Section 337 practitioners should consider crafting “in the process of being established” domestic industry allegations with the same degree of specificity as the other allegations in the complaint.

The U.S. International Trade Commission ("ITC") recently held that conclusory allegations in a Section 337 complaint that a domestic industry is "in the process of being established" are insufficient.¹ This appears to be the first time that the Commission has expressly found such insufficiency under 19 C.F.R. § 210.12(a)(6)(i) and practitioners should be aware.

The statutory language of Section 337 affords a domestic industry that is in the process of being established similar protection to an existing domestic industry.² There is a two-part test to determine whether or not an industry is in the process of being established: 1) the complainant must "demonstrate that he is taking the necessary tangible steps to establish such an industry in the United States"; and 2) the complainant must show that there is a "significant likelihood that the domestic industry requirement will be met in the future."³

The Commission Rules treat the pleading of a domestic industry in the process of being established in the same fashion as an existing domestic industry.⁴ The degree of granularity required in a Section 337 complaint is even finer than required under Fed. R. Civ. P. 9(b) for pleading certain matters with specificity.

The Commission's recent decision was based upon a determination that the complaint merely included a description of the relevant domestic industry that "allegedly exists" without a similar description of the one in the process of being established. The complaint at issue appears conventional in all respects with respect to the particularity that one ordinarily expects in Section 337 complaints, so the decision may be surprising to practitioners.

This decision may represent an effort by the Commission to rein in allegations of nascent domestic industries. Generally, the existence of a domestic industry is established at the time the complaint is filed.⁵ Left unfettered, cases of a domestic industry in the process of being established are exceptions that could theoretically become the rule.

The Commission's decision was without prejudice for the complainant to seek to amend its complaint, so it is unclear what effect, if any, the decision will have in the outcome of the case. Section 337 practitioners should consider crafting "in the process of being established" domestic industry allegations with the same degree of specificity as the other allegations in the complaint.

For Further Information

If you have any questions about this Alert, please contact Rodney R. Sweetland III, Michael G. McManus, any member of the ITC Section 337 Litigation Practice Group or any attorney in the firm with whom you are in regular contact.

Notes

1. Certain Communications Equipment, Components Thereof, and Products Containing the Same, Including Power Over Ethernet Telephones, Switches, Wireless Access Points, Routers and Other Devices Used in LANs and Cameras, Inv. No. 337-TA-817 (Comm'n Notice March 28, 2012).
2. 19 U.S.C. § 1337(a)(2). See also H.R. Rep. 100-40, at 157 (1st Sess. 1987) ("The phrase "or in the process of being established" with regard to the industry requirement recognizes that there may be situations where…an industry does not "exist" but a party should be entitled to bring a 337 action. For example, if a new product is being developed in the United States and is protected by a U.S. intellectual property right, the owner of the intellectual property right would not have to wait to bring an action under section 337 until he can satisfy the definition of industry, if he can demonstrate that he is taking the necessary steps to establish such an industry in the United States.").
3. Certain Stringed Musical Instruments & Components Thereof, Inv. No. 337-TA-586, Comm'n Op. at 13 (May 16, 2008).
4. 19 C.F.R. § 210.12(a)(6)(i).
5. Certain Video Game Systems and Controllers, Inv. No. 337-TA-743, Comm'n Op. at 4-6 (January 20, 2012).

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