The United States International Trade Commission (ITC) can provide a powerful alternative forum for enforcement of Intellectual Property Rights, including U.S. patents.[1] But there are limitations on the actions that can be brought at the ITC. For example, to bring an action for patent infringement at the ITC, a patent owner must demonstrate, inter alia, that a “Domestic Industry” exists or is in the process of being established with regard to the articles protected by the patent.[2] Although the ITC has long held that there is no mathematical threshold or “rigid formula” to establish the existence of a Domestic Industry,[3] foreign-based companies often hesitate to enforce their patent rights at the ITC out of concern that they will not be able to meet the Domestic Industry requirement. The ITC’s recent decision in Certain Beverage Dispensing Systems and Components Thereof, Inv. No. 337-TA-1130, demonstrates, however, that foreign-based companies should not overlook the ITC when considering where to enforce their patents.
The ITC’s exclusionary remedies are provided by § 337 of the Tariff Act of 1930, as amended (“Section 337”). To establish a Domestic Industry, a Complainant must satisfy both a technical prong and an economic prong. A Complainant satisfies the technical prong by proving that its activities relate to an article protected by the intellectual property right.[4] A Complainant satisfies the economic prong by proving that, with respect to the articles protected by the intellectual property right, it has made one or more of the following:
(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.[5]
While the ITC has indicated that there is no “minimum monetary expenditure” that must be demonstrated by a Complainant to establish a Domestic Industry,[6] a Complainant must substantiate the nature and the significance of its activities with respect to the articles protected by the asserted patent.[7]
In Certain Beverage Dispensing Systems and Components Thereof, Inv. No. 337-TA-1130, (“the 1130 Investigation”) the ITC found that Heineken International B.V., Heineken Supply Chain B. V., and Heineken USA Inc. (collectively “Heineken”) satisfied the economic prong of the Domestic Industry requirement under both subparagraphs (A) and (B). Heineken, a well-known Dutch brewing company, alleged that Anheuser-Busch InBev S.A., InBev Belgium N.V., and Anheuser-Busch LLC (collectively “ABI”) were infringing Heineken’s patent covering a countertop system for dispensing beer from small kegs. After a five-day hearing, the Administrative Law Judge (“ALJ”) found that ABI infringed several claims of Heineken’s patent and that Heineken satisfied the Domestic Industry requirement. On March 11, 2020, the ITC confirmed the ALJ’s decision and issued an Exclusion Order preventing importation of infringing products, including ABI’s Stella Artois Nova product, as well as a Cease and Desist Order preventing distribution within the United States of infringing products.
In the 1130 Investigation, Heineken satisfied the Domestic Industry requirement by relying primarily on the domestic investments in plants and equipment, and labor and capital, made by its licensee, Hopsy, in the SUB beer dispensing product.[8] Although the SUB is not manufactured in the United States, Hopsy’s focus on building a sales strategy and a supply chain for the SUB and its removable beer container (the “Torp”) in the United States was significant.[9]
In support of its domestic investments in plants and equipment under subparagraph A, the ITC relied on the fact that Hopsy leased facilities in California, Illinois and New York.[10]
In support of its domestic investments in labor and capital under subparagraph B, the ITC noted evidence of (1) product assembly; (2) operations and customer support; (3) product development; (4) sales and marketing activities; and (5) other support functions in the United States.[11] For example, with respect to product assembly, Hopsy filled Torps at the facilities run by its domestic brewery partners with craft beer from such brewery partners; Hopsy tested filled Torps in-house using Hopsy employees; Hopsy’s employees “stored the filled and assembled Torps;” and members of Hopsy’s “OPs Team” performed the manual tasks of printing and placing labels on the Torps.[12] Hopsy’s “Ops Team” also matched Torps to orders and packaged Torps into boxes.[13] Hopsy’s employees also worked with its customers on sales, quality assurance and technical support.[14]
The Commission found that Hopsy’s business model relied on domestic labor for the filling and completion of the Torp beer containers it sells and domestic beer production from its craft-beer partners to drive usage of its products by consumers.[15] Further, Hopsy relied on beer supplies from domestic breweries to fill Torps and it partnered with a number of those breweries, increasing their sales and exposure.[16] Heineken’s expert also conducted a value-added analysis to show how Hopsy’s domestic activities added significant value to the SUB/Torp in the U.S. relative to Heineken’s contribution of overseas components.[17]
As the 1130 Investigation demonstrates, foreign-based companies should not overlook the ITC as a potential venue to enforce their Intellectual Property Rights. Options exist for meeting the Domestic Industry requirement of Section 337, even if a foreign-based company has little or no operations in the United States. Activities of licensees, as well as investments made in engineering, research and development, assembly, packaging, quality control, installation, service and repair can all be considered to meet the Domestic Industry requirement.
[1] Although this article focuses on enforcement of patent rights, the principles discussed herein also apply to enforcement of other intellectual property rights.
[2] 19 U.S. Code § 1337(a)(2).
[3] Certain Male Prophylactic Devices, Inc., Inv. No. 337-TA-292, Comm’n Op. at 39, USITC Pub. 2390 (June 1991) (“Male Prophylactic Devices”).
[4] 19 U.S. Code § 1337(a)(2).
[5] 19 U.S. Code § 1337(a)(3).
[6] Certain Stringed Musical Instruments and Components Thereof; Inv. No. 337-TA-586, Comm ‘n Op. at 25-26 (May 16, 2008) (“Stringed Instruments”).
[7] Certain Printing and Imaging Devices and Components Thereof, Inv. No. 337-TA-690, Comm’n Op. at 30 (Feb. I 7, 2011) (“Imaging Devices”)
[8] Certain Beverage Dispensing Systems and Components Thereof, Inv. No. 337-TA-1130, Final Initial Determination, at 167-168.
[9] Id. at 175.
[10] Id. at 182.
[11] Id. at 183.
[12] Id. at 184.
[13] Id.
[14] Id. at 185.
[15] Id. at 177-178.
[16] Id. at 178.
[17] Id. at 176 and 179.
