CHIPS and Science Act May Impact Section 337 Investigations at the ITC

President Biden recently signed into law the CHIPS and Science Act, which will provide billions of dollars in spending and tax credits for companies to manufacture semiconductor chips in the United States.^[1] The new law may impact both the domestic industry and importation requirements in Section 337 investigations at the U.S. International Trade Commission, potentially benefitting complainants and respondents alike.

Under the economic prong of the domestic industry requirement, the ITC mandates that the patent holder, or “complainant” in ITC parlance, make significant investments in the United States in a product that practices the asserted patent.^[2] The investments are limited to those in plant, equipment, labor, capital, engineering, and research and development for the product at issue. Companies with manufacturing activity exclusively overseas must identify some other source of domestic investment that fits within the foregoing categories, which can be challenging, depending on the nature of the company and its relative size in the industry.

With the enactment of the CHIPS and Science Act, however, semiconductor patent holders who manufacture chips abroad may now have a new source of investment to satisfy the ITC’s economic prong. Indeed, to the extent any such company establishes a domestic manufacturing presence, the economic prong may become much easier to satisfy. And these potential complainants may be able to assert manufacturing investments without having to wait the years-long process to finalize their new facilities, as a complainant can satisfy the economic prong when the domestic industry is merely “in the process of being established.”^[3] Thus, the effects of the CHIPS and Science Act on potential complainants may be felt in the relative near-term.

The second potential impact on Section 337 investigations would favor patent challengers, known as “respondents” at the ITC. Because the ITC has jurisdiction only over accused products that are sold for importation, imported, or sold after importation into the U.S.,^[4] fully domestic production of an accused product would foreclose the ITC’s jurisdiction to adjudicate a claim of infringement by that product. Thus, for any respondent previously accused of infringement for importing semiconductor chips, relocating the semiconductor manufacturing into the U.S. under the new law would raise the bar for complainants to satisfy the importation requirement. In such cases, complainants would need to establish importation in some other way, such as through exportation of the semiconductor chips for incorporation into downstream products that are then imported back into the U.S.

In the coming years, an increase in semiconductor patents asserted at the ITC, coupled with an increase in respondents asserting a lack of importation, will indicate the extent to which the CHIPS and Science Act has impacted domestic manufacturing and, consequently, Section 337 investigations.

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_{[1] https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/}

_{[2] 19 U.S.C. § 1337(a)(3).}

_{[3] 19 U.S.C. § 1337(a)(2).}

_{[4] 19 U.S.C. § 1337(a)(1)(B).}