Sign Up for PublicationsFederal Circuit Opinion Lowers Domestic Industry Requirement for Section 337 Investigations at the U.S. International Trade Commission
On March 5, 2025, the Federal Circuit issued its decision in Lashify, Inc. v. Int'l Trade Comm'n. The Federal Circuit’s decision confirms that U.S. investments in activities like sales, marketing, quality control, warehousing, and distribution can be used to satisfy the domestic industry requirement in Section 337 investigations. Prior to this decision, the ITC traditionally took the position that such activities alone cannot satisfy the domestic industry requirement because they are akin to the activities of mere importers, who were not intended to have Section 337 protection. The Federal Circuit’s decision in Lashify thus opens the ITC’s door to complainants who may not have previously viewed the ITC as a viable option; for example, complainants who do not manufacture or conduct R&D in the United States. A complainant must still show that its domestic industry investments are “significant or “substantial,” which requires effectively presenting contextual factors.
Additionally, in reversing the ITC’s decision, the Federal Circuit interpreted Section 337 based on its “independent judgment” pursuant to the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo. That decision reversed the doctrine of Chevron deference, which directed courts to defer to an agency’s reasonable interpretation of an ambiguity in a law that the agency enforces. Under Loper, the Federal Circuit is no longer required to give deference to the ITC’s (or any other agency’s) reasonable interpretation of its statutory mandate. Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 412 (2024). Thus, the Federal Circuit’s application of Loper in Lashify could also pave the way for future challenges to the ITC’s interpretation of Section 337 that may not have been contemplated previously due to the required deference.
Bringing a Claim Under Section 337
The scope of Section 337 is broad, covering unfair acts and methods of competition associated with imported goods. Although most Section 337 claims involve imports that are alleged to infringe patents, what constitutes unfair conduct is not defined in the statute or its legislative history, and complainants have successfully brought a variety of claims under Section 337, including false advertising, false designation of origin, and trade secret misappropriation.
To establish a Section 337 violation in cases involving registered intellectual property (“IP”) (i.e., a patent, trademark, or copyright), a complainant must establish: (1) infringement of the registered IP; (2) importation, sale for importation, or sale after importation of goods that infringe the registered IP; and (3) that an industry in the United States exists (or is being established) in relation to products that are protected by the registered IP. The third element is colloquially referred to as the domestic industry requirement and consists of two prongs: the technical prong and the economic prong.
The technical prong is satisfied by showing that the complainant’s or its licensee’s products practice the registered IP, and the test is the same as the test applied to determine whether the accused products infringe.
The economic prong is satisfied by showing any one of the following in relation to the product(s) used to satisfy the technical prong:
(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.
Because these criteria—colloquially referred to as subsections (A), (B), and (C)—are listed in the disjunctive, satisfaction of any one of them is sufficient to meet the economic prong requirement.
Cases involving non-registered IP, such as trade secret misappropriation or false designation of origin, are governed by a different part of the statute than registered IP cases (like patent cases) and require an additional showing of injury or threat of injury to the domestic industry.
Relief Provided by the ITC
The relief provided by the ITC is robust. Although monetary damages are unavailable, a complainant can obtain an exclusion order that bars infringing importations from entering the United States. These exclusion orders are enforced at ports of entry by U.S. Customs and Border Protection. The most common type of exclusion order is a limited exclusion order, which excludes any infringing products that are made by or on behalf of the named respondents. A complainant can also obtain a general exclusion order, which excludes infringing products regardless of source, if one of the following can be demonstrated: (1) general exclusion is necessary to prevent circumvention of a limited exclusion order; or (2) there is a pattern of Section 337 violation and difficulty in identifying the source of infringing products.
In addition to (or in lieu of) an exclusion order, a complainant can also obtain a cease-and-desist order, which prevents named respondents from marketing, selling, or distributing infringing products that were imported prior to issuance of an exclusion order. Cease-and-desist orders are enforced by the ITC, and failure to comply can result in harsh penalties.
The Federal Circuit’s Decision in Lashify Concerning the Economic Prong
In Lashify, complainant Lashify Inc. (“Lashify”) appealed the ITC’s finding that it failed to satisfy the economic prong requirement. Specifically, Lashify challenged the ITC’s finding that Subsection (B) is not satisfied when: (1) the labor and capital investments are used for sales and marketing in the absence of “other qualifying expenditures,” and (2) the labor and capital investments are used for warehousing, quality control, and distribution, and the domestic industry products are manufactured outside of U.S. with no additional steps in the U.S. to make them saleable. Lashify, Inc. v. Int'l Trade Comm'n, 130 F.4th 948, 958 (Fed. Cir. 2025).
The Federal Circuit found that the ITC improperly interpreted the statutory language of Subsection (B) for numerous reasons. First, the Federal Circuit found that the ITC’s interpretation contradicted the plain language of the statute. The Federal Circuit found that the plain language of Subsection (B) covers significant use of labor and capital “without any limitation on the use within an enterprise to which those items are put, i.e., the enterprise function they serve.” Id. In other words, the statute simply states “significant employment of labor or capital,” without any limitation or requirement as to the nature of domestic activities and investments that comprise the labor or capital (other than the requirement that they be with respect to the patented articles, which was not in dispute). The Federal Circuit also contrasted the plain language of Subsections (A) and (B) with the plain language of Subsection (C), which does impose limitations on the nature of investments and activities; namely, Subsection (C) covers “substantial investment in [the patent’s] exploitation, including engineering, research and development, or licensing.” Id. at 958. Second, contrary to the ITC’s argument, the Federal Circuit found that the legislative history of Section 337 indicates an intent to include, rather than exclude, labor and capital investments in sales, marketing, warehousing, quality control, and distribution. Id. at 960-63.
In sum, using its “independent judgment” under Loper, the Federal Circuit found that neither the plain language of Subsection (B) nor the legislative history of Section 337 supported the ITC’s statutory interpretation. Accordingly, the Federal Circuit remanded the case to the ITC with a direction to consider the investments it had excluded:
The Commission’s determination on [the economic prong] rested on its incorrect understanding of clause (B). It deemed Lashify’s analysis to be “overinclusive and not supported” because it “include[d] expenses related to warehousing, distribution, and quality control” as well as “sales and marketing expenses.” We decide today that it is not “overinclusive” to include those expenses to the extent they relate to employment of labor or capital. On remand, the Commission must count Lashify’s employment of labor and capital even when they are used in sales, marketing, warehousing, quality control, or distribution, and the Commission must make a factual finding of whether those qualifying expenses are significant or substantial based on “a holistic review of all relevant considerations.” Id. at 963 (internal citations omitted).
Conclusion
The Federal Circuit’s decision in Lashify marks a significant development in ITC caselaw because it rejects the ITC’s traditional approach to investments in activities like sales, marketing, warehousing, quality control, and distribution. The ITC has historically deemed investments in such activities insufficient on their own (i.e., absent R&D or manufacturing), categorizing them as mere importer activities that cannot satisfy the domestic industry requirement. The Federal Circuit’s decision in Lashify rejects this approach and opens the ITC’s doors to complainants who may not have viewed the ITC as a viable option, such as complainants who do not manufacture or conduct R&D in the U.S. That said, a complainant must still demonstrate that its investments are “significant” or “substantial” under the statute. That analysis is very context dependent, and complainants must still identify, develop, and present compelling contextual factors to prove that their investments satisfy the economic prong.