Litigation Expenses Can Be Used to Establish a Domestic Industry Under Section 337

Author:Mr Gary Hnath
Profession:Mayer Brown

Originally published April 15, 2010

Keywords: Patents, licensing, Section 337, domestic industry, litigation expenses, Coaxial Cable Connectors

On April 14, 2010, the International Trade Commission ("ITC" or the "Commission") issued a public version of its much-anticipated opinion in the Coaxial Cable Connectors case. In that decision, the Commission considered whether, and to what extent, litigation expenditures may used to establish a domestic industry based on licensing activities in a Section 337 investigation.

Section 337 prohibits unfair acts of importation of products into the United States. The number of Section 337 complaints filed in the last seven years has almost tripled, reflecting the growing importance of the ITC as a forum for protecting US intellectual property rights.

Complainants in a patent-based Section 337 investigation at the ITC are required to establish that a "domestic industry" exists, or is in the process of being established, relating to the asserted patents. While manufacturing in the United States is one way to satisfy the domestic industry requirement, it is not the only way, as the statute expressly provides for exploitation of a patent through other activities, such as research and development, engineering and licensing.

One recurring issue in recent years is whether litigation expenses can be considered as part of licensing activities to meet the domestic industry requirement. This issue was addressed by the ITC in the Coaxial Cable Connectors investigation.

The Commission instituted the investigation on May 30, 2008, based on a complaint filed by John Mezzalingua Associates, Inc. d/b/a PPC, Inc., alleging violations of Section 337 through the importation of coaxial cable connectors that infringed two utility patents and two design patents.

After an evidentiary hearing in July 2009, the Administrative Law Judge (ALJ) concluded that a domestic industry existed with respect to the '539 design patent. This conclusion was based on litigation expenditures related to licensing, as well as the inventor's salary, time, effort, and use of PPC's equipment and facilities in developing the invention.

On December 14, 2009, the Commission decided to review the ALJ's decision. Highlighting the importance of this case, the Commission requested submissions from the public on the issue of whether, and to what extent, litigation expenditures could be considered as part of a domestic industry based on licensing. In response...

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