[00:00:00] Speaker 01:
submitted.

[00:00:03] Speaker 01:
The next case for argument is 23-1245, Rashify versus ITC.

[00:01:07] Speaker 01:
Good morning, please proceed.

[00:01:09] Speaker 06:
Good morning.

[00:01:09] Speaker 06:
May it please the court, Sayina Shamilov, on behalf of the appellant, Lashify.

[00:01:14] Speaker 06:
There are two issues here on appeal.

[00:01:16] Speaker 06:
There's one with respect to economic industry determination below, and one with respect to claim construction issue.

[00:01:22] Speaker 06:
I'd start with economic industry first, if it's all right, and then end with a claim construction issue.

[00:01:27] Speaker 06:
On the economic industry issue, it's really at issue the language of Section 337A3B,

[00:01:34] Speaker 06:
It says domestic industry exists if you can show substantial employment of labor or capital.

[00:01:41] Speaker 06:
Now, the way the commission found that there was no showing of substantial investment in labor or capital for two reasons, predominantly.

[00:01:50] Speaker 06:
One, it excluded sales and marketing investments, and then it excluded warehouse and distribution investments.

[00:01:59] Speaker 06:
Now, there's nothing all solely based on the wrong interpretation and reading of the statute.

[00:02:05] Speaker 06:
There's nothing in the language, it's plain language, it's very clear.

[00:02:08] Speaker 06:
There's nothing in the language that says you have to exclude certain things.

[00:02:13] Speaker 06:
Now, the commission said you have to exclude sales and marketing at all from labor and capital unless you have to show some substantial other investments.

[00:02:22] Speaker 06:
There's nothing in the statute supporting that.

[00:02:24] Speaker 06:
analysis.

[00:02:25] Speaker 06:
With respect to warehouse and distribution, the Commission's analysis was, you cannot consider those investments because Lashawa is not a manufacturer of domestic products in the U.S.

[00:02:37] Speaker 06:
Again, there is nothing in the statute.

[00:02:40] Speaker 06:
with respect to exclusion of those.

[00:02:43] Speaker 06:
Now below, and even here on the appeal, there's no dispute that if you would consider the categories that were excluded, that the investments were substantial.

[00:02:54] Speaker 02:
So I think that there's no dispute here.

[00:02:58] Speaker 02:
Was that an issue that was

[00:03:03] Speaker 02:
litigated in the ITC before the ALJ or to the commission?

[00:03:08] Speaker 02:
Because I'm trying to figure out whether if we concluded that the categorical exclusion of the warehousing and the marketing was incorrect, whether we outright reverse on economic prong or whether we remand for consideration of the significance question.

[00:03:32] Speaker 06:
Understood, Your Honor.

[00:03:34] Speaker 06:
You will reverse the termination.

[00:03:35] Speaker 06:
And the dissent did it correctly.

[00:03:37] Speaker 06:
If you look at the two commissioners' dissent opinion, there was no blow in front of the ALJ.

[00:03:42] Speaker 06:
The other side never argued that the investments were not substantial.

[00:03:47] Speaker 06:
The only argument was a categorical exclusion of sales and marketing and warehouse and distribution expenses based on erroneous reading of this language of the statute.

[00:03:57] Speaker 03:
So if this could- Wouldn't the ALJ or commission still have to make an affirmative determination?

[00:04:03] Speaker 06:
Because the below, the LDN, the commission, there is nothing in the opinions that says that the investments are not substantial.

[00:04:14] Speaker 06:
They've looked at them.

[00:04:15] Speaker 06:
There was a determination.

[00:04:16] Speaker 06:
They said, look.

[00:04:17] Speaker 03:
They made no determination.

[00:04:19] Speaker 03:
They never evaluated, I guess, the strength of that data.

[00:04:22] Speaker 03:
And so it's unclear whether we could say, therefore, there's definitely a domestic industry.

[00:04:31] Speaker 06:
But I think in the absence of a challenge that was not substantial, there was no challenge below at all to the substantiality of the investments.

[00:04:40] Speaker 06:
There was no basis for the Commission to say the investments are not substantial, and even just commonsensically.

[00:04:48] Speaker 06:
It's in the record and in front of the commission, the investments increased year over year.

[00:04:52] Speaker 06:
It's millions of dollars of the investments in the United States.

[00:04:56] Speaker 01:
So the decision below was solely categorical exclusion.

[00:05:00] Speaker 01:
Can I ask you unsubstantial?

[00:05:03] Speaker 01:
What is the test that you would advocate or that you think the commission has adopted?

[00:05:10] Speaker 01:
I mean, are we looking exclusively at you, at the one company?

[00:05:15] Speaker 01:
Do we look at it industry-wide?

