337(a)(3)(A) and (B).

If you would like a copy of the Commission Opinion, or wish to discuss how this decision may impact you, please contact your attorney at Brinks Gilson & Lione, or one of our ITC attorneys.

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