A Broader Path to ITC Protection: How the Federal Circuit Expanded the “Domestic Industry” Requirement, with Lessons from the Lashify Case

Introduction

The Federal Circuit recently handed down a decision that broadens the types of investments that can satisfy the International Trade Commission’s (“ITC”) domestic industry requirement. This change is especially important for patent owners who want to keep infringing products out of the United States. Below are the main points of the decision’s immediate impact:

- Wider List of Qualifying Expenses

Expenditures related to marketing, administrative overhead, and ecosystem-building can now count toward proving domestic industry.

- Easier Access to ITC Remedies

Patent owners can more easily meet the requirement to use the ITC’s powerful exclusion orders.

- Adaptation to Modern Business Models

Activities like licensing and promotions, which go beyond basic manufacturing, are now recognized as valid proof of domestic investment.

- Stronger Position for Complainants

Accused infringers will face more robust arguments and evidence that the patent holder has a real U.S. presence.

- Insight from Lashify, Inc. v. ITC

The Lashify case demonstrates how these principles apply in a real-world setting, showing that investments in branding, customer support, and design can all help meet the domestic industry threshold.

This post explains how the ITC’s domestic industry requirement has evolved, examines the Federal Circuit’s broader view, and uses Lashify, Inc. v. International Trade Commission as a key example. We’ll also discuss how this affects non-practicing entities (“NPEs”) and provide recommendations for companies and their attorneys.

Background and Context

The ITC carries out investigations under Section 337 of the Tariff Act of 1930. It has the power to keep infringing imports out of the United States through powerful remedies like exclusion orders. This makes it an attractive forum for patent owners. However, to access these remedies, a complainant must prove it has a “domestic industry” related to the patent it’s enforcing.

For a long time, the domestic industry requirement largely focused on whether a patent owner manufactured the patented product in the United States. Over time, that focus expanded to include research and development activities. Then, it broadened again to recognize licensing efforts. Now, the Federal Circuit has gone further, allowing a wider range of expenditures to qualify, such as marketing costs, technical support, training, and more indirect forms of investment.

This expanded viewpoint recognizes the reality of modern commerce. Not every patent holder engages in large-scale domestic manufacturing. Some focus on design, marketing, or licensing arrangements as their main form of commercializing an invention. The law has adapted to protect these patent holders by allowing them to show various kinds of investments in the United States.

Within this context, the Lashify, Inc. v. International Trade Commission case shows how the Commission approaches these newer ideas about what counts as an investment in the patented technology. Lashify, a beauty and cosmetics company, demonstrated in its ITC case how marketing and consumer-oriented efforts could help establish that it had a domestic industry for its patented eyelash extensions.

The Federal Circuit’s Decision and Its Core Points

The Federal Circuit’s most recent decision made it clear that it is no longer just the old style of evidence—like big factories or specialized R&D labs—that can satisfy the domestic industry requirement. Instead, a wider selection of investments can now be counted. Let’s break down some of the key clarifications:

1. Expanded Recognition of Costs

Traditional expenses (like R&D equipment or salaries for engineers) remain relevant. But now, certain overhead costs, marketing budgets, and even support for distribution or customer training can count, as long as they tie back to the patent in question.

2. Looser Nexus Requirement

Patent owners still need to show a link between their expenditures and the patented technology. However, the court clarified that this link need not be extremely tight or direct. As long as the money spent furthers the commercial use or support of the patent, it can help establish domestic industry.

3. Licensing and Ecosystem-Building

Licensing has long been an accepted way to show domestic industry. The Federal Circuit emphasized that broader efforts to foster a community around the patent—such as training programs, marketing collaborations, or partnerships—are now more clearly accepted as part of a valid domestic industry.

4. Policy Considerations

This shift aligns with Congress’s intent to protect U.S. innovators. In a modern economy, inventions can be commercialized in ways other than physical manufacturing. By recognizing marketing, licensing, and other support services, the ITC’s approach stays in step with today’s business models.

Historical Development of the Domestic Industry Requirement

Early Focus on Manufacturing

When Section 337 first began to take shape, the domestic industry requirement was mainly tied to whether the patent owner made the patented products within the country. This made good sense in the past when most innovation moved from inventors to factory floors. Infringing foreign goods threatened not just intellectual property but local jobs.

The Move to R&D

As technology advanced, a company could have significant innovation work based in the United States even if it did not own a factory here. Software, biotech, and aerospace industries often spend heavy resources on research, design, and prototyping, sometimes outsourcing final assembly abroad. The ITC began to count these kinds of research expenditures as proof of domestic industry.

Licensing as a Valid Investment

Further developments recognized that a patent owner might not make or sell anything directly but might license its invention to others. If those licensing efforts were genuine and contributed to U.S. commerce, that still counted as a sufficient domestic industry. This step opened the door for companies whose main activity was licensing out their IP rather than producing a product.

