The Federal Circuit issued two rulings concerning the proper analysis governing the economic prong of the domestic industry requirement for jurisdiction at the U.S. International Trade Commission (ITC).
As background, the ITC is a popular forum for patent infringement cases involving foreign-made products because of the availability of an exclusion order—a type of injunction on the importation of infringing products. But to invoke the jurisdiction of the ITC, a complainant must establish that it has a domestic industry that is being harmed by the importation of the accused products. To do so, a complainant may identify (1) a domestic industry product that practices the asserted patent, and (2) significant or substantial domestic investments in that product, like research and development, manufacturing, sales, services, and product support.
In Zircon, the complainant asserted multiple patents against a competitor’s electronic stud-finders. Zircon alleged that its investments in U.S. plants and equipment, employment of labor and capital, and exploitation of the asserted patents met the domestic-industry requirement. The ITC, however, took issue with how Zircon allocated these investments. Specifically, Zircon aggregated its collective investments across all of its domestic stud-finder products, many of which practiced fewer than all asserted patents. Zircon did not provide any apportionment by which the ITC could evaluate how much Zircon invested with respect to each asserted patent.
On appeal, Zircon continued to rely on its cumulative expenditures across 53 domestic-industry products. Of those, 14 products practiced all three patents asserted, 21 products practiced two of the patents, and 18 practiced only one patent. Zircon argued that the ITC should take a flexible, market-oriented approach to domestic industry, under which Zircon’s collective approach was adequate. The ITC countered that complainants are required as a threshold matter to present a reasonable allocation method to estimate investments attributable to each patent.
The Federal Circuit sided with the ITC. While the Federal Circuit agreed that domestic industry investments do not need to be broken down on a patent-by-patent basis to satisfy the economic prong, it explained that aggregating expenditures for groups of patents is permissible only when all products are protected by the same patents. The court observed that Zircon could have tried to show quantitative and qualitative significance collectively for the 14 products that practice all three asserted patents but it did not.
In Roku, only one patent was at issue. The patent covered the QuickSet software installed on the domestic industry products (i.e., Samsung TVs). The ITC found that the economic prong was met based on the complainant’s investments in engineering and R&D in the QuickSet software, even though the TVs were identified as the domestic-industry product. The respondent argued that, by focusing on the embedded software, the ITC failed to require the complainant to allocate its investment to a specific domestic-industry product. The Federal Circuit rejected this argument, holding that “a complainant can satisfy the economic prong… based on expenditures related to a subset of a product, if the patent(s) at issue only involve that subject.”
To be clear, the patent in Roku claimed a physical device (TVs) but, for domestic industry purposes, the complainant relied solely on certain investments in its unpatented software—portions of which may be incorporated into a variety of different consumer products. The ITC found third-party televisions running the patented software were the “articles protected by” the patent under the statute. The ITC nonetheless counted all of complainant’s domestic research and development and engineering investments in the software towards satisfaction of the domestic industry requirement and found that expenditure to be substantial. The Federal Circuit was nonetheless satisfied that the patent claims were sufficiently directed to a physical device running the QuickSet software and that those domestic investments related to the patent.
This article appeared in the 2024 Federal Circuit IP Appeals: Summaries of Key 2024 Decisions report.
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