Lashify’s Early Impacts at the ITC 

Co-Authored by: Kevin Garvey, Summer Associate 

The Federal Circuit recently considered the types of expenditures complainants can rely upon when establishing a domestic industry at the International Trade Commission (ITC). Lashify, Inc. v. Int’l Trade Comm’n, 130 F.4th 948 (Fed. Cir. 2025). The ITC had found that Lashify had not satisfied the technical prong of the domestic industry analysis with respect to one utility patent or the economic prong of the domestic industry analysis with respect to the utility patent and two design patents. Id. at 951. Lashify challenged these findings on appeal, where the Federal Circuit affirmed the Commission’s technical prong finding but vacated its economic prong determination. Id. at 965.

Key points 

• The Federal Circuit expanded cognizable expenditures under Section 337(a)(3)(B), holding that “there is no carveout of employment of labor or capital for sales, marketing, warehousing, quality control, or distribution,” and that these expenses need not be qualified by expenditures in other areas, like domestic manufacturing. Id. at 958–59.  
• The Federal Circuit distinguished subparts (A) and (B) of Section 337 from subpart (C) saying that clauses (A) and (B) “refer directly and only to concretely identified inputs for an enterprise’s functioning (plant, equipment, labor, and capital), but they do not limit what enterprise functions the inputs must be used to perform,” while clause (C) “does not specify particular inputs, but instead speaks of a functionally defined enterprise activity (whatever inputs are used).” Id. at 959. 
• The Federal Circuit also reiterated the definitions of “labor” and “capital,” stating that “capital is a stock of accumulated goods — not simply money to finance an enterprise” and “labor is human activity that produces goods or provides the services in demand in an economy.” Id. (cleaned up). 

Statutory background 

To prevail in a Section 337 investigation based on patent, copyright, trademark, mask work, or design infringement, the complainant must establish that “an industry in the United States, relating to the articles protected by the patent, copyright, trademark, mask work, or design concerned, exists or is in the process of being established,” which is known as the domestic industry requirement. 19 U.S.C. § 1337(a). The domestic industry requirement is commonly broken up into two prongs, “the ‘economic prong,’ which requires that there be an industry in the United States, and the ‘technical prong,’ which requires that the industry relate to articles protected by the patent.” InterDigital Commc’ns, LLC v. Int’l Trade Comm’n, 707 F.3d 1295, 1298 (Fed. Cir. 2013).  

For purposes of Section 337(a)(3): 

[A]n industry in the United States shall be considered to exist if there is in the United States, with respect to the articles protected by the patent, copyright, trademark, mask work, or design concerned— 

(A) significant investment in plant and equipment; 

(B) significant employment of labor or capital; or 

(C) substantial investment in its exploitation, including engineering, research and development, or licensing. 

19 U.S.C. § 1337(a)(3). Subparts (A) through (C) are “potentially overlapping but independently sufficient bases for considering the required industry to exist” under the economic prong. Lashify, 130 F.4th at 954. The technical prong asks essentially the same question “as that for infringement, i.e., a comparison of domestic products to the asserted claims.” Alloc, Inc. v. Int’l Trade Comm’n, 342 F.3d 1361, 1375 (Fed. Cir. 2003). 

Factual background 

Lashify manufactures and sells artificial eyelashes and related products. Lashify, 104 F.3d at 951. It conducts its research and development and design work in the United States but manufactures its products abroad and then ships them to customers in the U.S. and elsewhere after customers place orders on its website. Id.  

On September 10, 2020, Lashify filed a complaint before the Commission, alleging infringement of U.S. Patent No. 10,721,984 and two design patents, U.S. Design Patent Nos. D877,416 and D867,664 by multiple respondents. Id. at 954.  

Following an investigation, the administrative law judge (ALJ) stated in their initial determination that the technical prong was not satisfied for the ’984 patent but was satisfied for the ’D416 and ’D664 patents, and also that Lashify had not satisfied the economic prong requirement, which “defeated the claim for relief for all three patents.” Id. at 954–55. But in reaching their conclusion on the economic prong, the ALJ “excluded expenses relating to sales, marketing, warehousing, quality control, and distribution” because “there were ‘no additional steps required to make these products saleable’ upon arrival into the United States, and because the quality-control measures were ‘no more than what a normal importer would perform upon receipt.’” Id. at 955 (quoting Certain Artificial Eyelash Extension Systems, Products, and Components Thereof, USITC Inv. No. 337-TA-1226, Initial Determination on Violation of Section 337 and Recommended Determination on Remedy and Body (Oct. 28, 2021)). The ALJ excluded the sales and marketing expenses because Lashify did not establish other qualifying expenses. Id. at 955. Lashify petitioned the Commission for review. Id. at 956. 

Although the Commission agreed with the ALJ’s findings and did not issue any Section 337 relief, it was split on the issue of the economic prong. The majority of Commissioners “reasoned that ‘it is well settled that sales and marketing activities alone cannot satisfy the domestic industry requirement,” and found that the exclusion of the warehousing, quality control, and distribution expenses was proper because they were “akin to those incurred by mere importers.” Id. (quoting Certain Artificial Eyelash Extension Systems, Products, and Components Thereof, USITC Inv. No. 337-TA-1226, Comm’n Opinion at *18 (Oct. 24, 2022)). The dissenting Commissioners found that there was significant employment of labor or capital under the meaning of Section 337(a)(3)(B) because the statutory language did not provide reason for excluding certain activities. Id. Lashify appealed the Commission’s decision to the Federal Circuit. Id. at 957. 

