14
Sep
By Barry Herman
In Section 337 actions, the domestic industry requirement includes two prongs: (1) the economic prong, which involves investment activities, and (2) the technical prong, which involves the practice of the asserted intellectual property right.

Subsection 337(a)(3) defines domestic industry as follows:
   
An industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned –
(A) significant investment in plant and equipment;
(B) significant employment of labor or capital; or
(C) substantial investment in its exploitation, including engineering, research and development, or licensing. 

The domestic industry requirement can be met by satisfying any one of these three criteria.  Certain Integrated Circuit Chipsets and Products Containing Same, Inv. No. 337-TA-428, Order No. 10, Initial Determination (May 4, 2000), citing Certain Variable Speed Wind Turbines and Components Thereof, Inv. No. 337-TA-376, Comm’n Op., USITC Pub. 3003 (Nov. 1996).  If a complainant relies on either Subsection (A) or (B) to prove domestic industry, it must also show satisfaction of the technical prong.  Certain Set-Top Boxes and Components Thereof, Inv. No. 337-TA-454, Initial Determination, USITC Pub. 3564 (Nov. 2002).  If, however, a complainant relies on Subsection (C) to prove domestic industry, it is not always necessary to show satisfaction of the technical prong.

Subsection (C) was added to Section 337 in 1988, making it possible to demonstrate domestic industry using proof of exploitation of the intellectual property right, including if a complainant patent owner makes U.S. investments in the licensing of its patent(s), domestic industry may exist under Subsection 337(a)(3)(C).  See Certain Digital Satellite System (DSS) Receivers and Components Thereof, Inv. No. 337-TA-392, Initial Determination (Oct. 20, 1997) (complainant satisfied the domestic industry requirement solely through investment of money in a patent licensing program); Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-432, Order No. 13, Initial Determination (Jan. 24, 2001) (summary determination granted in favor of complainant on the existence of domestic industry based solely on activities related to licensing); Certain Zero-Mercury-Added Alkaline Batteries, Parts Thereof and Products Containing Same, Inv. No. 337-TA-493, Initial Determination (Jun. 2, 2004) (U.S. investment in exploitation of patent through licensing alone satisfied Subsection 337(a)(3)(C) for domestic industry); Certain 3G Mobile Handsets and Components Thereof, Inv. No. 337-TA-613, Order No. 42, Initial Determination (Mar. 10, 2009) (grant of summary determination of domestic industry based on licensing activities alone).

When domestic industry exists under Subsection (C) due to investments made in the licensing of a patent, it is unnecessary to show that complainant patent holder or its licensee(s) are involved in actual domestic production to satisfy the technical prong.  Certain Semiconductor Chips with Minimized Chip Package Size and Products Containing Same, Inv. No. 337-TA-432, Order No. 13, Initial Determination (Jan. 24, 2001).  It is, however, necessary to show a nexus between the licensing activities relied on by complainant under Subsection 337(a)(3)(C) and the asserted patent(s).  Certain Microlithographic Machines and Components Thereof, Inv. No. 337-TA-468, Initial Determination (Jan. 29, 2003).  In addition, a complainant must actually receive some revenue, such as a lump sum payment or royalty payments, from its licensing activities in the U.S., Certain Digital Processors and Digital Processing Systems, Components Thereof and Products Containing Same, Inv. No. 337-TA-559, Order No. 24, Initial Determination (May 11, 2007), and the investment in licensing activities must be substantial to alone satisfy domestic industry under Subsection 337(a)(3)(C).  Certain Stringed Musical Instruments and Components Thereof, Inv. No. 337-TA-586, Initial Determination (Dec. 3, 2007).

As summarized recently by Chief ALJ Paul J. Luckern, “[u]nder 337(a)(3)(C), a complainant may satisfy the domestic industry requirement solely by relying on licensing activities that relate to the patent(s) asserted in the investigation, even if the complainant (or a licensee of the complainant) does not manufacture patented products in the United States. …  [C]omplainant need only demonstrate that (1) it has made a substantial investment in its licensing program and (2) there is a sufficient nexus between the patent at issue and the alleged domestic licensing industry.”  Certain Short-Wavelength Light Emitting Diodes, Laser Diodes and Products Containing Same, Inv. No. 337-TA-640, Order No. 72, Initial Determination (May 8, 2009).
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