U.S. Importers Likely Face Greater Exposure from Patent Trolls Following a Recent Federal Circuit Decision

If your business imports consumer products into the U.S., a recent decision from the U.S. Court of Appeals for the Federal Circuit may increase your exposure to non-practicing entities (NPEs), in some cases referred to as patent trolls. On March 5, 2025, the Federal Circuit issued a decision in  Lashify, Inc. v. Int'l Trade Comm'n, No. 2023-1245 (Fed. Cir. Mar. 5, 2025), that expands access to the International Trade Commission (ITC) to entities that previously had difficulty satisfying the ITC's domestic industry requirements - including trolls. Because the ITC can block imported products accused of patent infringement on an expedited time frame, this decision may have a significant impact on U.S. businesses.

What is the ITC and what does it do?

The ITC is a forum set up to hear cases under Section 337 of the Tariff Act of 1930, which focuses on preventing the importation of goods into the U.S. that infringe U.S. patents, among other issues. Notably, the ITC can issue exclusion orders to block infringing items from entering the U.S. market.

Patent owners often choose the ITC because its proceedings are generally faster than traditional district court litigation and its remedy (exclusion orders) can be particularly effective in stopping infringing products at the border.

Who can bring a patent case before the ITC?

For a patent-holder company to bring a patent infringement action before the ITC, the patent-holder company must prove that it has a “significant” or “substantial” domestic industry within the United States. A company may meet this requirement, for example, by showing a “significant employment of labor and capital” in the United States relating to a product that practices the asserted patent. 19 U.S.C. § 1337(a)(3).[1] This is sometimes referred to as the “domestic industry requirement.”

What happened in the Lashify case?

Lashify sells artificial eyelash extensions, applicator tools and products, and lash-extension storage containers. Lashify conducts its research, design, and development work in the United States. However, it manufactures its products abroad before shipping them to customers, including U.S. customers, who purchase them online through its website. Lashify, Inc. v. Int'l Trade Comm'n, No. 2023-1245, 2025 WL 699368, at *1 (Fed. Cir. Mar. 5, 2025).

Lashify owns three patents at issue in the case—one utility patent relating to the method of heating and clustering artificial hairs to construct the lash extensions, and two design patents for the design of a storage cartridge for lash extensions and the design of an applicator.

As relevant here, Lashify filed a complaint with the ITC alleging that foreign manufacturers were infringing its patents and selling the infringing products in the U.S., including at Wal-Mart and Ulta Beauty, among other places.

The ITC ruled that, applying the old standard, Lashify could not bring a case before the ITC.

Prior to March 5, 2025, the ITC held that, in order for a patent-holder such as Lashify to satisfy the domestic industry requirement, the patent-holder could not rely solely on activities within the U.S. such as advertising, distributing or selling to meet the domestic industry requirement. Thus, prior to March 5, 2025, a patent-holder needed to show something beyond advertising, distributing and selling in the U.S.—such as having a domestic manufacturing presence—before it could get before the ITC.

Applying that understanding, the ITC found that Lashify could not bring a claim before the ITC because it failed the domestic industry requirement. Lashify could not show that it had domestic manufacturing within the U.S., and its research, sales and marketing activities within the U.S. were not enough, according to the ITC, to satisfy the domestic industry requirement.

The Federal Circuit held that domestic manufacturing is not required.

The Federal Circuit reversed the ITC’s ruling, holding that the ITC was wrong to throw out Lashify’s complaint.

The Federal Circuit reasoned that the statute only requires a showing of “significant employment of labor or capital” within the United States with respect to the patent-holders patented products. Nothing in that language requires the “labor” or “capital” to be spent on domestic manufacturing capabilities, as the ITC had previously held in prior decisions. Likewise, the Federal Circuit stated that there is nothing in the statute that excludes the amount that a patent-holder spent on domestic sales, marketing, quality control or distribution.

Under the Federal Circuit’s decision, a patent-holder can satisfy the domestic industry requirement by showing, for example:

1. That the company has compiled a large enough stock of accumulated goods within the United States;
2. A significant amount of human activity within the United States for producing goods or providing the services in demand; or
3. A significant amount of human activity within the U.S. on sales, marketing, quality control, and distribution.
   

The Federal Circuit sent the case back to the ITC to determine whether Lashify had shown enough, under the new standard, to meet the domestic industry requirement.

Impact of the Lashify Decision.

The Lashify decision greatly expands who can file a patent action before the ITC—potentially including NPEs or patent trolls. As of March 5, 2025, the Lashify decision makes it easier for patent trolls to get their patent infringement claims in front of the ITC, even if they do not manufacture products within the U.S. and only have sales or marketing activities within the U.S., potentially including licensing activities. This could force a party accused of infringement by a troll to defend itself before the ITC, and risk having an exclusion order issued against its products.

While the Federal Circuit’s Lashify decision will likely be challenged, the ITC will likely see a surge of complaints from companies that previously would not have been able to satisfy the economic domestic industry prong. 

Further, the Lashify decision comes shortly after another recent decision from the Federal Circuit that also made it easier for potential patent trolls to get their case before the ITC.

In the Wuhan Healthgen decision dated February 7, 2025, the Federal Circuit held that a patent holder’s relatively small investment within the United States was enough to satisfy the domestic industry prong. Wuhan Healthgen Biotechnology Corp. v. Int'l Trade Comm'n, 127 F.4th 1334, 1339 (Fed. Cir. 2025). The Court held that, even though it was “relatively inexpensive for Ventria to develop and produce its patented product,” all of its research investment happened within the U.S. Despite that the company’s research costs in the U.S. were fairly low, the U.S. costs represented a significant portion of the company’s overall costs, including foreign production costs, and the U.S.-based investments were high compared to revenue. The Federal Circuit stated that “a finding of domestic industry cannot hinge on a threshold dollar value or require a rigid formula” and instead requires “a holistic review of all relevant considerations that is very context dependent.” In other words, even a relatively small investment in the U.S. can suffice, if that investment is “significant” compared to other metrics.

Both of these decisions make it easier for companies that may not have particularly strong ties to the United States to get cases before the ITC. This makes it more likely that such parties will utilize the ITC as a venue for raising patent-infringement disputes.

As things stand, the Lashify and Wuhan Healthgen decision make it easier for NPEs, potentially including trolls, to use creative arguments to get their claims of patent infringement in front of the ITC. This carries a threat that U.S. importers will have to deal with an increased number of patent infringement claims, and may risk an exclusion order from the ITC, shutting down imports of certain products.

What this means for U.S. Importers:

As a result of the Lashify and Healthgen decisions, U.S. importers may face:

• Potential Increased risk of facing ITC Claims - More patent-holders may now more easily meet the requirements to file ITC complaints instead of (or in addition to) traditional lawsuits.
  
• Higher risk of costly import bans or other downsides of ITC actions – Responding to an ITC claim can carry significant burdens in terms of attorneys’ fees and investigatory compliance. Further, a potential remedy in ITC actions is an exclusion order that shuts down imports of your key products, even before a federal court case plays out. 
• Need for proactive IP strategies - Companies importing goods must assess their patent risk and be prepared to defend against ITC actions.
  

If your company is not already assessing its patent risk on an ongoing basis, this may be good motivation to start.