On March 5, 2025, the Federal Circuit issued its opinion in Lashify, Inc. v. ITC, an appeal from the Commission's opinion in the 1226 investigation initiated by Lashify. The court vacated the Commission's ruling that Lashify failed to satisfy the economic prong of the domestic–industry requirement. The court held that the Commission misinterpreted 19 U.S.C. § 1337(a)(3)(B) and incorrectly excluded labor or capital devoted to sales, marketing, warehousing, quality control, or distribution.
Lashify sells lash extension products made abroad and shipped to the United States. In the underlying investigation, Lashify alleged a violation of Section 337 based on infringement of its lash-extension patents. In denying Section 337 relief, the Commission determined that Lashify failed to show "significant employment of labor or capital" to establish the economic prong under 19 U.S.C. § 1337(a)(3)(B).
The Commission, in reaching its determination, excluded or discounted Lashify's expenses relating to sales, marketing, warehousing, quality control, and distribution. The Commission excluded these expenses because there were no additional steps performed domestically to make the foreign-made products saleable, and these activities were nothing beyond those of mere importers. In other words, to the Commission, in order for expenses used for the particular functions at issue (sales, marketing, warehousing, quality control, and distribution) to qualify as "labor or capital" under clause (B), these expenses must be accompanied by domestic manufacturing.
The Federal Circuit disagreed and held that the Commission misinterpreted 19 U.S.C. §1337(a)(3)(B). The court held that clause (B) did not exclude or discount significant labor or capital devoted to those business functions that the Commission considered not qualifying standing alone. Specifically, the court explained, the three clauses in 19 U.S.C. § 1337(a)(3)(B) identified three independently sufficient bases to establish the economic prong. As relevant here, clause (B) plainly declared "significant employment of labor or capital" can itself suffice for the economic prong, without limitations on their functions. According to the court, the statutory language did not carve out expenses based on what functions they were used for, and it did not require those functions be accompanied by domestic manufacturing. The court added that the surrounding text in clauses (A) and (C) reinforced the absence of any limitation, so did the plain meaning of the individual terms as used in clause (B). The court further found the Commission failed to identify anything in the legislative history that supported restricting the uses of qualifying expenses under clause (B).
The Federal Circuit thus vacated the Commission's decision and remanded for reassessment of the economic prong. The court instructed that the Commission must reconsider Lashify's employment of labor and capital, including those expended in sales, marketing, warehousing, quality control or distribution, and that the Commission must assess whether these expenses were significant based on "a holistic review of all relevant considerations."
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