by Dennis Crouch
The Federal Circuit has affirmed a US International Trade Commission (ITC) determination that Wuhan Healthgen violated Section 337 through importation of clinical-grade recombinant human serum albumin (rHSA) products that infringe Ventria Bioscience’s U.S. Patent No. 10,618,951. Wuhan Healthgen Biotechnology Corp. v. International Trade Commission, No. 2023-1389 (Fed. Cir. Feb. 7, 2025).
The patentee in the case – Ventria / ExpressTec – is a small biotech company operating out of Junction City Kansas. Their asserted patent is directed to a cell culture media containing rHSA produced via plants genetically modified to include the human genes. The albumin is basically a protein food for growing human cells in artificial laboratory environments. Traditionally, the albumin came from animal sources, such as blood serum, but the plant process has some easy to identify benefits. A key feature of the patented invention is monomer purity. Ideally, the albumin will be in monomer form as opposed to forming dimers or other aggregated groups, and Ventria’s patent particularly requires “less than 2% aggregated albumin.”
Wuhan Healthgen has been competing in the market by supplying its own version of the product exported from its Chinese production facilities and Ventria took action – in the ITC seeking a trade exclusion order of the infringing product. The ITC largely sided with the patentee. In this post, I focus on the domestic industry requirement and particularly how it applies to small innovative US companies.
Domestic Industry Analysis: Section 337 requires showing “an industry in the United States, relating to the articles protected by the patent … exists or is in the process of being established.” 19 U.S.C. § 1337(a)(2). This involves both technical and economic prongs, with the economic prong requiring significant/substantial U.S. investment in plant and equipment, labor and capital, or exploitation through engineering, research and development, or licensing. 19 U.S.C. § 1337(a)(3).
In this case, the actual dollar values of U.S. investment was redacted in the briefing, but it is apparently small enough that Healthgen argued that it was too modest to reach the requirement of significant or substantial investment. The argument was strengthened by recognition that only one Ventria products (Optibumin) had enough nexus with the patent coverage — and so the substantial U.S. investment needed to be derived from activities associated with that single product.
In the appeal though, the Federal Circuit refused to focus on absolute dollar amounts, but rather concluded that qualitative factors demonstrated the significance of Ventria’s domestic operations.
In particular, the court noted that 100% of Ventria’s activities related to researching, developing, and commercially producing Optibumin occurred within the United States. This complete domestic focus proved compelling evidence that Ventria had established a meaningful U.S. industry, even if the total investment amounts were relatively small. The court explained that comparing domestic to foreign manufacturing costs to determine the percentage of additional value created by domestic operations yields a value-added metric of 100% in Ventria’s case.
That it may have been relatively inexpensive for Ventria to develop and produce its patented product does not alone preclude a finding that Ventria did in fact establish a domestic industry in that product. It is undisputed all of Ventria’s investments and activities related to researching, developing, and commercially producing Optibumin occurred within the United States. Comparing the cost of foreign to domestic manufacturing to determine the percentage of additional value created by domestic Optibumin operations in the final product yields a value added of 100%. The investment-to-revenue ratio can indicate whether an investment is significant and substantial. A high ratio signals the company is investing heavily in the industry despite comparatively low revenue, highlighting the industry’s importance and value to the company, which can be predictive of a significant market.
The court also looked at the high investment to revenue ratios — something that ordinarily suggests inefficient operations. But in this context the court found that they also indicated that Ventria was making substantial commitments to developing its domestic industry despite modest initial returns. As the court noted, this heavy investment relative to current revenue highlights both the industry’s importance to the company and its potential for future growth.
Healthgen cited to a prior Federal Circuit decision that “Qualitative factors cannot compensate for quantitative data that indicate insignificant investment.” Lelo Inc. v. Int’l Trade Comm’n, 786 F.3d 879 (Fed. Cir. 2015). In Lelo, the patentee argued that its purchases of “crucial” components from U.S. suppliers satisfied the domestic industry requirement, even though these purchases represented relatively modest amounts. The Federal Circuit rejected this approach, holding that the significance of investments must be demonstrated through quantitative analysis – actual numbers showing meaningful investment in plant, equipment, labor, or capital. The mere fact that purchased components were “crucial” or “critical” could not overcome weak quantitative showings.
In Wuhan Healthgen, the Federal Circuit distinguished Lelo by suggesting that Ventria’s domestic industry showing rested on legitimate quantitative metrics rather than purely qualitative factors. The court pointed to two specific comparisons used in Lelo: the ratio of domestic to total investments, and the measurement of value added by domestic operations. Because Ventria could show that 100% of its investments were domestic and that all value was added within the U.S., the court reasoned this provided the kind of quantitative analysis that Lelo required.
The odd aspect of this outcome is that the “significant” and “substantial” investment requirements of domestic industry appear to now be moved to a purely subjective where the the significance of the US investment is tied directly to the overall project expenditure — is unmoored from any larger framework. . .
The odd aspect of this outcome is that the “significant” and “substantial” investment requirements of domestic industry appear to now be moved to a purely subjective analysis where the significance of the U.S. investment is tied directly to the overall project expenditure — unmoored from any larger framework of what constitutes meaningful domestic industry activity. By focusing solely on the percentage of domestic versus total investment, rather than examining whether the absolute investment amounts demonstrate real industrial presence, the Federal Circuit’s approach could theoretically find a domestic industry based on very minimal U.S. operations, so long as they represent the majority of a company’s activities relevant to the patented invention. This strained reading the statute reflects the Federal Circuit’s desire to preserve Section 337’s availability to smaller domestic industries.
Broader Implications for International Trade: In writing this blog post, I read an interesting 2022 article by Professors Sean Pager and Michael Sant’Ambrogio arguing that Section 337 of the Tariff Act could fill a void left by the Supreme Court’s narrowing of the Alien Tort Statute. Trading Up: Is Section 337 the New ATS?, 107 Iowa L. Rev. 1159 (2022). The Federal Circuit’s decision in Wuhan Healthgen provides a direct example of several advantages that Pager and Sant’Ambrogio identified regarding Section 337 actions. Most notably, the case demonstrates how Section 337’s in rem jurisdiction over imported goods allows the ITC to reach foreign conduct that might otherwise escape the scrutiny of US Courts. While Healthgen challenged the Commission’s authority to regulate conduct occurring entirely in China, the Federal Circuit affirmed the ITC’s power to block imports based on unfair acts abroad that harm domestic industries.
The article notes as a reminder that Section 337 actions can also assert trade secrecy violations. See TianRui Grp. Co. v. Int’l Trade Comm’n, 661 F.3d 1322, 1335 (Fed. Cir. 2011) (steel railway wheels produced in China using proprietary processes stolen from a US company). Also note that a pending case before the U.S. Supreme Court is focusing on whether the Defend Trade Secrets Act of 2016 (DTSA) is designed generally to have a strong extraterritorial effect. See, Dennis Crouch, The Extraterritorial Reach of Trade Secret Law, Patently-O (Jan 2025).