Domestic Marketing and Distribution of an Imported Product May Satisfy the Economic Prong of the Domestic-Industry Requirement

Written by:Susan E. Pratt, Ph.D. and Nathan D. Reeves

LASHIFY, INC. V. ITC

Before Prost, Taranto, and Chen. Appeal from the U.S. International Trade Commission.

Summary:  Warehousing, quality control, distribution, sales, and marketing expenses incurred in connection with an imported product may constitute “significant employment of labor or capital” that satisfies the economic prong of the ITC’s domestic-industry requirement.

Lashify filed an ITC complaint alleging that multiple respondents were importing products that infringe Lashify’s patents pertaining to eyelash extensions and related accessories.  In determining whether Lashify had established a domestic industry, the ITC declined to consider Lashify’s expenditures for the warehousing, quality control, distribution, sales and marketing of its products because those products were imported.  Accordingly, the ITC found that Lashify had not satisfied the economic prong of the domestic-industry requirement.  Lashify appealed.

Before the Federal Circuit, the ITC argued that the economic prong could not be satisfied by domestic expenditures on sales marketing, warehousing, quality control, or distribution of imported products for which no additional steps are taken in the U.S. to make them saleable.  The Federal Circuit disagreed, ruling that the ITC’s limitations had no basis in the statute.  The court explained that “clause (B) covers significant use of ‘labor’ and ‘capital’ without any limitation on the use within an enterprise to which those items are put.”  The Federal Circuit therefore vacated and remanded to the ITC for reconsideration under the proper standard.

Editor: Sean Murray