USITC Sets Standard for Domestic Industry in Section 337 Investigations

April 19, 2010

In its decision in Certain Coaxial Cable Connectors and Components Thereof and Products Containing the Same (Inv. No. 337-TA-65) the U.S. International Trade Commission (USITC) established a new threshold for what qualifies as a “domestic industry” for Section 337 investigations. Under the Section 337 of the 1930 Tariff Act, a patent owner must establish that a domestic industry exists in the U.S. related to the intellectual property being infringed.

The issue arose in the Coaxial Cable Case because the patent owner, John Mezzalingua Associates, argued that its expenses associated with patent infringement suits filed in U.S. district courts satisfied the Act’s domestic industry requirement to the Commission’s administrative law judge (ALJ).

After a review and public comment period on the domestic industry standard employed by the ALJ, the USITC’s commissioners noted in its April 14, 2010 decision that “the provision does not specifically mention litigation,” and found that “allowing patent infringement litigation alone to constitute a domestic industry would place the bar for establishing a domestic industry so low as to effectively render it meaningless.” However, the Commission ruled that litigation cost related to licensing could formulate a basis for domestic industry.

As such, patent holders not engaged in the “exploitation of the patent, including engineering, research and development, or licensing,” (so called “non-practicing entities” or patent trolls”) do not qualify as a domestic industry and therefore are not entitled to the Section 337 protections.