Federal Circuit Chooses Quantity over Quality in Fight over Electro-Mechanical Stimulation Device Patent

by Dennis Crouch

A discussion of Lelo v. USITC and Standard Innovation Corp. (Fed. Cir. 2015):

The US International Trade Commission (USITC) provides an alternate/additional forum for asserting patent rights. Unlike district court, the USITC is not empowered to award damages for past infringement but can only enjoin future importation of infringing articles through what is known as an exclusion order.  Although limited, these exclusion orders can carry substantial power – simply because so many high-tech products sold in the U.S. are manufactured abroad.

The Congressionally designated purpose of the USITC is to protect U.S. industry.  In the IP context, this purpose has been implemented as a requirement that USITC patent assertions be associated with a domestic industry.  Under Section 337(a) of the Tariff Act of 1930 (as substantially amended), “with respect to the articles protected by the patent,” the patentee must show that there is, within the U.S.:  “(A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial investment in its exploitation, including engineering, research and development, or licensing.” 19 U.S.C. § 1337(a)(3).  To be clear, although the USITC requires a domestic industry related to products covered by the patent, there is not requirement that the patentee be a U.S. company.

StandardInnovationCorpHere, the owner of the asserted U.S. patent No. 7,931,605 is the Canadian company Standard Innovation Corporation.  The invention covers an “electro-mechanical sexual stimulation device to be worn during intercourse.” The Federal Circuit euphemistically identifies this as a “kinesiotherapy device.”

Standard Innovation has its products manufactured in China, although the company does use some U.S. sourced components (such as the backbone material, rubber, pigment, and control-chip wafer). The manufactured product is then shipped worldwide, including to the U.S. where a wholly-owned U.S. subsidiary distributes the product.

The question on appeal is whether a domestic industry exists under the law.  The ALJ first deciding the case found “no,” but the Commission disagreed. On appeal, the Federal Circuit has sided with the ALJ that no domestic industry exists.

In reviewing USITC decisions, the Federal Circuit generally reviews questions of law de novo but gives substantial deference to factual conclusions (substantial evidence standard).

The court’s reasoning here is somewhat odd — that the statute requires a quantitative analysis of the amount of domestic industry that was not provided by the USITC.

Quantitative Analysis: As mentioned, the domestic industry requirement requires more than an iota of domestic industry – rather  the statute requires “signficant” or “substantial” industry.  According to the court – those heightened requirements are properly interpreted as requiring a quantitative analysis:

All of the foregoing requires a quantitative analysis in order to determine whether there is a “significant” increase or attribution by virtue of the claimant’s asserted commercial activity in the United States.

Rather than conducting a full analysis of domestic industry investment, the USITC simply found that some of the component products were “critical” aspects of the final product.  For example, “the backbone material specifically allowed for beneficial flexibility and resilience, [and] the microcontrollers enabled the devices to function as a vibrator [with multiple modes]”.

On appeal, the Federal Circuit rejected these “qualitative elements” – finding that the statute requires a quantitative analysis of the impact on domestic investment and employment.

= = = =

The USITC argued that its qualitative analysis was in parallel to that done in the prior case of Certain Male Prophylactic Devices, Inv. No. 337-TA- 546, USITC Pub. 4005 (June 21, 2007) (patent at issue).  However, the court found that it didn’t fit. That is, the prior decision was appropriately characterized as quantitative in nature.

31 thoughts on “Federal Circuit Chooses Quantity over Quality in Fight over Electro-Mechanical Stimulation Device Patent

  1. 7

    For an electro-mechanical sexual stimulant device, quantity should be more important than quality.

  2. 6

    Just 101 it, right Malcom?

    Directed to the abstract idea of vibration. Inner and outer arms with a connecting portion are at least as ancient as the hokey-pokey and tear drop shapes are as old as the tears Eve shed while being ushered out of the Garden… accordingly the arms and connecting portion do not add substantially more to the abstract idea.

    link to google.com

  3. 5

    Perhaps more of an electoral stimulant than a electro one…

    A little OT (political, albeit still related to IP), but when even the liberal side is taking shots at the executive who ran under a plank of “open government (but with the least open government ever)”:

    “If the president is so confident it’s a good deal, he should declassify the text and let people see it before asking Congress to tie its hands on fixing it,” Warren said in the interview with the Plum Line blog.


