Addressing the economic prong of the domestic industry requirement under Section 337(a)(3)(B) of the Tariff Act of 1930, the US Court of Appeals for the Federal Circuit reversed a US International Trade Commission decision, finding that the Commission had applied an overly narrow interpretation of the requirement. The Court explained that expenses related to sales, marketing, warehousing, quality control, and distribution may qualify as “labor and capital” for establishing the existence of a domestic industry, even if there is no domestic manufacturing. Lashify, Inc. v. International Trade Comm’n, Case No. 23-1245 (Fed. Cir. Mar. 5, 2025) (Taranto, Prost, Chen, JJ.)

Lashify is a US-based company that sells eyelash extension products. Concerned about the importation of similar goods, Lashify filed a complaint with the Commission, alleging that certain importers were infringing its patents. As an importer itself, Lashify had its products manufactured abroad before selling them to customers in the United States. In doing so, Lashify incurred significant expenses related to warehousing, distribution, quality control, sales, and marketing. These expenses were critical to Lashify’s domestic industry case.

The Commission rejected Lashify’s claims, reasoning that it did not demonstrate the establishment of, or effort to establish, a domestic industry. This is known as the “economic prong” of the domestic industry requirement. One way to satisfy this prong is by showing the expenditure of significant labor or capital within the US. Lashify’s domestic expenses were limited to warehousing, distribution, quality control, sales, and marketing costs, and in the Commission’s view, these expenses did not constitute significant “labor or capital” under Section 337 (a)(3)(B). The Commission determined that these expenses were no greater than those any importer would incur once its products arrived in the US. Lashify appealed.

The Federal Circuit reversed, citing the text of the provision recognizing significant labor or capital as a means of establishing a domestic industry and noted that the statutory language did not exclude expenses related to warehousing, distribution, quality control, sales, and marketing. Considering the domestic industry requirement under Section 337(a)(3)(C), the Court noted that the reference to labor and capital in part (B) was analogous to investments in plant and manufacturing in part (C), which similarly did not limit the “enterprise functions” to which the investments must be directed.

The Federal Circuit cited its 2015 decision in Lelo, which defined “labor” as “human activity that produces goods or provides the services in demand in an economy” and “capital” as “a stock of accumulated goods,” not simply money to finance an enterprise. The Court held that complainants may satisfy the economic prong by demonstrating the “employment of a large enough stock of accumulated goods [i.e., capital] or of a significant amount of human activity for production goods or providing the services in demand in an economy [i.e., labor].” The Court determined that Lashify’s warehousing, distribution, quality control, sales, and marketing expenses fit within this definition and should therefore be considered in assessing whether Lashify had employed sufficient labor and capital within the US to satisfy the economic prong.

Practice Note: This ruling broadens the scope of domestic industry in Section 337 cases, allowing intellectual property holders to count additional operational expenses toward establishing the domestic industry requirements. Those seeking to enforce their intellectual property rights at the Commission, particularly where their own products are manufactured abroad, will likely benefit from this decision.