Federal Circuit’s Decision in Lashify Dramatically Expands Scope of Domestic Industry Requirement in Section 337 Investigations
Client Alert | March 13, 2025
On March 5, 2025, the Court of Appeals for the Federal Circuit issued a decision in Lashify, Inc. v. ITC, No. 23-1245 (Fed. Cir. Mar. 5, 2025) that rewrites long-standing ITC precedent concerning what types of domestic industry investments and activities may be considered under the economic prong of the domestic industry analysis. The Lashify decision therefore greatly expands the scope of what activities may qualify a company to bring a Section 337 Investigation before the ITC.
In this case, complainant Lashify sought to bar the importation of eyelash extensions, including cases and applicators, that allegedly infringe a Lashify utility patents and two design patents. While Lashify markets and distributes its products in the United States, all its manufacturing operations occur abroad, and its products are imported. Based on certain findings related to technical domestic industry and, for economic domestic industry, the nature of Lashify’s domestic activities and investments, the ITC concluded that Lashify had not proven a violation of Section 337. As to economic domestic industry, the ITC concluded that Lashify’s investments directed to sales, marketing, warehousing, quality control, and distribution—as opposed to manufacturing—were insufficient to prove the existence of a significant domestic industry.
For a company to bring a patent infringement action before the ITC, it must prove that it has a sufficiently “significant” or “substantial” domestic industry; essentially, a showing that a company’s investments in the United States with respect to a product practicing an asserted patent are sufficiently quantitatively and qualitatively significant. Under 19 U.S.C. § 1337(a)(3), a company may show this, for example, based on “significant employment of labor and capital” in the United States. Historically, the ITC has interpreted this requirement to exclude certain activities on their own (i.e., without corresponding domestic manufacturing) as qualifying as domestic industry; namely, costs associated with selling, advertising, and distributing in the United States.
In Lashify, the Federal Circuit rejected the ITC’s long-standing precedent and interpretation of § 1337(a)(3), holding that the language of the statute is “straightforward,” and does not limit what types of domestic activities may be considered to establish a domestic industry. Writing for the Court, Judge Taranto stated that “there is no carveout of employment of labor or capital for sales, marketing, warehousing, quality control, or distribution,” and that there is no “suggestion [in the statute] that such uses, to count, must be accompanied by significant employment or other functions, such as manufacturing.” Put differently, the Federal Circuit has held that any significant employment of labor and capital may qualify as meeting the economic prong of the domestic industry requirement.
In so ruling, the Federal Circuit has opened the proverbial floodgate for companies seeking to file Section 337 Investigations before the ITC whose only domestic investments and activities in the United States are related to marketing, sales, and distribution—without any corresponding domestic manufacturing. Assuming the Federal Circuit’s decision in Lashify stands, the ITC can expect a wave of investigations to be filed by companies who would otherwise historically would not have been able to satisfy the economic domestic industry prong. Of course, this ruling also leaves unresolved many questions including for example, what would qualify under the statute as “significant” investment in activities such as marketing and distribution of a domestic industry product. The question of significance is a highly litigated and disjointed area of ITC law, and remains ripe for debate and clarification.
Given the gravity of the Federal Circuit’s decision, we expect the ITC to request an en banc appeal of this holding.
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