  4. 4

    How do you do a quantitative analysis of domestic industry? Is this decision a prelude to the CAFC reversing itself (severely limiting the scope of the statute in the process) and saying that a licensing program doesn’t constitute a domestic industry?

    1. 4.1

      Dear “I still don’t get it,”

      I don’t get your reference to licensing programs.

      If anything, since licensing will be more “all-encompassing,” they would seem to more easily pass as a domestic industry on a quant analysis.

  5. 3

    There has always been a tension between the protectionist jurisdiction of the ITC and the USA’s international obligation to provide ‘national treatment’ under Article 2 of the Paris Convention.
    link to wipo.int

    E.g. nationals of other countries “shall have the same protection” as US nationals, and “the same legal remedy against any infringement of their rights”.

    And “no requirement as to domicile or establishment in the country where protection is claimed may be imposed upon nationals of countries of the Union for the enjoyment of any industrial property rights.”

    I have difficulty seeing a distinction between requiring a domestic industry and not imposing a requirement as to establishment in the USA.

    By tightening the prerequisites for foreign inventors and companies to use the ITC, the Federal Circuit undermines US efforts (e.g. under TRIPs) to insist that foreign countries should enforce the intellectual property of rights of US inventors and companies.

    1. 3.1

      Now it seems that American R&D is protected from imports to the extent it generates patents that are licensed and actually cover articles made, used or sold in the United States..

      American manufacturing is protected against imports to the extent that such manufacturing is covered by US patents.

      But American use is not covered when related R&D is conducted outside the United States or when related manufacturing is conducted outside the United States.

      This does seem like discrimination – in favor of American jobs and American inventors.

      Now what is the purpose for the Patent Clause in the Constitution? To provide incentives for non US inventors? Hardly. In fact, there may be no authority under this clause to issue patents to foreign inventors. At best, foreign inventors are protected only to the extent treaties call for their protection.

      So we have a treaty that provides equal protection for all patentees. But the 337 denies equal protection.

      What to do?

      Well for one, withdraw from the treaty seems like a first step.

      1. 3.1.1

        Ned: “So we have a treaty that provides equal protection for all patentees. But the 337 denies equal protection. What to do? Well for one, withdraw from the treaty seems like a first step.”

        Yeah, brilliant idea Ned.

        No patents for US inventors in any other country of the world.

        The whole world will be free to steal US inventiveness and pay nothing. To freeload on the benefits of the R&D in which US corporations invested $$$. Free to sell everywhere in the world. (As long as they don’t import back into the USA.)

        And since the US corporations had to pay those R&D dollars, and no-one else has that burden, everyone will be able to undercut the more expensive US products in every country of the world. Everyone will make a killing. (Except in USA.)

        Yeah, that’s bound to be a huge incentive to US inventors and investors to do the work and invest the money. It’s bound to be giant leap to promote progress in science and the useful arts.

        Go for it!


          Or, Babel, we might insist on a world patent granted by the US patent office. With respect to such a patent, R&D and manufacturing anywhere in the world would be “domestic.”

          Wouldn’t it be lovely. Why do our IP negotiators always think small?


          Even if we withdraw from the treaty, couldn’t we just file patent applications in other countries? The timing would become a problem (no more 30 months to decide what to do), but you could still file for patents.


            Article 2 of the Paris Convention is the reason why other countries have to grant patent protection to US nationals.

            In practice, I agree that if the US withdrew from Paris, other countries might still be willing to to grant you patents. But the conditions on which they would be prepared to do so would probably vary from country to country, e.g. based on bilateral treaties instead.

            So for example, it would be much easier for other countries to say that a US patentee could only enforce his patent if he sets up a domestic industry in the country concerned.

            Actually, withdrawing from Paris would be enormously difficult. The TRIPS Agreement says that in order to be a member of the World Trade Organisation, you have to adhere to Paris. So either you’d need to leave the WTO, or renegotiate it. Bear in mind that the USA was one of the chief proponents of the WTO and TRIPS, because of the huge trade benefits they bring.


              IPMan, there are some who do not view NAFTA or WTO in a fond light.

