• ITC Issues Public Version Of Opinion Finding No Section 337 Violation In Certain Products Having Laminated Packaging (337-TA-874)
  • September 10, 2013 | Authors: Lisa M. Mandrusiak; Eric W. Schweibenz
  • Law Firm: Oblon, Spivak, McClelland, Maier & Neustadt, L.L.P. - Alexandria Office
  • On September 3, 2013, the International Trade Commission (the “Commission”) issued the public version of its opinion on whether the economic prong of the domestic industry requirement was met in Certain Products Having Laminated Packaging, Laminated Packaging, and Components Thereof (Inv. No. 337-TA-874).

    By way of background, the investigation is based on a complaint and amended complaint filed by Lamina Packaging Innovations LLC (“Lamina”) alleging violation of Section 337 in the importation into the U.S. and sale of certain products having laminated packaging, laminated packaging and components thereof that infringe one or more claims of U.S. Patent Nos. 6,207,242 and 7,348,067.

    The Notice of Investigation in this case instructed the presiding ALJ to “hold an early evidentiary hearing, find facts, and issue an early decision, as to whether the complainant has satisfied the economic prong of the domestic industry requirement.”  Although ALJ Theodore R. Essex stated that the instruction was “of questionable legality,” he issued an Initial Determination (“ID”) finding that Lamina failed to meet the economic prong of the domestic industry requirement. 

    As summarized in our August 8, 2013 post, the Commission determined to review the ID, including reviewing the issue of instructing the ALJ to issue a 100-day ID.  We now provide additional details from the opinion.

    Authority To Issue Initial Determination Within 100 Days

    According to the opinion, ALJ Essex relied on the Constitution, the Administrative Procedure Act (“APA”), and Commission rules to argue that the 100-day process imposed was unlawful.  The Commission determined that the constitutional arguments lacked support in either the text of the Constitution or in governing precedent, and stated that “none of the ID’s citations stand for the proposition that the Constitution requires more process than was provided here.”

    Arguments based on the APA were also dismissed, with the Commission noting, inter alia, that “a Commission ALJ lacks the authority to conduct such an inquiry so as to repudiate or nullify the Commission’s own application of its procedural rules.”

    Similarly, the Commission determined that there was no conflict with its existing rules, noting that even if there was, the Commission is able to alter or waive procedural rules.  The Commission ended by explaining that, regardless of its basis for doing so, there was no substantial prejudice to Lamina (since Lamina was able to obtain information from its licensees, to take third party discovery, and could have moved to extend the proceedings if necessary), and without substantial prejudice, there can be no challenge of a procedural determination.

    Economic Prong of Domestic Industry Requirement

    According to the opinion, Lamina relied on the investment and employment undertaken by its licensees to meet the economic prong of the domestic industry requirement, since it does not produce any articles itself.  However, the Commission agreed with the ALJ that Lamina’s showing on this front was insufficient.  Specifically, Lamina’s arguments were based on the “mistaken premise that it ought to be able to capture its licensees’ expenditures related to products...placed in laminated packages rather than the expenditures related only to the laminated packages themselves.”  Additional arguments put forth attempting to segregate the expenses were considered waived, as they were not presented to the ALJ in Lamina’s post-hearing brief.  Furthermore, Lamina “failed to explain how the claimed expenditures are significant as required by the statute,” and was unable to prove that the manufacturing underlying the expenditures took place in the United States.

    Although licensing expenses can be used to meet the economic prong of the domestic industry requirement in some circumstances, Lamina “did not show that its expenditures were connected to licensing, as opposed to the antecedent litigation that led to the licenses.”  The Commission also agreed with the ALJ that Lamina had not known that these expenditures were substantial, as the substantiality is judged in the context of the industry in question.

    For completeness, the Commission addressed Lamina’s argument that it was in the process of establishing a domestic industry with respect to licensing, although they agreed with the ALJ that this argument had been waived.  In short, the Commission found that Lamina was only able to show vague discussions, and that the “lack of interest...to settle with Lamina for any significant value” indicated there was no domestic industry in the process of being established.

    As such, the Commission agreed with the ALJ that the economic prong of the domestic industry requirement was not met, and the investigation was terminated with a finding of no violation of Section 337.