Acceptance of Indirect and Overhead Costs

Now, with the Federal Circuit’s latest decision, we see that even indirect costs—like marketing and overhead—can matter if the patent owner can explain how these expenses help exploit the patent. This means, for example, that a marketing campaign that highlights the patented feature can count, or a licensing workshop that trains potential licensees in using the patented invention can support domestic industry.

Analyzing the Broader Standards

1. Recognizing Various Expenses

Expenses once thought too indirect, such as general marketing or overhead related to business operations, might now qualify if there is a clear link to the patented invention. For instance, if a marketing campaign zeroes in on the benefits of a patented product, that money spent could meet part of the domestic industry threshold.

2. Linking Costs to the Patent

Patent owners must still prove their investments connect to the patent. But the Federal Circuit now favors a more holistic look. If a business invests in branding, sales training, or related activities that help get the patented product to market, those activities likely count. The key is to show that the patent is a meaningful part of these efforts.

3. Strengthening the Role of Licensing

For many companies—especially those focusing on patent licensing rather than manufacturing—this decision is a welcome update. The ITC has signaled it is ready to consider the full scope of work that goes into building a successful licensing program. This can include marketing to potential licensees, supporting those licensees as they develop products under the patent, and even training or guidance on how to use the patented feature effectively.

The Lashify, Inc. v. International Trade Commission Case

One of the clearest examples of how the domestic industry requirement has expanded is found in Lashify, Inc. v. International Trade Commission. Lashify is a California-based beauty company best known for its at-home eyelash extension products. These products include lash segments, adhesives, and specialized applicators.

1. Lashify’s ITC Complaint

Lashify discovered that certain foreign companies were selling products that it believed infringed its patents. Lashify turned to the ITC for help keeping these products out of the U.S. market. In doing so, it had to prove that it met the domestic industry requirement.

2. Showing Domestic Industry

Lashify highlighted several types of U.S. investments tied to its patented technology:

- Product Development and R&D

Even if much of the manufacturing took place outside the country, Lashify had invested heavily in designing and perfecting the lash system in the U.S.

- Marketing and Influencers

Lashify used social media and influencer marketing to show off the patented features of its lash extensions. By connecting these efforts back to the patent, it argued these costs should count.

- Customer Support and Education

The company showed that it ran customer service and training programs from its U.S. headquarters to teach buyers how to use the patented lash system.

3. ITC’s View

In Lashify, the Administrative Law Judge (“ALJ”) and, later, the Commission, looked at all these activities to decide if they were meaningfully tied to the asserted patent. Critics said Lashify’s marketing spend was simply a general business cost. Lashify countered that its marketing and support were directly tied to the patented design, adhesives, and application methods.

In the end, the ITC found Lashify’s evidence solid enough to meet the domestic industry requirement. This showed that a company can satisfy the requirement by tying marketing, customer support, and design improvements to a patented product—even if large-scale manufacturing is done elsewhere.

4. Meaning for Future Cases

Lashify is an important example for smaller brands, startups, or product-focused companies that rely on marketing and customer engagement as much as they rely on factories. It shows that the ITC’s door is open to different types of evidence beyond heavy manufacturing or pure R&D spending.

Practical Implications for Stakeholders

For Patent Owners:

1. Access to Strong Remedies

The ITC’s exclusion orders can stop infringing products at the border, often more quickly than district court litigation. With a broader definition of domestic industry, more patent owners can now seek this kind of swift relief.

2. Record-Keeping is Key

Patent owners should keep detailed records that connect each category of spending—marketing, R&D, licensing—to the patented technology. This documentation helps persuade the ITC that there is a real domestic industry.

3. Holistic Enforcement Strategy

With the ITC now recognizing a broader range of domestic activities, patent owners can integrate an ITC approach with other enforcement methods, like federal district court cases or licensing programs, to strengthen their overall strategy.

For Accused Infringers:

1. More Complex Defense

Respondents who hope to dismiss a Section 337 complaint early on will likely face a tougher climb, given that patent owners now have a bigger playbook for meeting the domestic industry requirement.

2. Thorough Discovery

Accused infringers may need to probe how the patent owner is linking its U.S. activities to the patent. They might look for signs that the claimed expenditures are too general or not truly tied to the patented invention.

3. Narrowing the Scope

Respondents may still argue that some expenses are too far removed from the patent. If they can show that the marketing or overhead costs do not really promote the patented feature, they might limit the patent owner’s domestic industry claims.

For the ITC and Policymakers:

1. Potential Rise in Filings

With the domestic industry standard now more expansive, the Commission could see a bump in the number of Section 337 complaints.

2. Continued Balancing

While Congress wants to protect real U.S. investments, there is always some concern about potential misuse by parties who claim a domestic industry without genuine ties. Policymakers may watch to see if further clarifications are needed.

