Zircon Corp. v. International Trade Commission, No. 2022-1649 (Fed. Cir. (ITC) May 8, 2024). Opinion by Bryson, joined by Lourie and Stark.
Zircon filed an ITC complaint against Stanley and Black & Decker alleging a violation of section 337 of the Tariff Act of 1930. Zircon’s complaint alleged that the importation and sale of certain electronic stud finders, metal detectors, and electrical scanners infringed various claims of three Zircon patents.
The ALJ issued an initial determination finding no violation of section 337, and the Commission affirmed for two independent reasons. First, the Commission affirmed the ALJ’s determination that Zircon had not satisfied the economic prong of the domestic industry requirement. Second, the Commission found that each asserted claim was either invalid or not infringed.
As to the economic prong, Zircon had relied on evidence of its cumulative expenditures on 53 domestic industry products, arguing that its investments in plant and equipment, labor or capital, and/or research and development had been significant or substantial. But Zircon acknowledged that not all 53 products practice all three of the asserted patents. And Zircon did not allocate its expenditures on its 53 products separately with respect to each of its products or each of the asserted patents. The Commission thus found that Zircon’s failure to do such an allocation precluded the Commission from evaluating the significance of Zircon’s investments with respect to each asserted patent. Zircon appealed.
On appeal, Zircon argued that the Commission erred by requiring a patent-by-patent breakdown of its investments and that, in doing so, the Commission departed from its “flexible, market-oriented approach to domestic industry.” The Federal Circuit disagreed with Zircon and thus affirmed.
The focus of the parties’ dispute on appeal centered on whether section 337 permits Zircon to rely on investment data aggregated across different products protected by different patents. Addressing that question, the Federal Circuit held: “In cases in which all the domestic industry products practice all the asserted patents, it follows from the language of section 337 and our case law that the complainant could satisfy the economic prong as to all asserted patents based on the entire product group. But in cases in which the complainant’s products or groups of products each practice different patents, the complainant would need to establish separate domestic industries for each of those different groups of products.”
The Federal Circuit explained that the required showing “might be made, in an appropriate case, without necessarily breaking out investments on a per-patent basis, provided that sufficient evidence is presented to persuade the Commission that the domestic industry requirement is met for each patent,” and so the “investments do not always need to be broken down patent-by-patent.” But here, Zircon’s products “practiced multiple different combinations of patents,” and Zircon’s evidence did not provide a way for the Commission to assess the significance of the investments in the domestic industry products.
As the Federal Circuit explained, “Zircon was required to identify, in some manner, how much of its investment in each statutory category was attributable to each group of products.” The court ruled that “the Commission did not err in finding that Zircon failed to meet that burden when it relied on aggregated evidence of its investments in all domestic industry products without allocating those investments among products or product groups relating to each asserted patent, or product groups relating to all the asserted patents.”