The Commission recently reversed the ALJ’s determination that the economic prong of the domestic industry requirement was satisfied and thereby found that there had been no section 337 violation in Certain Replacement Automotive Lamps, Inv. No. 337-TA-1291 and Certain Replacement Automotive Lamps II, Inv. No. 337-TA-1292.

Both investigations began in December 2021, when Complainants Kia and Hyundai respectively filed complaints with the ITC alleging violation of section 337 for importation, sale for importation, and sale within the United States by certain common respondents of replacement automotive lamps that infringed complainants’ design patents.¹ An evidentiary hearing on the economic prong issue was held pursuant to the Commission’s Pilot Program for Interim Initial Determinations (“IID”) on April 20, 2022, and on July 1, 2022, an IID issued finding that complainants had satisfied the economic prong of the domestic industry requirement with respect to all 20 Kia and 21 Hyundai asserted design patents. Following an evidentiary hearing on the remaining issues, a Final ID issued on January 24, 2023 affirming the IID’s finding that the domestic industry requirement was satisfied, despite reducing the alleged DI investments due to Complainants’ failure to establish that certain alleged DI products are representative of other alleged DI products.

The Commission determined to review the IID and FD and, on March 7, 2024, found that Complainants had failed to satisfy the domestic industry requirement with respect to any of their asserted patents.

This conclusion was supported by the following findings. First, the Commission ultimately found that Complainants had asserted a number of design patents, each covering distinct designs, but had erred by relying on combined investments across multiple patents when each DI product is protected by only one asserted patent. Complainants were required to separately establish a domestic industry with respect to articles protected by each of the asserted patents. Instead, they relied on aggregate investments across different articles protected by different patents in order to establish significant investment. Second, the Commission also concluded that the IID and Final ID improperly found Complainants had a significant domestic industry despite the Complainants’ failure to meet their burden of proof to show the significance in its post-hearing brief at the interim ID stage. Lastly, the Commission found that the underlying significance analysis was flawed because the same sales data used to apportion the domestic investments on a per-patent basis was then used to assess the significance on an investment-to-sales basis. The Commission found that this methodology was not a meaningful metric by which to evaluate significance.

Here are some takeaways from this Commission Opinion:

• Complainants must not aggregate investments directed to different DI products that are protected by different patents because this will preclude the Commission from determining the significance of investments with respect to each asserted patent. Rather, complainants should conduct a patent-by-patent assessment of the cognizable domestic industry investments and demonstrate the significance of those investments separately on a per-patent basis.
• Complainants asserting a high number of patents should pay particular attention to the domestic industry economic prong to ensure their evidence is in order. In particular, complainants should make sure the record is clear that there is a significant domestic industry in each statutory category (e.g., prong A or B) as to each asserted patent. It is best practice to have a plan for establishing domestic industry significance at the outset of complaint filing.

Finally, this case serves simultaneously as a reminder of the potential benefits and as a cautionary tale of the Commission’s Pilot Program. Complainants confident in their economic domestic industry arguments can pursue this program to their advantage to secure an early resolution of this critical issue in their favor. However, any interim ID is subject to Commission review, which may upend any early ruling. Moreover, parties should carefully weigh the pros and cons of the Pilot Program’s expedited schedule, which requires fact discovery, expert discovery, a hearing, and an interim ID within just 100 days of institution.

[1] The Respondents included TYC Brother Industrial Co., Ltd. of Tainan, Taiwan, and Genera Corporation (dba TYC Genera) of Brea, California; LKQ Corporation of Chicago, Illinois, and Keystone Automotive Industries, Inc. of Exeter, Pennsylvania. Please see Sterne Kessler’s prior case update for further background on these investigations: https://www.sternekessler.com/news-insights/publications/pair-section-337-investigations-involving-automotive-lamps-illuminated/.