On May 11, 2015, in Lelo, Inc. v. International Trade Commission, the US Court of Appeals for the Federal Circuit reversed the International Trade Commission's (ITC) determination that the domestic industry requirement of 19 U.S.C. § 1337(a)(3) was satisfied based on a qualitative determination that the patent owner's purchase of four off-the-shelf components from third-party US suppliers constituted a significant investment or significant employment of labor or capital despite an absence of quantitative data connecting the cost of the components to an increase of investment or employment in the US (No. 2013-1582, (Fed. Cir. May 11, 2015)).

Standard Innovation Corporation is a Canadian corporation and the assignee of US Patent No. 7,931,605. Standard Innovation markets a line of sexual stimulation devices that it:

Lelo, Inc. and its related companies import into the US three devices that Standard Innovation claimed infringe its patent. Standard Innovation asserted that Lelo's activities violate Section 337 of the Tariff Act of 1930.

In addition to proving infringement, a claimant asserting patent rights under Section 337 must satisfy the domestic industry requirement by establishing, with respect to the patented device, that it has made one of the following:

(19 U.S.C. § 1337(a)(3).)

In this case, the ITC determined that certain of the accused devices infringed valid claims of the asserted patent. In addition, despite the Administrative Law Judge's Initial Determination, the ITC concluded that Standard Innovation satisfied the domestic industry requirement based on Standard Innovation's US purchase of four off-the-shelf components used to manufacture the patented device. Specifically, the ITC determined that Standard Innovation's expenditures on these components satisfied the first two domestic industry tests since the components were critical to the devices, even though these purchases were modest and insignificant. The ITC reasoned that:

Lelo appealed.

The Federal Circuit explained that the only issue on appeal was whether qualitative factors alone can satisfy the Section 337 requirements of significant investment or significant employment. The Federal Circuit analyzed the plain language of the statute and past ITC cases to hold that Section 337 requires a quantitative analysis to determine whether there has been a significant increase in the quantity of investment or employment.

Applying this rule here, the Federal Circuit noted that:

As a result, the Federal Circuit reversed the ITC and reiterated that qualitative factors cannot substitute for quantitative data demonstrating significant investment or employment when considering Section 337's domestic industry requirement.