[00:05:18] Speaker 01:
Because none of that analysis was done here, was it?

[00:05:22] Speaker 06:
Correct, but I think there is the substantial, I mean, the commission before has done many analyses, right, on that issue.

[00:05:31] Speaker 06:
And then this court, for example, in Lilo, talked about quantitative and qualitative factors you would take into consideration.

[00:05:38] Speaker 06:
I think if you were determining substantiality, you would look at the nature of the product, right, the nature of the industry, the nature of the company, then you look at the total number of

[00:05:49] Speaker 06:
dollar figures that are put in quantitatively and see, for example, do they increase year over year, right?

[00:05:56] Speaker 06:
Or the, you know, the court said there is no particular benchmark or it's not a bright rule of determined substantiality, but there are ways to determine whether the dollar figures themselves were substantial

[00:06:06] Speaker 01:
Well, I guess I'm a little troubled by just looking at whether the dollar is substantial, particularly in a case such as your client, where you've got a relatively small business.

[00:06:15] Speaker 01:
So dollars could be in substantial themselves, but a substantial portion of the value of the company.

[00:06:23] Speaker 01:
And is that the test that you're looking at?

[00:06:25] Speaker 06:
That's one test.

[00:06:26] Speaker 06:
I mean, I think there are several ways of how you can quantitatively look at whether a dollar figure is substantial.

[00:06:33] Speaker 01:
because they'd ever challenge that.

[00:06:34] Speaker 01:
So just if you're right on domestic industry and we agree with you, then it's done.

[00:06:40] Speaker 06:
I think that's right.

[00:06:43] Speaker 06:
There was no challenge at all as to substantiality below.

[00:06:47] Speaker 01:
I wanted to ask you, in your view, would there ever be a situation in which sales and marketing expenses alone can show economic domestic industry?

[00:06:57] Speaker 06:
I don't know the exact answer to that question, Your Honor, because I think it will depend on the nature of the product and the nature of the business and what type of marketing, for example, it is, right?

[00:07:05] Speaker 06:
Like if it's pure traditional marketing or marketing where they teach a particular aspect of the product of how to use because it's now a new product on the market and people just don't know how to use it correctly.

[00:07:17] Speaker 06:
I don't know, but that's not an issue in this case.

[00:07:20] Speaker 06:
for this court really needs to get to, because undisputedly, this case does not involve only sales or marketing expenses.

[00:07:28] Speaker 06:
There are different other expenses that were at issue and that the court, that the LJ and the commission addressed and considered bullet.

[00:07:36] Speaker 01:
In your view, what does capital mean?

[00:07:39] Speaker 01:
How do we define capital?

[00:07:41] Speaker 06:
I think capital is costs and expenses and investments that relate to stock of product and how you move that stock of product.

[00:07:50] Speaker 06:
I base that answer on some language that this court included in the legal opinion, for example, when talking about capital investments.

[00:07:58] Speaker 01:
So a stock of accumulated goods?

[00:08:02] Speaker 06:
It's costs associated with stock of accumulated goods and moving the stock of accumulated goods.

[00:08:07] Speaker 01:
For example, I think that- So it doesn't include sales and marketing expenditures.

[00:08:14] Speaker 01:
In capital, that would all go in labor?

[00:08:16] Speaker 06:
I think that would go in labor.

[00:08:18] Speaker 06:
For the capital, things like flight shipping.

[00:08:21] Speaker 06:
And for example, the things that we've included below in the capital expenditures would be something that you

[00:08:30] Speaker 06:
would consider that being part of it.

[00:08:32] Speaker 03:
Is it your view that sales and marketing would always fall within labor?

[00:08:37] Speaker 03:
Or are there some types, subtypes, of sales and marketing that actually don't fall within labor or capital?

[00:08:49] Speaker 03:
The reason why I ask is because obviously we all know about the lead up to the 1988 amendment and clearly

[00:08:59] Speaker 03:
sales and marketing was put into, you know, subsection C and then yanked out.

[00:09:06] Speaker 03:
And so sales and marketing, it's suggesting that sales and marketing maybe by itself isn't good enough.

[00:09:12] Speaker 03:
But does that suggest that maybe there are some kinds of sales and marketing that just don't fit within labor or capital?

[00:09:24] Speaker 06:
There might be perhaps some sales or marketing expenses that may not be labor or capital, depending on a particular company's business.

[00:09:33] Speaker 02:
If you just put out a mass internet blast repeatedly, which costs you almost nothing, but is serious, serious marketing to 100 million people, why would that not be sales and marketing, and yet not be significant labor or capital?

[00:09:50] Speaker 02:
Which would be a helpful point for you

[00:09:53] Speaker 02:
in distinguishing what happened in the legislative history leading to the 88 amendments, right?

