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Patent Prosecution and FDA Compliance Expenses May Help Satisfy the ITC’s Domestic Industry Requirement

In a recent initial determination, Administrative Law Judge (“ALJ”) Cheney of the U.S. International Trade Commission (“ITC”) provided useful guidance for patentees by reaffirming that there is no categorical rule that patent prosecution expenses cannot be included in the domestic industry analysis at the ITC, and also finding that complainants may rely upon expenses relating to FDA compliance to satisfy the domestic industry requirement.  

In Certain Strontium-Rubidium Radioisotope Infusion Systems, Inv. No. 337-TA-1110, Complainant Bracco Diagnostics Inc. (“Bracco”) sued Respondents Jubilant DraxImage Inc. of Quebec, Canada, Jubilant Pharma Limited of Singapore, and Jubilant Life Sciences of Uttar Pradesh, India (collectively “Jubilant”) at the ITC alleging infringement of patents related to strontium-rubidium elution and infusion systems used in positron emission tomography for cardiac imaging.  

Complainants at the ITC are required to satisfy the ITC’s “domestic industry requirement,” which has an economic prong and a technical prong.  One way for them to satisfy the economic prongs is by showing that a domestic industry for the patented article(s) exists based on significant employment of labor or capital in the United States.  19 U.S.C. § 1337(a)(3)(B).  To satisfy the domestic industry requirement, Bracco relied on its Model 1700 system.  The Model 1700 system is not approved by the FDA yet and is not commercially available.  Bracco argued that salaries it paid to engineers, technical personnel, and regulatory employees who worked on the FDA approval process relating to the Model 1700 system satisfied the domestic industry requirement.  The ITC Staff disagreed, arguing that FDA approval and compliance expenses cannot satisfy the domestic industry requirement for they were akin to patent prosecution activities and maintenance fees that the Commission had disregarded in the past.  

In his Initial Determination, ALJ Cheney began his discussion of FDA compliance investments by rejecting Staff’s argument that the Commission does not credit patent prosecution activities for domestic industry purposes.  In fact, ALJ Cheney stated that to his knowledge, the Commission had never stated that patent prosecution expenses could not be relied upon, and that to the contrary, in a previous decision the Commission preserved the option to consider patent prosecution expenses in the future.  Judge Cheney continued on to note that on at least two occasions, the Commission credited investments to obtain FDA approval as part of the domestic industry and that accordingly complainants can rely on expenditures relating to FDA approval to satisfy the domestic industry requirement.  Ultimately, ALJ Cheney found all of the asserted claims obvious in light of the prior art.  However, if the asserted patents are later found valid, ALJ Cheney held that Bracco’s efforts to obtain FDA approval for the Model 1700 satisfy section 337(a)(3)(B). 

ALJ Cheney also used this dispute to springboard to a larger discussion about the status of domestic industry accounting at the ITC, and the proofs required of complainants, saying:

“Before I move on from the topic of domestic industry accounting, I observe that this litigation has followed an unfortunate recent trend of losing sight of the domestic industry forest by concentrating on each line item tree. There is no serious dispute that Bracco and its contractors designed and manufactured the Model 1700 system in the United States at great expense, and that the Model 1700 practices the inventions in the asserted patents.    Nevertheless, Bracco aggressively identified an over-inclusive bucket of expenses, likely learning from past Commission determinations that line items would be whittled away in litigation. And Staff and Jubilant were no doubt following a well-worn path when challenging individual expenditures asserted by the complainant. This investigation did present serious questions about FDA approval, but surely nitpicking line items is not what Congress intended on these facts. Perhaps all concerned about this area of the law can do better in the future.” (emphasis added).

It will be interesting to see how domestic industry accounting at the ITC progresses and if any litigants take heed of ALJ Cheney’s guidance on the domestic industry forest and trees.  In the meantime, however, this decision provides patentees with useful guidance about additional investments which may be relied on to satisfy the domestic industry requirement.

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