Domestic Industry by Respondent

There are a number of ways in which Section 337’s domestic industry requirement interacts awkwardly with today’s globalized economy. The most interesting domestic industry debates at the ITC often involve multinational companies with cross-border supply chains, international product development operations, and/or global licensing strategies. In those cases, the agency has to decide on a case-by-case basis whether enough of the right kind of activities have occurred in the United States such that “an industry in the United States, relating to the articles protected by the patent . . . exists or is in the process of being established.”

In Multi-Stage Fuel Vapor Canisters (Inv. 1140), the domestic industry question has gotten especially complex. The accused products are vapor-filtering canisters used in automobile fuel tanks, and the asserted patent describes a method for using carbon filters to reduce fuel vapor emissions. Complainant Ingevity, however, doesn’t make fuel tanks or vapor canisters; it makes carbon pellets and honeycombs that it sells to other companies who make all sorts of different products, including vapor canisters.

The carbon that Ingevity makes does not practice the asserted patent. The company argues, however, that its domestically manufactured carbon pellets and honeycombs should qualify as domestic industry products because its customers use the products to manufacture fuel vapor canisters in the United Sates that practice the claims of the patent.

This line of argument is particularly curious in this case, because the customer Ingevity relies on to establish a domestic industry is also one of the respondents in the investigation being accused of infringement. That respondent is Europe-based Mahle, a multinational auto parts maker who apparently buys a bunch of carbon from Ingevity and does some but not all of its fuel vapor canister manufacturing in the United States.

Allowing a complainant to rely on a respondent’s activity to satisfy the domestic industry test certainly doesn’t seem fair. It’s also not compatible with the purpose of the domestic industry requirement, which Congress intended to ensure that “the statute be utilized on behalf of an industry in the United States.”

In arguments before the administrative law judge, Mahle claimed that “the purpose of Section 337 is to protect and encourage investments in domestic industries” and noted that “allowing a respondent’s activities to satisfy the domestic industry requirement would only discourage actual and potential respondents from making domestic investments and conducting domestic activities that could later be used against them in a Section 337 Investigation.”

It will be interesting to see how the ALJ deals with this issue in the final initial determination scheduled for release in January.

Fancy Bendy Straws

On October 8, the ITC received a new Section 337 complaint accusing a score of Chinese manufacturing companies of infringing a patent for a reusable folding drinking straw. The complainant, U.S.-based Final Straw, claims these manufacturers have “directly copied or made replicas of” its product at “an epidemic level.”

In some ways, this is the ideal Section 337 patent case. In most cases, the ITC merely provides redundant administrative adjudication of disputes already being heard in federal court while threatening to impose an inappropriately excessive remedy. But in cases like this one where numerous alleged infringers are able to sell a large number of cheaply manufactured, copycat products through online channels without any U.S. presence, ITC litigation can provide complainants with a uniquely effective way to enforce their patent rights without significantly interfering in the proper work of federal district courts.

And this case may end up being especially easy for complainants because it’s quite likely that all of the respondents will default. That is, they will choose not to challenge the complaint, because the cost of defending themselves in foreign litigation outweighs the benefits (if they win) of continuing to sell the accused product in the United States.

But the actions of these respondents could have an impact beyond their own business, because like many complainants in their situation, Final Straw is asking the ITC to issue a special remedy known as a “general exclusion order” that would block imports of all accused products regardless of their source. This remedy is available under Section 337 if it is “necessary to prevent circumvention of an exclusion order limited to products of named persons” or when the ITC finds that “there is a pattern of violation . . . and it is difficult to identify the source of infringing products.”

In cases where every named respondents defaults so no one challenges the allegations, the law imposes an additional requirement that the complainant provide “substantial, reliable, and probative evidence” in support of its claims before the ITC can grant a general exclusion order. There’s every reason to believe Final Straw will meet this burden in its case.

The troubling consequence of a general exclusion order, however, is that it acts as injunctive relief against all current and potential future producers awarded without any adversarial proceedings to determine, among other things, the validity of the asserted patents.

This problem may be particularly relevant in the straw case, as Final Straw’s patent essentially describes a rubber straw inside four metal tubes. It might be nice to have a court review the validity of that patent before a trade agency summarily denies consumers the benefit of competitively-priced fancy drinking straws.

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