The ITC issued an Opinion finding a violation of Section 337 and issuing a general exclusion order and cease and desist orders.  Of note, the Commission clarified that the “domestic industry” for unregistered trade dress need not be defined by the subheadings in 19 U.S.C. § 1337(a)(3) like they are in a patent-based or registered trademark-based investigation.

The Case

The Commission instituted Certain Hand Dryers and Housing for Hand Dryers, Inv. No. 337-TA-1015 on August 1, 2016, based on a complaint filed by Excel Dryer alleging a violation of Section 337 by twelve respondents.  Excel asserted infringement of trade dress, the threat or effect of which is to destroy or substantially injure an industry in the United States.  Excel’s asserted trade is not registered with the United States Patent and Trademark Office.  The ITC terminated six respondents from the investigation based on the entry of consent orders.  The ITC found the six remaining respondents in default for failing to respond to the complaint and notice of investigation.

On June 2, 2017, the ALJ issued an initial determination granting Excel’s motion for summary judgment of a violation of Section 337 as to the defaulted respondents.  In his ID, the ALJ found that a domestic industry existed based on investments categorized under Section 337(a)(3).  The Commission determined to review the ID’s analysis with respect to domestic industry.

On October 30, 2017, the Commission issued its Opinion affirming the ALJ’s findings, but with modified reasoning as to domestic industry.

The ALJ had found that Excel established the existence of a domestic industry by showing investments in the categories set forth in section 337(a)(3). ID at 38-42.  Section 337(a)(2) and (a)(3) provide that:

(2) Subparagraphs (B), (C), (D), and (E) of paragraph (1) apply only if ,an industry in the United States, relating to the articles protected by the patent, copyright, trademark, mask work, or design concerned, exists or is in the process of being established.

(3) For purposes of paragraph (2), an industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned—

(A) significant investment in plant and equipment;

(B) significant employment of labor or capital; or

(C) substantial investment in its exploitation, including engineering, research and development, or licensing.

19 U.S.C. § 1337(a)(2), (a)(3).  However, the Commission held that because a violation of Section 337 was found pursuant to subparagraph (A) of paragraph (1), specifically 337(a)(l)(A)(i), that these subcategories of investment need not define the domestic industry.  Section 337(a)(2) and (a)(3) only apply to actions pursuant to Section 337(a)(l)(B)-(E) which cover statutory intellectual property—not 337(a)(l)(A).  Therefore, the Commission held that there is no textual basis for concluding that those definitions delineate what constitutes “an industry in the United States” for purposes of section 337(a)(1)(A)(i).  The Commission did note, however, this provision requires an additional showing that the “threat or effect” of any asserted unfair method of competition or unfair act be “to destroy or substantially injure an industry in the United States.”

The Commission further clarified that, although there is no requirement that the domestic industry be defined by the section 337(a)(3) investment categories for purposes of Section 337(a)(1)(A)(i), a showing under these categories may be sufficient in certain circumstances to establish “an industry in the United States” .

The Commission concluded here that Excel’s showing under Section 337(a)(3) was sufficient to establish a domestic industry and accordingly entered a general exclusion order and cease and desist orders.

Takeaway

Where patents or registered trademarks are asserted in a Section 337 investigation, the complainant must establish a domestic industry under at least one of the three investment categories of Section 337(a)(2).  Where a complainant asserts an unregistered mark (or other non-statutory IP such as trade secret), there is no specific requirement that the industry be defined by these categories.  However, in such investigations the complainant must also show that the “threat or effect” of any asserted unfair method of competition or unfair act be to destroy or substantially injure an industry in the United States—a requirement not present in patent-based Section 337 Investigations.