              What is good for the USA is the best policy for the USA. Do you agree or disagree?


                We’re clearly not going to agree about what’s good for the USA, Ned.

                I would say that allowing other countries the freedom to discriminate against US inventors was not good for the USA. But of course, you are free to disagree with that.

                1. IP Man, Most countries discriminate against the US in all kinds of different ways.

                  I realize that the Paris Convention is a good idea from the point of view of filing patent applications abroad. But, regarding rights, that is whole different kettle of fish. Every country is different from every other country.

                  If one wants to make the field level from an enforcement of rights point of view, we have to have one patent and one court system. Thus, I propose the unilateral world patent where a US patent covers the entire world, causes of action are transitory and may be tried in US courts, and where our negotiators jobs will be to extend the effect of US court judgments so that they will be given full faith and credit in other countries. Regardless, the judgment should be enforceable against assets in the US.

                  (We might even give the likes of the Chinese the right to a trial by jury when defending against a patent lawsuit filed by a Japanese company in a district court in Hawaii for infringement in the Philippines.)

                  Some might say that a transitory cause of action for patent infringement might violate international law. I might agree with them. But would such a statute be unconstitutional?

                2. “But would such a statute be unconstitutional?”

                  Yes, in every country except one.

                  Of course, the rest of the world might not agree to Ned’s Law immediately. For some reason, not everyone in the world has yet been persuaded of the superiority of the US way of doing things. It might take a while.

                  So while you work on persuading them, how do you propose to prevent discrimination against US inventors in the meantime?

                  Let me suggest an interim alternative, just as a stop-gap while you try to get your proposal accepted. How about a treaty which says that all countries should treat the nationals of other countries the same as they treat their own nationals?

                  True, in any given country X, US nationals won’t be treated the same as they would be in the USA. But they will be treated the same way as nationals of that country X (and the same way as nationals of country Y, and country Z). It’s a level playing field of sorts.

                  Of course, to get other countries to agree even to that, you might need to offer to do the same in the USA.

                  And you’ll need to think of a name for this treaty. Tell you what, you could name it after a European capital city.

                3. In the “6-is-a-genius-because-he-agrees-with-me” manner:

                  Wouldn’t it be lovely. Why do our IP negotiators always think small?

                4. Treaties do not elevate, they only set a floor.

                  Everyone knows that a world patent and a world court system to implement such a patent is the ultimate objective. We can lead the way as we have a court system in place — although the bar is doing its best to dismantle it with IPRs and the like.

                  I am not really suggesting that we do away with the Paris Convention. I do think that it does not apply to remedies and the like.

                5. “Everyone knows that a world patent and a world court system to implement such a patent is the ultimate objective.”

                  Do they?

                  “We can lead the way as we have a court system in place…”

                  Just about every patenting country has a court system in place. I’ve direct first-hand experience of about half a dozen of the major ones – including USA – so I feel able to make comparisons.

                  In my experience, there is no perfect court system anywhere. They’re different, but they all have good points and bad points. Including USA.

                  As to leading the way, Europe is much further ahead with plans for a Unified Patent Court covering 25 countries. It will have good points and bad points. For example, some criticisms are:

                  – the likely cost will deter small companies and individual inventors. (But it will be 10 times cheaper than USA).

                  – forum shopping (as in the USA).

                  On the other hand, one good point is that there will be specialist judges with technical qualifications and training in patent law – not typically found in US district courts.

                  “I am not really suggesting that we do away with the Paris Convention. I do think that it does not apply to remedies and the like.”

                  Have you read Article 2 yet?

      2. 3.1.2

        “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”

        I don’t see any thing like “only in the U.S.” in there anywhere Ned.


          Why of course you do not, Les. I suspect you have never read the following words. From whence they hence?

          “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”


            Ned – Not only have I read them, I can sing them School House Rock style and recite them garbled Yang style (E Pleg nesta) as in the Omega Glory episode of Star Trek TOS: link to youtube.com.

            I fully understand the one named Kirk.

            It still doesn’t limit the purpose of the patent system to promotion of science and the useful arts only in the U.S.

  6. 2

    The operative word in Dennis’ summary is “euphemistically” and his primary observation is “. . . it didn’t fit.”

