Lashify, Inc. v. Itc
23-1245, Doc. 110 (Fed. Cir. 2025) (2025)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under Section 337(a)(3)(B) of the Tariff Act, a domestic industry exists if there is 'significant employment of labor or capital' in the U.S. with respect to the patented articles. This analysis must include expenditures on activities such as sales, marketing, warehousing, quality control, and distribution, even if the products are manufactured abroad, as such activities are not categorically excluded by the statute.
Facts:
- Lashify, Inc. is an American company that sells artificial eyelash extensions, applicators, and storage containers for which it holds U.S. patents.
- Lashify conducts its research, design, and development activities within the United States.
- Lashify arranges for its products, including the eyelash extensions, to be manufactured in foreign countries.
- After being manufactured abroad, the products are imported into the United States for sale to customers.
- In the U.S., Lashify employs labor and capital for various business functions, including sales, marketing, warehousing, quality control, distribution, and customer support.
- Several competitor companies began importing and selling similar eyelash extension products in the United States.
Procedural Posture:
- Lashify, Inc. filed a complaint with the U.S. International Trade Commission (ITC), alleging that several importers were violating Section 337 of the Tariff Act by infringing its patents.
- The ITC instituted an investigation, assigning the case to an Administrative Law Judge (ALJ).
- The ALJ issued a claim construction order, construing the patent term 'heat fused' to mean 'joined by applying heat to form a single entity.'
- The ALJ issued a Final Initial Determination finding no violation of Section 337.
- The ALJ found Lashify failed the economic prong of the domestic industry requirement by excluding its U.S. expenses for sales, marketing, warehousing, and distribution.
- The ALJ also found Lashify failed the technical prong for its '984 utility patent because its own products did not meet the 'heat fused' construction.
- On review, a majority of the full Commission affirmed the ALJ's decision, concluding that Lashify had not satisfied the economic-prong requirement, which was sufficient to deny relief.
- Lashify, Inc. (appellant) appealed the Commission's (appellee) final determination to the U.S. Court of Appeals for the Federal Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does Section 337(a)(3)(B) of the Tariff Act permit the International Trade Commission to categorically exclude expenditures for sales, marketing, warehousing, quality control, and distribution when determining if a 'significant employment of labor or capital' constitutes a domestic industry for products manufactured abroad?
Opinions:
Majority - Taranto, J.
No. Section 337(a)(3)(B) does not permit the categorical exclusion of such expenditures, as the statute's plain text declares 'significant employment of labor or capital' to be sufficient to establish a domestic industry without limiting the types of enterprise functions to which that labor or capital is applied. The court reasoned that the statutory language is straightforward and contains no carveout for employment of labor or capital for sales, marketing, warehousing, quality control, or distribution. The Commission's reliance on pre-1988 legislative history and case law, such as Schaper, is misplaced because the 1988 amendments to the Tariff Act were intended to broaden the definition of domestic industry and specifically rejected a strict domestic manufacturing requirement. The Commission's interpretation attributes limitations to the statute that are not in its text. Therefore, the court vacated the Commission's finding on the economic prong and remanded for reevaluation under the correct legal standard for the two design patents. However, the court affirmed the Commission's construction of 'heat fused' and its finding that Lashify failed the technical prong for the '984 utility patent.
Analysis:
This decision significantly clarifies the 'economic prong' of the domestic industry requirement for Section 337 investigations, aligning it with modern global business practices. By rejecting the ITC's exclusion of post-importation commercial activities, the court makes it easier for U.S. companies that design products domestically but manufacture them abroad to obtain relief from infringing imports. The ruling solidifies that substantial U.S. investment in sales, marketing, and logistics is a valid basis for establishing a domestic industry, thereby strengthening the protections available to patent holders who utilize international supply chains. This precedent will likely encourage more such companies to seek relief at the ITC and will require the ITC to perform a more holistic analysis of a complainant's domestic activities.