[00:09:59] Speaker 06:
I think if the sales and marketing, like in the example in this hypothetical, were minimal, then you would fail the substantial, the substantiality tests, right?

[00:10:09] Speaker 06:
So the way the statute is written and here with respect to what happened with C doesn't necessarily.

[00:10:14] Speaker 03:
Am I hearing you agree with Judge Toronto?

[00:10:16] Speaker 03:
Because Judge Toronto basically put a finer point on what was going on behind my question.

[00:10:22] Speaker 06:
I might have missed the point.

[00:10:23] Speaker 02:
You want to say in diminishing the significance or the inferences to be drawn from the 1988 legislative history, namely what Judge Chen mentioned, there was once a reference to sales and marketing and then it was, I think the technical expression was yanked out.

[00:10:44] Speaker 02:
And by saying, well, removing all

[00:10:49] Speaker 02:
that is removing a provision that would cover all sales and marketing is not the same as precluding some of that when there is significant, the word is significant in this provision, right?

[00:11:03] Speaker 02:
Not substantial, right?

[00:11:04] Speaker 02:
Significant labor and capital.

[00:11:07] Speaker 02:
And so it's useful to think about whether there is a category

[00:11:12] Speaker 02:
of significant sales and marketing that wouldn't be labor and capital.

[00:11:18] Speaker 02:
And that was my internet example.

[00:11:20] Speaker 06:
Understood, Your Honor.

[00:11:22] Speaker 06:
I think the reason why I might have answered not in the best way is that I don't think that yanking out the sales and marketing from C affects what you can consider as labor or capital as part of the B language, which isn't referred to that.

[00:11:38] Speaker 06:
And moreover, if you would consider the legislature of history,

[00:11:42] Speaker 06:
The history said you can't rely on sales and marketing alone.

[00:11:45] Speaker 06:
Now, if you have sales and marketing plus others, I think there, again, in our situation, and maybe there are others that would be slightly different, but in our situation, you can look at sales and marketing along with other things.

[00:11:59] Speaker 02:
You don't need to parse it.

[00:12:00] Speaker 02:
You mentioned a couple of times in your brief the, I don't know, appealing fact that your principal was the inventor.

[00:12:12] Speaker 02:
Why does that matter under the statutory provisions we're talking about?

[00:12:18] Speaker 06:
I think that if I understood the question correctly, I think it matters because when you determine, once you've allocated the labor and capital expenses under subsection B, you then have to look at them whether they're substantial, right?

[00:12:32] Speaker 06:
And then you work quantitatively and qualitatively, for example.

[00:12:35] Speaker 06:
But you can't do that in the vacuum.

[00:12:37] Speaker 06:
You have to look at what is this company and how did it came to be?

[00:12:40] Speaker 06:
Because the whole point of the statute is protect domestic companies.

[00:12:45] Speaker 06:
The situation here, we have one woman who got an idea and then worked around the clock, who ended up the inventor, to start this company up, right, and then filed the patents and got the patents and now has a company, a real company that not just... Is that what you consider a qualitative factor?

[00:13:03] Speaker 06:
I think it's part of the qualitative factor.

[00:13:05] Speaker 06:
It's also part of the quantitative factor because you have to take into consideration quantitatively what is the nature of the business and the product.

[00:13:13] Speaker 06:
And I'll give you one example of that, right?

[00:13:15] Speaker 06:
For example, the commission says, well, this case is nothing like the percussive equipment case because there, there was, you know, repair was, you know, the company was doing repair, for example, under warranties after that.

[00:13:31] Speaker 06:
And here, there is no repair.

[00:13:34] Speaker 06:
But you have to take into consideration the nature of the product.

[00:13:36] Speaker 06:
We're talking about one-use lashes that you put on, you wear them for a few days, and you dispose them.

[00:13:42] Speaker 06:
There will be no repair.

[00:13:44] Speaker 06:
So you have to take into consideration how the company came to be and what their business is and what they're doing to determine that.

[00:13:52] Speaker 03:
Is it fair to say that the inventor's hero journey, that's really more relevant to the qualitative factor, not the quantitative factor?

[00:14:01] Speaker 06:
I think generally, yes.

[00:14:04] Speaker 03:
Because I'm trying to isolate out.

[00:14:08] Speaker 03:
what we need to think about over here on this side of the bench when it comes to interpreting the statue.

[00:14:14] Speaker 03:
And you've got a story.

[00:14:15] Speaker 03:
You've got a nice sounding narrative.

[00:14:18] Speaker 03:
And I'm trying to figure out, well, how is that really actually relevant?

[00:14:22] Speaker 03:
What if this inventor wasn't someone from the United States, from California, and tried to grow the business here in the United States, but was a woman in China, in Shanghai?

