United States: Domestic Industry Alive And Well At ITC; Important New Opinion Continues Trend

The U.S. International Trade Commission (the "ITC"), in an important new opinion, recently extended a series of final determinations that complainants had satisfied the "economic prong" of Section 337's domestic injury requirement.  This decision reinforces the Commission's critical role in defending U.S. intellectual property rights and bodes well for patent owners.  In Certain Percussive Massage Devices, Inv. No. 337-TA-1206, the Commission found that complainant Hyperice Inc. proved it had "significant" domestic industry investments in labor, notwithstanding that all of the domestic industry devices were manufactured overseas.  Indeed, thus far in 2022, the Commission has found the economic prong of the domestic industry requirement satisfied in all four public final determinations.  In 2021 and 2022 combined, the Commission found the economic prong of the domestic industry requirement satisfied in 80% of all patent-based investigations that resolved on the merits, demonstrating that Complainants with well-organized, substantiated domestic industry cases continue to meet with success at the ITC.

Two-Part Importance of Commission Opinion

The Commission Opinion in the Percussive Massage Devices case is important in two ways.  First, the Commission found that the domestic industry activities of the complainant were "significant," even without regard to the company's foreign manufacturing expenses.  Second, the Commission found that the overall growth in the number of Hyperice's U.S. employees (and related expenses) over the past three years to be "indicative of quantitative significance."  The relevant growth in employment at Hyperice included sales and marketing employees, and employees involved in general intellectual property protection and business operations, as well as the research, design, and development of the domestic industry products.

Hyperice is More Than a "Mere Importer"

The majority of the Commission did not accept the dissenting analysis of Commissioner Kearns, who argued against finding that the economic prong of the domestic industry requirement satisfied because "the DI product has been manufactured in China (through a contract manufacturer), and most of Complainant's domestic activities at the time of the filing of the complaint, such as supply chain and operation management for foreign manufacturing, sales, marketing, and customer service, do not appear distinguishable from those of a mere importer."  Id. at footnote 10.  Indeed, the majority opinion directly contradicted Commissioner Kearns' analysis, stating: "Hyperice is more than a mere importer because Hyperice started as a small domestic entity where a majority of its expenses went towards designing and developing the DI Products in the United States." Id. at 15.

Hyperice DI Built on its Products' Commercial Success

The Commission's Opinion, instead, emphasized that Hyperice is a domestic company, which "grew its domestic industry based on the commercial success of the DI Products that practice the [] patent, which Hyperice internally developed and continues to support."  Id. at 15.  The Commission did not hold against Hyperice the fact that the company's more recent employment growth in the United States included sales, marketing and logistics activities, nor that the DI products were made overseas.  Inclusion of sales and marketing activities in the Commission's "significance" analysis – in conjunction with other activities – is consistent with longstanding Commission precedent, and belies the notion that the Commission has embarked on a new, more stringent approach to the domestic industry issue.

Commission's Approach Reflects Consistency

The Commission's approach in Percussive Devices is consistent with the agency's historically pragmatic approach to the economic prong of the domestic industry requirement. As noted above, already in 2022, the Commission has found the economic prong to satisfied in all Investigations that have reached a final determination, as well as the final determinations reached in December 2021, including Certain LED Products, Inv. No. 337-TA-1213 (Jan. 4, 2022), Certain Variable Speed Wind Turbine Generators and Components Thereof; Inv. No. 337-TA-1218 (Jan. 26, 2022), Certain Laparoscopic Surgical Staplers, Inv. 337-TA-1167 (Dec. 20, 2021), and Certain Electronic Devices, Including Streaming Players, Televisions, Set Top Boxes, Remote Controllers, and Components Thereof; Inv. 337-TA-1200 (Dec. 3, 2021). 

The Takeaway   

The ITC is open for business to protect patent owners with substantiated, well-defined U.S. domestic industry investments.

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