Federal Circuit Opens the Door to Additional Domestic Industry Investment: “Ordinary Importer” No Longer

In its recent decision in Lashify, Inc. v. International Trade Commission, the Federal Circuit opened the door for patent owners to include expanded categories of domestic investment to satisfy the economic prong of the domestic industry requirement under Section 337(a)(3)(B). App. No. 2023-1245, Opinion (Mar. 5, 2025). Post-manufacture activities that previously were not considered—like sales, marketing, warehousing, quality control, and distribution—are now likely includable as domestic industry investments for purposes of establishing a domestic industry under Section 337(a)(3)(B). This is a significant departure from International Trade Commission (ITC) precedent and will likely open the door to a greater number of ITC investigations involving foreign-manufactured articles.

One of the unique aspects of ITC practice is its requirement that the complainant prove the existence of a domestic industry in order to obtain the coveted exclusion order. This requirement involves two prongs—the technical prong, which requires the complainant prove that it practices the patent at issue; and the economic prong, which requires the complainant prove with respect to the articles protected by the patent: (A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in exploitation, including engineering, research and development, or licensing. 19 U.S.C. § 1337(a)(3). The Federal Circuit’s decision in Lashify addressed the economic prong.

Since its enactment in 1988, the ITC’s interpretation of Section 337(a)(3)(B) has effectively barred domestic investments directed solely to post-manufacture activities such as sales, marketing, warehousing, quality control, and distribution from establishing the existence of a domestic industry. The ITC often referred to these activities as those of an “ordinary importer,” failing to alone meet the economic prong of the domestic industry requirement because such activities contribute nothing to the actual manufacture of the article. Where manufacture of the article occurs outside of the United States, no additional steps occur in the United States to make the article salable, and thus no cognizable domestic industry activities remain for purposes of establishing the economic prong. Over the years, this interpretation of Section 337(a)(3) has effectively required some form of domestic manufacture or assembly activity to satisfy the economic prong of the domestic industry requirement. This is likely not the case anymore.

Lashify sells artificial eyelash extensions, applicator tools and products, and lash-extension storage containers. While Lashify conducts research and development in the United States, it manufactures its products overseas and ships them to U.S. customers who purchase the products via Lashify’s website. Customers are then able to use a variety of Lashify-provided resources to apply them, such as educational videos on social media, online chats, and video-call sessions. Lashify owns patents directed to these products, including a least one utility patent directed to, for example, certain lash-fusion technology; and design patents directed to, for example, a certain storage cartridge for eyelash extensions. Lashify filed a complaint before the ITC, in which it alleged that importers of similar products were violating Section 337 by infringing these patents.

The Administrative Law Judge (“ALJ”) at the ITC denied Lashify relief under the statute, determining, inter alia, that Lashify did not satisfy the economic prong of the domestic industry requirement. In reaching this determination, the ALJ excluded expenses relating to sales, marketing, warehousing, quality control, and distribution, following decades of ITC precedent considering these investments alone insufficient to meet the economic prong of the domestic industry requirement. The ALJ reasoned that because there were “no additional steps required to make these products saleable” upon arrival into the United States, and because the quality control measures were “no more than what a normal importer would perform upon receipt,” no domestic industry existed under Section 337(a)(3)(B).

The Commission agreed to review the ALJ’s decision and affirmed. The majority agreed with the ALJ that Lashify had not satisfied the economic prong of the domestic industry requirement, reasoning that “it is well settled that sales and marketing activities alone cannot satisfy the domestic industry requirement.” The majority reached the same conclusion with respect to warehousing, quality control, and distribution.

Lashify appealed to the Federal Circuit. The Federal Circuit vacated the ITC’s determination and remanded the investigation to the ITC for redetermination of satisfaction of the economic prong of the domestic industry requirement. The Federal Circuit concluded that the ITC’s determination relied upon an incorrect interpretation of Section 337(a)(3)(B). The Federal Circuit rejected the ITC’s conclusion that Lashify’s analysis was “overinclusive and not supported” because it “included expenses related to warehousing, distribution, and quality control” as well as “sales and marketing expenses.” The Federal Circuit found no support for these categorical exclusions in the text of the statute, relying heavily on its plain text and a thorough review of the legislative history surrounding the 1988 enactment.

The Federal Circuit observed that the provision “straightforwardly states that domestic industry ‘shall be considered to exist if there is in the United States, with respect to the articles protected by the patent . . . concerned, . . . significant employment of labor and capital.’” 19 U.S.C. § 1337(a)(3)(B). Absent some limitation, the Federal Circuit concluded:

[T]he provision 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. In particular, there is no carveout of employment of labor or capital for sales, marketing, warehousing, quality control, or distribution. Nor is there a suggestion that such uses, to count, must be accompanied by significant employment for other functions, such as manufacturing. The Commission’s holdings attribute limitations to clause (B) not found there.

The Federal Circuit went on to conclude that there was no other rationale for imparting a categorical limitation to Section 337(a)(3)(B), precluding reliance on these types of investments from the context of the statute or its legislative history. The Federal Circuit thus directed the ITC, on remand, to “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.’”

The Federal Circuit’s decision in Lashify is likely to have a significant impact on ITC practice. Foremost, it is likely to make the ITC available to businesses and industries previously excluded from the venue on the basis of the foreign manufacture of the imported article. Now, foreign manufacture of the article is not likely to be a bar to a patent owner’s ability to claim significant or substantial domestic investment in labor and capital under Section 337(a)(3)(B), even when such labor and capital is devoted to activities that do not make the product saleable or amount to anything more than those post-manufacture activities performed by an ordinary importer. Companies who perform such purely post-manufacture activities—as long as such investments are significant—will have the ability to claim such activities constitute domestic investment for purposes of meeting the economic prong of the domestic industry under Section 337(a)(3)(B).