[00:14:36] Speaker 03:
everything there and now we're left with looking at sales and marketing, warehousing costs, things that probably any importer would have to face.

[00:14:50] Speaker 03:
Then how do we think about that kind of a fact pattern?

[00:14:54] Speaker 03:
Is it your view that well then that particular kind of fact pattern

[00:15:00] Speaker 03:
would have to go down on the qualitative factor, but maybe because the quantitative elements are just as strong as yours, that that person, that company would satisfy the quantitative factor?

[00:15:14] Speaker 06:
I think that in any scenario under the statute, you have to look at what is done on labor capital expenses, dollar figures that happen here and determine where the substantial, and then look at them qualitatively.

[00:15:28] Speaker 06:
as to the nature of the industry.

[00:15:30] Speaker 03:
So getting back to my fact pattern, what's the answer?

[00:15:32] Speaker 06:
Well, in that case, under quantitative determination, if in that hypothetical, there was the same amount of expenses in the domestic industry as here, I think quantitatively in that hypothetical, there would be substantial investments.

[00:15:47] Speaker 06:
Now, then qualitatively, the court may decide differently and say, well, the industry is different, and the qualitative analysis may be different.

[00:15:57] Speaker 06:
But this is a situation here.

[00:15:58] Speaker 03:
To what degree are we here today, is the court confronted with the qualitative factor question?

[00:16:07] Speaker 03:
Or is it merely that never really got fully ventilated and what this case on appeal is just narrowly about is the quantitative factor and whether it was correct or incorrect under the statute to exclude sales and marketing, warehouse costs, et cetera?

[00:16:24] Speaker 06:
Well, I think that the majority's opinion below does not talk about neither quantitative nor qualitative factors at all.

[00:16:31] Speaker 06:
I think the substance of that, you can see that it probably focused on quantitative without calling it that way.

[00:16:40] Speaker 06:
But if you look at the dissent opinion, and there was again no challenge to the qualitative aspects below at all on the domestic industry, it was all about

[00:16:48] Speaker 06:
just wholesale exclusion of categories of information before any analysis.

[00:16:54] Speaker 06:
So I think I don't think that needs to be the issue in front of the court is was there a substantial investment on the B if you take appropriate

[00:17:03] Speaker 06:
you know, if you read the language correctly, and that would include both quantitative and qualitative analysis, and the descent did it correctly below.

[00:17:11] Speaker 06:
See that I'm out of time.

[00:17:12] Speaker 06:
This one quickly.

[00:17:14] Speaker 01:
Oh, yeah, we should cover climate construction.

[00:17:19] Speaker 06:
I will be very brief there, Your Honors.

[00:17:21] Speaker 06:
I think the issue with the claim construction is this inclusion of the single entity requirement that then went and permeated all the infringement analysis and technical domestic industry analysis.

[00:17:33] Speaker 06:
The judge correctly determined that melting was not required, for example,

[00:17:38] Speaker 06:
And then that single entity was used later to say, well, melting is required.

[00:17:43] Speaker 06:
And single entity requirement is not an intrinsic record.

[00:17:47] Speaker 06:
It was plucked from a single dictionary.

[00:17:49] Speaker 06:
And there's nothing in the specification on your intrinsic record talking about that heat fusion requires merging or making of fibers into a single entity.

[00:17:58] Speaker 06:
All it required is connections that are resulting because you use heat.

[00:18:02] Speaker 03:
Just curious, hypothetically, if we were to send back the economic prom, but affirm the claim construction, and thereby saying that the technical prom wasn't met for the 984 patent,

[00:18:21] Speaker 03:
Do you still have, in your view, a legitimate case for the domestic industry requirement for the two design patents?

[00:18:31] Speaker 06:
Yes, Your Honor, because the technical domestic industry

[00:18:35] Speaker 06:
was not related to the claim construction issue.

[00:18:38] Speaker 06:
So the only thing is the economic.

[00:18:40] Speaker 03:
Sales, marketing, whatever expenditures that you think are labor and capital, there are sufficient amounts that are devoted to just the two design patents and not the 984.

[00:18:51] Speaker 06:
Correct, Your Honor.

[00:18:55] Speaker 06:
The allocation that we're appealing, the determination of allocations per patent was correct.

[00:19:00] Speaker 06:
So yes, if the claim construction is against us, but the economic industry is remanded back for the two design patents, those issues would be right for the resolution.

[00:19:09] Speaker 01:
On your challenge of single entity, what would you want?

[00:19:13] Speaker 01:
I'm having a hard time finding out what's wrong with that.

[00:19:16] Speaker 01:
Heat fusion is the centerpiece of all of this.

[00:19:19] Speaker 01:
you end up with a single entity when you fuse several things together.