The Federal Circuit’s ruling 

On appeal, the Federal Circuit found for Lashify on the economic prong issue, holding that “there is no carveout of employment of labor or capital for sales, marketing, warehousing, quality control, or distribution,” and that these expenses do not need to be qualified by expenditures in other areas, thus opening the economic prong to more types of expenditures under subpart (B) of Section 337. Id. at 958–59. The court distinguished subparts (A) and (B) from (C) saying that clauses (A) and (B) “refer directly and only to concretely identified inputs for an enterprise’s functioning (plant, equipment, labor, and capital), but they do not limit what enterprise functions the inputs must be used to perform,” while clause (C) “does not specify particular inputs, but instead speaks of a functionally defined enterprise activity (whatever inputs are used).” Id. at 959. The court also reiterated the definitions of “labor” and “capital,” stating that “capital is a stock of accumulated goods — not simply money to finance an enterprise” and “labor is human activity that produces goods or provides the services in demand in an economy.” Id. (cleaned up). Further, the court defined “significant” as “an increase in quantity, or to a benchmark in numbers,” and that under this definition, “clause (B) does not exclude or discount the sufficiency of significant-in-amount labor or capital that is devoted to the particular enterprise functions the Commission deemed not to count standing alone.” Id. at 960 (quoting Lelo Inc. v. Int’l Trade Comm’n, 786 F.3d 879, 883 (Fed. Cir. 2015)). The court also denied the Commission’s legislative history argument. See id. Accordingly, the court affirmed the Commission’s technical prong finding. Id. at 965. 

Ultimately, the Federal Circuit held that under Section 337(a)(3)(B), a complainant can satisfy the economic prong of domestic industry “by showing employment of a large enough stock of accumulated goods or of a significant amount of human activity for producing goods or providing the services in demand in an economy.” Id. at 959. That stock of goods does not have to be manufactured domestically, and “[t]here is no exclusion from labor when the human activity employed is for sales, marketing, warehousing, quality control, or distribution, which are common aspects of providing goods or services.” Id. The court also noted that sales and marketing expenditures are also “natural aspects” of providing services in demand. Id. In sum, Lashify expanded the range of expenditures that could Satisfy section 337(a)(3)(B) for the economic prong of domestic industry while distinguishing subparts (A) and (B) from subpart (C). Id. 

Potential impacts of Lashify  

Lashify’s impact is potentially significant. Complainants will now be able to rely on sales, marketing, warehousing, quality control, and distribution expenses when meeting the economic prong of the domestic industry requirement. This is likely to open the doors to complainants who had previously not considered the ITC as a viable forum for their patent infringement claims. 

The ITC post-Lashify 

The Commission is already applying Lashify and has indicated that it is receptive to sales and marketing expenses under the economic prong. In Certain Dermatological Treatment Devices and Components Thereof, the Commission found a domestic industry existed on pre-Lashify facts but stated that Lashify expenses like sales and marketing “would only further support” the finding. Certain Dermatological Treatment Devices and Components Thereof, USITC Inv. No. 337-TA-1356, Comm’n Op. at 18. (June 18, 2025). Commissioner Kearns noted that the complainant in Certain Dermatological Treatment Devices was “relying on a range of activities” of its licensee to support its domestic industry claim and that “Lashify appears to require crediting all these activities” where “at least some . . . go beyond the sorts of activities that would be conducted by a mere importer.” Id. at 17 n. 10. In Certain Exercise Equipment and Subassemblies Thereof, ALJ Elliot noted the Lashify opinion’s holding regarding subparts (A) and (B) and continued to comment that “a complainant must substantiate the significance of its activities with respect to the articles protected by the patent” in a “quantitative context.” Certain Exercise Equipment and Subassemblies Thereof, USITC Inv. No. 337-TA-1419, Initial Determination at 6 (Apr. 30, 2025). This demonstrates that the same previous considerations for the economic prong are in effect regarding the new Lashify expenditures.  

Similarly, in Certain Liquid Coolers for Electronic Components in Computers, Components in Computers, Components Thereof, Devices for Controlling Same, and Products Containing Same, Chief ALJ Cheney found that the respondent’s argument that the complainant’s economic prong was not satisfied because the complainant was relying on “nothing more than customer-facing technical sales activities under the guise of ‘research and development’” lacked merit because, under Lashify, even if all or some of the complainant’s “credited activities are customer-facing technical sales activities, it would not be error to consider those activities as part of ‘a holistic review of all relevant considerations’ in the domestic industry analysis.” Certain Liquid Coolers for Electronic Components in Computers, Components in Computers, Components Thereof, Devices for Controlling Same, and Products Containing Same, USITC Inv. No. 337-TA-1394, Initial Determination at 114 (Mar. 21, 2025) (quoting Lashify, 104 F.4th at 963). As a result, Chief ALJ Cheney held that all the investments that the complainant had characterized as relating to research and development were cognizable under 19 U.S.C. § 1337(a)(3)(B). Id.  

Further, Chief ALJ Cheney also held that the realities of the marketplace that the complainant was engaged in — selling a simulator that contained the domestic industry products — would not require separate time accounting for patented versus non-patented aspects of the simulator because that type of accounting was not done in the ordinary course of business and therefore the extent of the “simulator business can appropriately be part of a holistic review of all relevant domestic industry considerations." Id. (citing Lashify, 104 F.4th at 963). Chief ALJ Cheney also cited to Lashify when discussing the complainant’s time estimates from employees who were asked the percentage of time they spent working on R&D-related activities for the domestic industry products, saying that “even if the time estimates provided by [the complainant’s] employees encompassed some activities that went beyond strict boundaries of ‘research and development,’” the evidence showed that “those activities are related to articles protected by the asserted patents and should be considered as part of a ‘holistic review of all relevant considerations’ in the domestic industry analysis.” Id. (quoting Lashify, 104 F.4th at 963).