Ensuring ITC Domestic Industry Is Not Too Domestic: Employees Working Remotely

June 5, 2020

One of the unique requirements for bringing a suit under Section 337 at the U.S. International Trade Commission (ITC) is that a domestic industry exists or is being established when the complaint is presented to the ITC. There are two parts to this requirement: (1) a technical prong, that the complainant’s articles at issue are protected by U.S. intellectual property (IP) rights; and (2) an economic prong, that there are sufficient investments in the United States directed to the IP at issue.

The three ways to satisfy the economic prong are: (1) a significant investment in plants and equipment; (2) significant employment of labor or capital; or (3) substantial investment in the IP’s exploitation, including engineering, research and development, or licensing.

During the COVID-19 pandemic, many employees are working remotely, a trend that likely will continue until a vaccine is developed and administered. Under this new normal, how would a company show that the economic prong is satisfied under the three statutory subparts?

While the ITC may temporarily adopt a more flexible approach, measuring the domestic industry from a date before the pandemic began, this is not a certainty. Until there is guidance on this, it is reasonable to expect that a respondent could raise a defense relying on the types of economic prong activities taking place when the complaint was filed. Thus, any company wishing to bring an ITC complaint to stop unfair competition may want to consider the following:

1. Significant investment in plant and equipment
In addition to investments in plant and equipment before COVID-19, companies should ensure that employees track expenses for such things as internet connections, work areas, computers, phones, printers and other work-related equipment and supplies. Companies should also consider reimbursing employees for such costs, and maintain documentation to show such expenses and reimbursements.

2. Significant employment of labor or capital
To the extent that workers are furloughed and drawing unemployment, a company will need to find ways to show that it employed significant labor before the pandemic and will do so again after the pandemic is more controlled. To the extent a company must act at the ITC to stop infringing imports sooner rather than later, the company should consider recalling some employees before filing a complaint to avoid any issue on this point.

3. Substantial investment in IP exploitation, including engineering, R&D, or licensing
Companies may need to ensure that their written corporate policies and any agreements with employees make clear the conditions under which engineering and R&D work are performed (and where). Too, as discussed in this June 4 McGuireWoods alert, companies may need to revise corporate documents or employment agreements to ensure that inventions made by employees remain the property of the company, despite the employee’s working from home.

McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.

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