[00:19:24] Speaker 01:
I guess I understood some of your arguments, but I didn't see how they played into the choice of the word single entity.

[00:19:32] Speaker 01:
They seem to be going around other issues, but not that one in particular.

[00:19:37] Speaker 06:
Yeah, so the way the single, so the court below said it's single entity, and the reason why it has to be single entity is because it cannot be easily separated, okay?

[00:19:46] Speaker 01:
And you agree with that.

[00:19:47] Speaker 01:
See, I don't think you think you're selling lashes and they're just flying off the minute you touch the piece of it.

[00:19:53] Speaker 01:
So in terms of not easily separated, that too, I don't see why that should be a centerpiece of an issue here.

[00:20:00] Speaker 06:
I think the issue, why this is an issue here, because on the infringement side and the technical domestic industry side, the analysis that the other side performed, they soaked these lashes into acetone, took metal instruments, and then tore them apart.

[00:20:14] Speaker 06:
They pulled the bases and pulled the things apart and said, you see, it was easily separated.

[00:20:19] Speaker 06:
The reason that the single entity and the easily separated requirement is against the intrinsic evidence because you could have heat-fuse connections without merging the two fibers together completely and making them a single entity.

[00:20:31] Speaker 06:
Because heat fusion does not, there are different degrees of heat fusion that occur.

[00:20:36] Speaker 06:
Heat fusion, and that was plenty in the record where both sides agree, takes place even on a molecular level when you have commingling.

[00:20:44] Speaker 01:
When you're saying single entity, you're saying you could have heat fusion but they would never be together?

[00:20:52] Speaker 06:
They would be connected, but they would not become a one mass.

[00:20:55] Speaker 06:
What happened, and the single entity becomes how the court construed it and then used it becomes very clear.

[00:21:03] Speaker 06:
as how they apply this term and what they thought the scope is of the construction with respect to technical domestic industry and infringement.

[00:21:11] Speaker 06:
They said, there is no melting.

[00:21:14] Speaker 06:
The temperatures are not high enough.

[00:21:15] Speaker 06:
Melting does not occur.

[00:21:17] Speaker 06:
So these things, two fibers, do not become a single mass, in effect.

[00:21:21] Speaker 06:
But there is nothing in this intrinsic record with supporting that.

[00:21:25] Speaker 02:
All it requires is your decision.

[00:21:27] Speaker 02:
I guess it seemed to me, if I'm remembering correctly,

[00:21:31] Speaker 02:
the ALJ was really relying on one thing.

[00:21:37] Speaker 02:
If the fibers have to be fused, fusing means something more than they are now somehow tied together, you know, the way, I don't know, two wheels with an axle between them are.

[00:21:52] Speaker 02:
They're not fused, but they are connected.

[00:21:55] Speaker 02:
And that can't be so

[00:21:57] Speaker 02:
The whole point of fusing is something like these fibers now have to be merged, or there were some other synonyms, but connected is not enough.

[00:22:09] Speaker 02:
And if what you do is put glue between them so the fibers never touch but there's an intermediate connecting glue, that's not fusing.

[00:22:19] Speaker 06:
I think, Your Honor, the issue of diffuse does not require necessarily, that does not, requires maybe some merging, but it has, it can be as at a molecular level, not to combine the two things into one single mass, right?

[00:22:33] Speaker 06:
And the construction that we're advocating for,

[00:22:37] Speaker 06:
is not just connection, is you're connecting using heat.

[00:22:40] Speaker 06:
So heat has to contribute to connection.

[00:22:43] Speaker 06:
In that case, when heat contributes to the connection and you're using polymers, you will have commingling on the molecular level or broader.

[00:22:53] Speaker 02:
In either the Lashify's product for technical prong or the Accused products, is there that kind of molecular

[00:23:03] Speaker 02:
sharing.

[00:23:04] Speaker 06:
We've put on evidence and testing of molecular sharing.

[00:23:10] Speaker 03:
But I thought I saw the ALJ decision, we had the solvent test, right, and then there were images of what happens after the solvent where the hairs

[00:23:24] Speaker 03:
They don't look in any way merged, I guess is the word I would use.

[00:23:31] Speaker 03:
And then secondly, there was those, I don't know, microscope images, which showed still clear boundaries between all of the individual hairs.

[00:23:42] Speaker 03:
And I guess what I'm trying to understand is why isn't that substantial evidence for the idea that the claim limitation is not being met?

[00:23:52] Speaker 06:
I think because all of those determinations were based on the erroneous finding that this heat fusion must result in single entity where there is no delineation of the fibers once you have heat infused and they're all one single mass.

[00:24:07] Speaker 06:
And there is nothing in the specification supporting that scope of that term.

