Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Lashify, Inc. v. International Trade Commission, No. 2023-1245 (Mar. 5, 2025), holding the Commission applied a legally incorrect understanding of the statutory test for the economic-prong of the domestic industry requirement of 19 U.S.C. § 1337.
In the underlying investigation, Lashify alleged numerous respondents infringed on three of Lashify’s patents related to eyelash extension systems. These patents included one utility patent (U.S. Patent No. 10,721,984) and two design patents. The Commission found no violation on two bases. First, it determined that Lashify failed to satisfy the technical prong as to one of the three patents at issue (the ’984 Patent). More substantively, it ruled that Lashify failed to meet the economic-prong requirement of the statutory test based on an insufficient showing of qualifying activities under Section 337 of the Tariff Act of 1930, which mandates a showing of a domestic industry related to the patented articles.
In its determination that there was no sufficient showing of domestic industry, the Commission concluded that the claimed expenses for warehousing, quality control, and distribution were properly excluded because there were “no additional steps required to make [the] product saleable” upon arrival into the United States. Costs in sales and marketing were excluded because the Commission concluded Lashify “did not meet its burden to establish significant qualifying expenses in other areas.” Lashify appealed.
The Federal Circuit concluded that the Commission’s exclusion of expenditures related to, inter alia, sales and marketing activities by the Complainant contradicted the plain language of the Commission’s authorizing statute. The statute requires, in the disjunctive, a showing of significant investments in (A) plants and equipment, (B) labor or capital, or (C) engineering, research, and development or licensing, and the Court determined the Commission improperly limited clause B (labor and capital). The Court held there was no statutory limitation on the types of labor or capital expended in exploitation of a patent, meaning the Commission’s exclusion of expenses for “sales and marketing” was improper. The Court separately affirmed the Commission’s finding that Lashify failed to establish domestic industry under the technical prong for the ’984 Patent. The Court vacated and remanded to the Commission to consider whether the investments in labor related to sales and marketing activities were significant as to the two design patents.