3. Staying Aligned with Modern Business

Recognizing a full array of activities—like marketing, customer support, and licensing—helps the ITC remain relevant in a world where innovation might happen in ways other than a traditional factory setting.

Effects on Non-Practicing Entities (NPEs):

Non-practicing entities (“NPEs”), also known as patent assertion entities, generally do not manufacture products under their patents. Instead, they focus on licensing or litigation to enforce their IP rights. The Federal Circuit’s broader interpretation of the domestic industry requirement can affect them in several ways:

1. Easier Time Meeting Domestic Industry

Since NPEs do not produce goods, they often depend on licensing to show a domestic industry. Under this broader rule, if an NPE invests in marketing, licensing efforts, and supporting licensees, those costs might be enough to demonstrate domestic industry.

2. Likely Resistance from Opponents

Companies responding to NPE complaints may challenge these alleged investments, claiming they are not truly tied to the patent’s exploitation. NPEs can expect thorough discovery into whether they have genuinely advanced the technology within the U.S.

3. Record-Keeping is Vital

NPEs need strong evidence showing they have engaged in good-faith efforts to license and support the patented invention. Detailed records—such as licensing negotiations, marketing plans, and educational workshops—can be key to showing a genuine domestic industry.

Strategic Considerations and Potential Challenges

1. Evidence of Nexus

Patent owners, whether they are manufacturers or licensors, must connect each dollar spent to the patent. This means marketing materials, purchase orders, and internal documents should point to how they support or promote the claimed invention.

2. Timing of Investments

The ITC typically looks at whether the patent owner had a domestic industry during the period of alleged infringement. Parties need to be mindful of when the main expenditures occurred.

3. Expert Testimony

Economic and technical experts can explain how certain costs tie back to the patented invention. Experts might be used to explain the value of brand-related spending or to link engineering work to a specific patent claim.

4. Global Manufacturing and Supply Chains

Many businesses design products in the U.S. but manufacture overseas. The new standard makes it easier for them to show they have a domestic industry based on design, brand promotion, and licensing activities, even if the final assembly happens abroad.

5. Fear of Abusive Claims

Some industry watchers worry that a bigger umbrella for domestic industry might allow “patent trolls” to misuse the ITC. However, the Commission will still require complainants to prove a meaningful connection between expenses and the patent. That requirement should curb many abuses.

Balancing Broader Protections with Potential Misuse

As the law grows more inclusive, there is a constant balancing act. On one hand, it is fair to protect real investments in U.S. innovation. On the other hand, the ITC must watch out for cases where a party might inflate or misrepresent its domestic activities. The Lashify case shows that the ITC and the Federal Circuit are willing to look closely at the evidence, ensuring that only legitimate expenses tied to a patent will count.

This broader view likely reflects lawmakers’ and the courts’ desire to protect modern forms of innovation and commerce—whether it’s the Lashify lash system or some advanced software platform. Because today’s businesses often rely on branding, partnerships, online presence, and licensing, it makes sense to acknowledge those efforts when deciding whether a patent holder has a real U.S. presence.

Conclusion

The Federal Circuit’s expansion of the domestic industry requirement—and its application in Lashify, Inc. v. International Trade Commission—marks a significant milestone in ITC practice. By accepting a wider array of expenses, including marketing, ecosystem support, and overhead, the court acknowledges the modern ways patent owners commercialize their inventions. This shift enhances the ITC’s role as a powerful venue for patent enforcement, offering faster timelines and tough remedies like exclusion orders.

Below is a list of recommendations for practitioners and companies moving forward:

1. Keep Thorough Documentation

Maintain detailed records that connect each expense (marketing, overhead, or licensing) to the patented technology.

2. Establish a Clear Link

Show a direct or reasonably tight relationship between your spending and the asserted patent. Vague references or overly general proof will not be as persuasive.

3. Use Experts to Clarify Value

Consider hiring economic or technical experts to explain the importance of certain costs, and how they promote or support the patent.

4. Plan a Consistent Strategy

Show a steady, good-faith investment in the technology rather than sudden, last-minute spending designed only to appear before the ITC.

5. Monitor Ongoing Legal Changes

Stay current on new Federal Circuit decisions, Commission rulings, or legislative activity that could further refine what is counted toward domestic industry.

6. Be Ready for Challenges

If you are a respondent, remember that you can test the complainant’s evidence by questioning if each alleged expenditure truly relates to the patent.

In short, this broader standard offers promising news for patent owners who invest in different ways—especially those who rely on marketing, licensing, or design improvements to promote their patented products. By following best practices and carefully documenting connections to the invention, complainants can put together a persuasive case at the ITC. Through this more flexible approach, the ITC continues its mission of protecting valid U.S. patent rights against unfair imports, while also adapting to the realities of a changing business landscape.