[00:24:11] Speaker 06:
The specification is very clear.

[00:24:12] Speaker 06:
You connect using heat.

[00:24:15] Speaker 03:
But the specification also makes a pretty clear distinction between using an adhesive with heat versus whatever heat fusion is.

[00:24:24] Speaker 03:
An example is something called the hot melt process or something like that.

[00:24:30] Speaker 03:
If the patent itself is making a distinction between something called heat fusion and something called using an adhesive with heat, then that tells me that whatever heat fusion is, it's something different and probably very likely something more than just adhesive with heat.

[00:24:49] Speaker 06:
The specification does not distinguish between heat fusion and

[00:24:54] Speaker 06:
glue, for example.

[00:24:56] Speaker 06:
On paragraph seven, it specifically talks about that you can have heat fusion and glue, right?

[00:25:02] Speaker 06:
You can still have glue, just a mere presence of glue does not exclude heat fusion.

[00:25:07] Speaker 06:
And then there are different degrees of heat fusion, hot melt and heat.

[00:25:10] Speaker 03:
We'll talk about column four, where we hit column four, line 46, where it talks about the intersecting portions of criss-crossing artificial pairs, and that they can be connected

[00:25:23] Speaker 03:
using an adhesive, and then it's, that is, i.e., rather than being fused together via hot melt process.

[00:25:31] Speaker 06:
Correct, John.

[00:25:31] Speaker 03:
And so, to me, that reads like we, you know, the patent earlier defines connected very broadly, right?

[00:25:40] Speaker 03:
It could be any kind of coupling, direct or indirect.

[00:25:44] Speaker 03:
And now here, this sentence seems to be identifying two different types of connection, one which would be using an adhesive and then another

[00:25:52] Speaker 03:
something called being fused together via hot melt process.

[00:25:56] Speaker 06:
What this distinguishes this is a hot melt process.

[00:25:58] Speaker 06:
There are different degrees of heat fusion that you can achieve using different processes.

[00:26:02] Speaker 06:
The specification describes two separate embodiments, hot melt and heat sealing.

[00:26:08] Speaker 06:
Hot melt may involve actual melting.

[00:26:10] Speaker 06:
Heat sealing don't include.

[00:26:11] Speaker 03:
But you don't think that sentence

[00:26:13] Speaker 03:
makes separate and distinct fusing together versus adhesive?

[00:26:17] Speaker 03:
With the rather than language?

[00:26:20] Speaker 06:
I think this sentence distinguishes the hot melt process, fusing with the hot melt process, rather than fusing generally.

[00:26:28] Speaker 06:
Because later in the specification, it talks about creating lash fusions using adhesives that are heated.

[00:26:37] Speaker 03:
Where there's an alternative embodiment to the fusing together embodiment that's described earlier in common sense.

[00:26:47] Speaker 03:
together these artificial hairs, you know, and you use a hot melt process.

[00:26:52] Speaker 03:
And then at the bottom of column seven, in an alternative environment, we're gonna use some adhesive and maybe put a blow dryer on that adhesive, and then that's another way of creating these extensions.

[00:27:04] Speaker 06:
Together with heat fusion and below in column seven, it also talks about that the clusters in that regard would be heat fused.

[00:27:10] Speaker 06:
But I think the question here is heat fusion is not a one

[00:27:15] Speaker 06:
thing, and you only reach it by one thing, there are degrees of heat fusion, the quartz polar went all the way to the melting portion and said you have to melt.

[00:27:23] Speaker 06:
But sure, heat fusion may be achieved by melting, but it's not required.

[00:27:28] Speaker 06:
Heat fusion can be achieved on temperatures way below melting.

[00:27:31] Speaker 06:
It does not require melting.

[00:27:32] Speaker 06:
All it requires is that this intermingling of polymers so you have a connection that was reached due to heat.

[00:27:40] Speaker 06:
And that's why that single entity requirement brought in all these other limitations with no support in the intrinsic record.

[00:27:48] Speaker 01:
I don't want to be redundant, but just touching upon what, because I think this is important, the centerpiece of the claim construction that you rely on is really predicated on these two paragraphs in column four and column seven.

[00:28:03] Speaker 01:
And one could read those as saying they demonstrate that glue is not enough.

[00:28:09] Speaker 01:
And we're not talking about glue here.

[00:28:11] Speaker 01:
Or they can read the reverse, which is the way you read them, that we're talking about just excluding, we're talking about hot melt process, but we're not talking about heat fusion.

[00:28:27] Speaker 01:
So are there other ways other than the heat melt process for heat fusion that are articulated in the spec?

[00:28:33] Speaker 06:
Specification also talks about hot sealing, which is an alternative embodiment.

