Lashify v ITC: The Federal Circuit Redefines the Domestic Industry Requirement

On appeal, the Federal Circuit disagreed, finding that the text of 337(a)(3)(B) “covers significant use of ‘labor’ and ‘capital’ without any limitations on the use within an enterprise to which those items are put, i.e., the enterprise function they serve.” “Nor is there a suggestion,” the Court continued, “that such uses, to count, must be accompanied by significant employment for other functions, such as manufacturing.” In short, not only do the activities of a ‘mere importer’ now count towards a domestic industry under subpart (B), but those activities need not be performed in concert with any of the traditionally cognizable activities, such as manufacturing or research and development.

The decision offers some concrete benchmarks to the prospective complainant by which to gauge its activities, based on the language used in the statute. Specifically, 337(a)(3)(B) “allows a complainant to satisfy the economic prong of the domestic industry requirement by showing employment of a large enough stock of accumulated goods or of a significant amount of human activity for producing goods or providing the services in demand in an economy.”

With respect to the former, the Court noted that “[w]arehousing on its face involves holding ‘a stock of accumulated goods’ … and there is no reason to exclude the associated labor costs or those relating to sales, marketing, quality control, and distribution from ‘human activity that … provides the services in demand in an economy.’” Indeed, “[e]nsuring that products, specifically products of desired quality, are provided to customers (i.e., warehousing, quality control, and distribution) is an aspect of, at least, ‘providing the services in demand.’” The Court also made clear that “[t]here is no requirement that a ‘stock of accumulated goods’ be manufactured domestically.”

With respect to the latter, the Court noted that “[t]here is no exclusion from labor when the human activity employed is for sales, marketing, warehousing, quality control, or distribution, which are common aspects of providing goods or services.” Finally, the Court found that “[e]fforts to sell and market products to customers also are natural aspects of ‘providing the services in demand’ … [and that s]uch efforts spread knowledge of the availability of, and means of using, goods or services offered.”

Looking forward, the Federal Circuit’s decision in Lashify will open the protections of section 337 to a class of prospective complainants which, by virtue of the nature of their domestic activities, could not previously avail themselves of the forum. Of course, the other requirements of section 337 remain in place: investments under section 337(a)(3)(B) must still be quantitatively significant pursuant to the Federal Circuit decision in Lelo; the complainant must still satisfy the technical prong of the domestic industry requirement; and there must be importation of an article that infringes the asserted intellectual property.

Finally, it is important to remember that the Commission can investigate and remedy many other types of unfair acts, including the infringement of trademarks, copyrights and semiconductor mask works. Thus, Lashify stands to increase a prospective complainant’s ability to assert a broader range of statutory intellectual property rights. Trade secret misappropriation and other forms of unfair competition can also be asserted under section 337(a)(1)(A); that section, however, does not share the same language as was addressed by the Federal Circuit in Lashify. As a result, it is unclear whether the so-called non-statutory causes of action, such as trade secret misappropriation or Lanham Act violations, will ultimately be affected by Lashify or its progeny.