    “The present invention relates to the field of sexual paraphernalia.” US Pat. 7931605.

    IOW, another male-conceived G-spot stimulator. A male from Canada, no less. Talk about euphemisms. . . “Canada” is a euphemism for “sex-obsessed.” Can’t believe all the sex-related patent work I did while employed there. No wonder the permafrost is melting.

    Never did figure out whether dildo patents promote the sciences or the arts, but then who cares as long as their retainer check (cheque) doesn’t bounce?

    1. 2.1

      Regardless of utility, those independent claims are obvious junk in view of the “problem to be solved here” and in view of many earlier attempts to “solve” that problem over the eons. The human hand is certainly analogous art here (no pun intended).

      Also interesting is that the ITC found that “the microcontrollers” to be “critical” when there is no mention of micocontrollers or processors or even controllers in any of the claims.

  7. 1

    DC: the USITC simply found that some of the component products were “critical” aspects of the final product.

    The problem with the ITC’s “criticality” approach is that it greatly expands what falls under the statute. For starters, any non-optional element of a patent claim can be deemed to be “critical to the invention”, even when that element is virtually valueless and/or ubiquitous and nobody would reasonably deem the sourcing to represent a “substantial investment.” Consider, e.g., the recitation of the term “salt” in a claim.

    It’s interesting that the CAFC appeared to recognize the bait-and-switching in this instance but completely muffed an even easier call regarding the same terminology in a different statute (Promega v. Lifetech — soon to be reversed).

    1. 1.1

      Expands? Or simply emphasizes that parsing and not taking claims as a whole is gen erally not a great idea with patent law?

      1. 1.1.1

        As I read it, the ITC’s “criticality” approach doesn’t relate to the patent claim. The 337 statute is protectionist, aiming to protect a domestic industry.

        OK, so first of all there’s a threshold question: does the alleged infringer’s imported product actually infringe the patent claim? If no, that’s the end of the case.

        If yes, then the next question moves on to whether the patentee’s competing product (not the claimed invention, not the infringement, but the patentee’s physical product) supports a substantial domestic industry.

        In that second question, I assume it’s irrelevant whether a particular feature of the product is critical to the claim. Does it even need to appear in the claim at all? This is an issue about protectionism, not patent law.

        So what matters (according to the ITC approach) is whether a component of the patentee’s product is critical to the impact on the domestic industry. And that’s where the FTC disagreed. They said there needed to be a more quantitative analysis of the impact on the domestic industry.


          Except of course IPMan, that an actual product is not required for a domestic industry… (and isn’t that really the – or at least one major – bone of contention?)


            An actual product was the issue in this case.

            The bone of contention to me is that the ITC remedy is contingent on the patentee having a domestic industry, when Paris says there should be no requirement for establishment in the USA.

            The USA would be the first to object if another country discriminated against the USA in a similar way. It would go straight into the Special 301 Report.


          IPMan: So what matters (according to the ITC approach) is whether a component of the patentee’s product is critical to the impact on the domestic industry. And that’s where the FTC disagreed. They said there needed to be a more quantitative analysis of the impact on the domestic industry.

          You make some fair points, IPMan, but I disagree with your statement about “what matters”.

          The bottom line — and I think we both agree here — is that focusing on the “criticality” of a component of the imported and infringing product (whether that component is recited in the patent claim or not) is a mistake. Instead (and I’m not sure that you agree with this but you can let me know ) it’s the substantial nature of the patentee’s domestic investment that matters and that substantiality requires some sort of quantitative analysis.

          Consider: foreign company owns a US patent. The only “domestic industry” related to that patent is that the company sources US salt (NaCl) for use in their product. The amount of salt sourced by the company represents 0.0004% of the domestic salt industries output. It doesn’t matter that salt is “critical” to the functionality of the invention (whether recited in the claim or not). What matters is that the investment in a domestic industry is insubstantial.

          Query whether the “substantially” determination is affected by the patentee’s net worth or profits …


            What dark crevice did that crawl out of Malcolm?

            WAIT – stop. I don’t want to know.

            It is enough to note that your “idea” has no connection whatsoever with law or reality and let your “idea” go at that.

Comments are closed.