[00:28:39] Speaker 06:
But the question, if I understand it, Your Honor, is to the extent the court is worried that construction may just capture gluing, right?

[00:28:48] Speaker 06:
Connecting, joining using heat, that's just not putting glue in between two fibers, right?

[00:28:55] Speaker 06:
There is nothing in the specification that excludes glue.

[00:28:59] Speaker 06:
Right?

[00:29:00] Speaker 06:
From heat fusion.

[00:29:01] Speaker 06:
You can have heat fusion.

[00:29:02] Speaker 01:
You can have glue.

[00:29:03] Speaker 01:
One might read these two paragraphs we've been talking about as distinguishing between heat fusion and glue if they think that hot melt, what they're talking about hot melt is heat fusion.

[00:29:15] Speaker 01:
But you're saying that's not true.

[00:29:16] Speaker 06:
Right.

[00:29:17] Speaker 06:
I think hot melt is the one way of achieving heat fusion.

[00:29:20] Speaker 06:
It is not the heat fusion or the only way of achieving.

[00:29:22] Speaker 06:
And it's not the only way that's described in this book.

[00:29:25] Speaker 01:
So your view is you should be able to use glue as long as it's with heat.

[00:29:31] Speaker 06:
as long as it results in connections between the fibers because you heated it.

[00:29:40] Speaker 01:
And that doesn't get you to a single entity?

[00:29:44] Speaker 06:
So here's why single entity is very ambiguous and confusing.

[00:29:48] Speaker 06:
These lashes are obviously single entity, right, built together.

[00:29:52] Speaker 06:
But this is not the way single entity was interpreted below and applied.

[00:29:56] Speaker 06:
The single entity below was applied.

[00:29:58] Speaker 06:
The fibers themselves, the two fibers, you can in images see that there's still two fibers and not one single mass.

[00:30:06] Speaker 06:
That's how the single entity applied.

[00:30:08] Speaker 06:
And the requirement of that was, not just that, but the reason why it's there is it shouldn't be easily separated.

[00:30:18] Speaker 06:
How do you determine how something is easily separated when you're dealing with something as delicate as lashes?

[00:30:24] Speaker 06:
That's just the form of degree whether it's lashes or something else.

[00:30:27] Speaker 06:
And that's why that single entity requirement was wrong and then applied wrong.

[00:30:33] Speaker 06:
Thank you so much.

[00:30:51] Speaker 05:
Good morning.

[00:30:52] Speaker 05:
I'm Lindy Hesbeck for the International Trade Commission.

[00:30:56] Speaker 05:
May it please the court?

[00:30:57] Speaker 05:
I'd like to clear up a couple of points that my friend made initially.

[00:31:00] Speaker 05:
First, on the issue of proving significance below and where the burden lies.

[00:31:05] Speaker 05:
So on the economic problem issue, if the court disagrees and feels that additional activities should have been credited towards flash fires to domestic industry, this would need to be remanded for determination on significance.

[00:31:18] Speaker 05:
Just because it wasn't challenged does not mean that Lashify would automatically meet its burden to demonstrate significant investments.

[00:31:27] Speaker 05:
Even where all the respondents default in a case, a complainant still must prove that they meet the domestic industry requirement.

[00:31:35] Speaker 05:
So in that case, we would expect a remand to the commission for that determination.

[00:31:40] Speaker 05:
On the question of what industry would need to be approved, we know under the 2024 Zircon opinion that

[00:31:47] Speaker 05:
for each patent that covers a product, if there's no overlap, you have to prove the domestic industry is met for each patent.

[00:31:55] Speaker 05:
So that's part of the problem with Lashify's case on its economic prong theory.

[00:32:00] Speaker 05:
They're co-mingling all of their investments, alleged investments, in all three patents, but all three patents cover separate products.

[00:32:07] Speaker 05:
So here, that becomes an issue, one, on the technical prong, if the technical prong finding that

[00:32:14] Speaker 05:
The 984 patent is not practiced by the domestic industry articles.

[00:32:18] Speaker 05:
All of those expenditures are inherently included in this economic prong theory.

[00:32:23] Speaker 05:
And Lashavai doesn't have a separate case for design patents.

[00:32:27] Speaker 05:
So what happens?

[00:32:28] Speaker 01:
I mean, let's say, hypothetically, we say that the

[00:32:32] Speaker 01:
ITC's reading of the domestic prong is wrong, statutory textual reading.

[00:32:38] Speaker 01:
And let's assume that we affirm on the claim construction portion.

[00:32:43] Speaker 01:
So it goes back, and I understand, your threshold thing is we haven't conceded it, they still have to prove it.

[00:32:50] Speaker 01:
But are you saying, it's impossible, so we should just leave?

