Federal Circuit Expands Economic Domestic Industry
Federal Circuit Expands Economic Domestic Industry: What It Means for Section 337 Investigations
The U.S. Court of Appeals for the Federal Circuit has issued a pivotal decision that reshapes how domestic industry is defined under Section 337 of the Tariff Act of 1930. In Lashify, Inc. v. International Trade Commission, decided on March 5, 2025, the court broadened the scope of what qualifies as a domestic industry under the statute’s economic prong. This shift opens new pathways for companies aiming to protect their intellectual property at the U.S. International Trade Commission (ITC), potentially lowering the threshold for access to powerful exclusionary remedies in cases involving unfair import practices, including patent infringement.
Background: Section 337 and the Domestic Industry Requirement
Section 337 of the Tariff Act of 1930 authorizes the ITC to investigate unfair trade practices, including the importation of goods that infringe U.S. intellectual property rights. To obtain relief, a complainant must establish a domestic industry related to the asserted IP. This involves satisfying two prongs:
- Technical Prong: The industry must involve products covered by the asserted IP rights.
- Economic Prong: The complainant must demonstrate significant U.S. investment or employment, which may include:
- Investment in plant and equipment,
- Employment of labor or capital, or
- Investment in exploitation, such as engineering, R&D, or licensing.
Historically, the ITC applied a narrow interpretation of the economic prong, frequently excluding sales, marketing, warehousing, and distribution expenses—particularly for products manufactured outside the U.S.—from qualifying toward the domestic industry requirement.
The Lashify Decision: Key Takeaways
In Lashify, Inc. v. ITC, the Federal Circuit found that ITC had applied an overly narrow view of the economic prong when denying relief for patent infringement. The court clarified several key points:
- No Categorical Exclusions: Activities like sales, marketing, warehousing, quality control, and distribution cannot be excluded from the economic prong—even if the products are made abroad and those are the only U.S.-based activities.
- Plain Language of the Statute: The statute refers broadly to “significant employment of labor or capital,” without restricting the types of business functions involved.
- Independent Basis for Relief: Investment in sales, marketing, or distribution alone can satisfy the economic prong, without needing to be tied to manufacturing or R&D.
The decision emphasized a more inclusive, enterprise-wide view of domestic industry, supported by legislative history and prior case law.
Implications for Section 337 Investigations
- Broader Access to ITC: More companies—especially those whose U.S. activities center on importation, sales, or distribution—can now meet the domestic industry requirement and seek relief at the ITC.
- Holistic Assessment: Respondents in Section 337 investigations must now address a wider range of domestic activities when challenging a complainant’s economic showing.
- Potential for Increased Filings: The decision, alongside recent guidance in Wuhan Healthgen Biotechnology Corp. v. ITC, lowers the threshold for what constitutes a domestic industry, potentially leading to more Section 337 complaints.
The Lashify decision significantly reshapes the landscape of Section 337 investigations by broadening what qualifies as a domestic industry under the economic prong. With sales, marketing, and other commercial activities now recognized as valid investments, the ITC becomes a more accessible venue for a wider range of rights holders—including those without U.S. manufacturing operations. As a result, companies should reevaluate their U.S. activities and consider the strategic benefits of ITC enforcement in light of this expanded framework.