Unpacking The Latest ITC Trends: Part 2

September 26, 2019

Libbie A. DiMarco, Gregory F. Corbett

(as published by Law360)

In part one of this two-part series, we discussed the latest U.S. International Trade Commission developments involving Patent Trial and Appeal Board proceedings, the public interest and importation. In part two, we will examine ITC developments on domestic industry, as well as recent ITC decisions from the U.S. Court of Appeals for the Federal Circuit and their practical impact, if any, on Section 337 practice.

Developments on the Domestic Industry Requirement

Last month, the commission declined to consider post-complaint domestic industry activities in an investigation where the complainant had asserted that a domestic industry was in the process of being established.[1] The commission determined that the “small number” of products — 70 units in total — produced after the filing date did not constitute a significant and unusual development. It also rejected the complainant’s reliance on “the alleged complexity” of the manufacturing process, noting that such an argument “could be made in any investigation.” The commission concluded that the circumstances did not warrant “departing from the general rule that the domestic industry is assessed at the time of the filing of the complaint.”

In a different investigation, the commission confirmed that a 5-year-old investment was quantitatively significant for purposes of establishing the domestic industry requirement.[2] There, the complainant submitted domestic industry evidence of current and ongoing investments into service and labor and five-plus-year-old evidence of multimillion-dollar investments in research and development. The administrative law judge found that the service labor revenue alone was “not quantitatively significant” and did not satisfy the economic industry requirement.[3]

However, the ALJ found that research and development investments made five years earlier covered a product feature that embodied the claimed invention. The prior investments were relevant because the complainant continued to make “qualifying investments” into field service even though the very same service investments were not “significant enough to substantiate a domestic industry on their own.” The commission determined not to review any issues related to domestic industry and those findings became part of its final determination.

The Federal Circuit affirmed, explaining that “nothing in the statutory language” supports a “bright line rule for rejecting research expenditures that are made more than five years earlier.”[4]

Practice Tips and Takeaways


Even when demonstrating that a domestic industry is in the process of being established, the general rule remains that a complainant must rely on prefiling evidence. For instance, in Certain Digital Cameras, Software, and Components Thereof,[5] ALJ MaryJoan McNamara relied on prefiling development and investments in finding that the complainant proved that it was in the process of establishing a domestic industry. Without evidence of prefiling activities, prototypes or samples manufactured after the ITC complaint is filed likely will not be enough to warrant considering post-complaint evidence.

On the other hand, very modest ongoing investments may be sufficient to establish the domestic industry so long as a nexus to prior significant investments can be shown. Complainants asserting that a domestic industry is in the process of being established should consider relying on the reasoning in Automated Teller Machines to tie prefiling research and development to post-complaint evidence.

Developments From the Federal Circuit


In Amarin Pharma Inc. v. ITC, a Federal Circuit majority concluded that the commission has discretion to deny institution where a complaint fails to state a legally cognizable claim.

As a threshold matter, with U.S. Circuit Judge Evan Wallach dissenting, U.S. Circuit Chief Judge Sharon Prost and U.S. Circuit Judge Todd Hughes concluded that the Federal Circuit had subject matter jurisdiction to review the commission’s decision to not institute, because a decision on institution amounts to a “final determination” on the merits within the meaning of Section 337.

On the merits, the majority rejected the notion that Section 337 creates a mandatory duty to institute an investigation. Instead, the majority ruled that, although Section 337 states that “[t]he Commission shall investigate any alleged violation of this section,” the statutory scheme as a whole “contemplates certain scenarios in which the Commission need not institute an investigation,” including where a complaint fails to state a legally cognizable claim.

In the underlying proceedings, the commission declined to institute Amarin’s complaint because all asserted claims required proving a violation of the Food, Drug, and Cosmetic Act. The FDCA does not create a private right of enforcement, and the commission determined that the FDCA precludes any claim that would require the commission, rather than the U.S. Food and Drug Administration, to apply the FDCA.

The Federal Circuit majority affirmed, ruling that a private party cannot state a cognizable claim arising under the FDCA, at least when the FDA “has not taken the position that the articles at issue do, indeed, violate the FDCA.”

Then in the Swagway LLC v. ITC decision this year, the Federal Circuit issued and then later withdrew a decision declaring that ITC trademark rulings have no preclusive effect in district court.

During the underlying commission proceedings, the ALJ found a violation had occurred based on trademark infringement but denied respondent Swagway’s motion for a consent order. The commission, therefore, entered an exclusion order.

A consent order has the same practical effect as an exclusion order in that the respondent agrees not to import the accused products and can be subjected to penalties for violating the consent order. However, a consent order does not have a preclusive effect, whereas a commission exclusion order in a trademark case does have a preclusive effect in district court litigation, at least in the U.S. Courts of Appeal for the Fourth and Sixth Circuits. Swagway appealed the denial of its motion for a consent order on that basis.

On May 9, the Federal Circuit ruled that the commission did not err in upholding the ALJ’s denial of the motion for the entry of a consent order on the ground that an exclusion order in a trademark action does not have a preclusive effect. This finding created a circuit split with potentially broad ramifications on Section 337 trademark practice.

Three months later, on Aug. 14, the Federal Circuit granted a petition for rehearing and vacated its “original decision on the issue of the preclusive effect of the Commission’s trademark decisions under 19 U.S.C. § 1337.” In its Aug. 14, decision, the Federal Circuit did not address the issue of preclusive effect, instead finding that the commission did not err in declining to review the ALJ’s decision to deny Swagway’s motion for a consent order because, “[i]n doing so, the Commission found no error in the ALJ’s disposition of the proposed consent order motion.”[6]

Practice Tips and Takeaways


On the issue of discretion to deny institution, the majority explicitly declined to address the broader question of whether “the Commission has discretion generally not to institute an investigation.” The Federal Circuit, therefore, left the door open for respondents to avoid institution by attacking the sufficiency of a complaint for failure to state a legally cognizable claim.

However, as a practical matter, commission practice is unlikely to change significantly. Historically, commission decisions to not institute an investigation are very rare.[7]

In Amarin, the asserted claims were precluded by federal statute as a matter of law. In view of the commission’s historical practices, although the Federal Circuit confirmed in Amarin that the commission does not have a mandatory duty to institute every investigation, there is unlikely to be a significant increase in the number of investigations that are not instituted.

And at least for the immediate term, a finding of trademark infringement in a Section 337 investigation continues to have a preclusive effect in the Fourth and Sixth Circuits. However, the original May 9 ruling may signal a future change in that interpretation of Section 337.



[1] Thermoplastic-Encapsulated Electric Motors (II), Inv. No. 337-TA-1073, Comm’n Op. (Aug. 12, 2019).

[2] Certain Automated Teller Machines, Inv. No. 337-TA-972.

[3] Inv. No. 337-TA-972, Initial Determination, (Nov. 30, 2016).

[4] Hyosung TNS, Inc. v. Int’l Trade Comm’n , 926 F.3d 1353 (Fed Cir. 2019).

[5] Inv. No. 337-TA-1059 (May 26, 2017).

[6] Swagway, LLC v. Int'l Trade Comm'n , No. 18-1672 (Aug. 14, 2019).

[7] See U.S. Int’l Trade Comm’n, Section 337 FAQs.