[00:32:55] Speaker 01:
I mean, there are numbers, and if it's necessary, you segregate the numbers, right?

[00:33:02] Speaker 01:
So what is your point?

[00:33:03] Speaker 01:
I mean, that they can't possibly do it, or that you win, or what?

[00:33:08] Speaker 05:
Well, I mean, my point would be that there's no case that Lashify was brought before the commission that could be evaluated on the individual design patents.

[00:33:16] Speaker 05:
And that goes to the process, the calculations that were used by Lashify's expert.

[00:33:21] Speaker 03:
So while that would be something that need to be resolved on remand.

[00:33:25] Speaker 05:
It could be resolved on remand, but it would require a room for additional argument because those arguments just haven't been made yet.

[00:33:32] Speaker 02:
Because you want to separate the lashes from the case from the installation of tool.

[00:33:36] Speaker 05:
That's correct.

[00:33:37] Speaker 05:
So all of those patents, each design patent covers a separate product and the utility patent covers only the lashes.

[00:33:43] Speaker 01:
But you're not saying that they forfeited their right to make that case because they were arguing all three together.

[00:33:48] Speaker 01:
You're not alleging they forfeited that.

[00:33:51] Speaker 01:
You're just saying it would have to be defined and they'd have to have an opportunity to make their demonstration on the numbers.

[00:33:59] Speaker 05:
Based on the record right now, they would have forfeited it, I believe, because they don't have a separate argument for that because of the way that they allocated.

[00:34:07] Speaker 05:
I also think that council was incorrect by stating that the commission had accepted their per-patent allocation.

[00:34:14] Speaker 05:
That's also not exactly correct.

[00:34:16] Speaker 05:
What the commission accepted was, of the many different econ-funk theories that Lashify presented,

[00:34:22] Speaker 05:
the commission and the ALJ evaluated the allocation that included only the patented products.

[00:34:28] Speaker 05:
But the problem that they have is they didn't allocate all of their investments until the very last step.

[00:34:34] Speaker 05:
So if you have something, like we're housing distribution, if we have something like a finishing step for one design patent, that finishing step should not have any of the investments included for the other design patent or the utility patent.

[00:34:47] Speaker 05:
But right now, that's the record that we have.

[00:34:49] Speaker 02:
OK.

[00:34:51] Speaker 02:
finishing step?

[00:34:53] Speaker 02:
Is that for the case or for the installation tool?

[00:34:56] Speaker 05:
It's for the application tool.

[00:34:58] Speaker 05:
So this, if we could go back to the warehousing distribution, and I would agree with Judge Chidin's concern that any importer could have those costs.

[00:35:07] Speaker 05:
So what the commission looks for is additional value added because it has to be an industry.

[00:35:12] Speaker 05:
It's a domestic industry requirement.

[00:35:14] Speaker 05:
It's not a domestic expenditure requirement.

[00:35:17] Speaker 05:
So if we're looking at warehousing distribution, for example, in prior investigations, the commission has evaluated what's the value added from any domestic additional steps.

[00:35:28] Speaker 02:
What you're saying now sounds like, which is fine, that you're now disputing the premise of the discussion we've been having for the last five minutes, which is that labor and capital even

[00:35:42] Speaker 02:
for sales and marketing without any making of stuff here counts.

[00:35:51] Speaker 05:
That's actually not at all what I would support, and I don't think the statute supports that either.

[00:35:56] Speaker 05:
My point is when we look at the plain language of Section 337, it has always required more than selling products.

[00:36:05] Speaker 05:
And the statute has never included all expenditures.

[00:36:08] Speaker 02:
So we're on the same page.

[00:36:10] Speaker 02:
Until you started saying something about finishing steps of the installation tool, there's probably a simpler name for the installation tool, that you started saying, well, there's no evidence that they were changed in the United States.

[00:36:27] Speaker 02:
Until that, we had not been talking.

[00:36:31] Speaker 02:
We have been accepting that they're right.

[00:36:34] Speaker 02:
and the commission is wrong about the exclusion of sales and marketing.

[00:36:41] Speaker 02:
Now, if we want to change arguments, that's fine, but just to be clear, they might have warehouses full of fully finished installation tools that would count if the commission is wrong about the categorical sales marketing exclusion.

[00:36:59] Speaker 05:
I think I understand, and I'm sorry if I misinterpreted your honor's question prior.

[00:37:04] Speaker 05:
I'm talking about the way that they presented their case below.

[00:37:07] Speaker 05:
I was just giving one example of the way that the investments have been commingled in a way it would be difficult.

[00:37:12] Speaker 03:
We don't have a lot of time here.

[00:37:13] Speaker 03:
Can we get to the statutory question?

[00:37:14] Speaker 05:
Yes.

[00:37:15] Speaker 05:
If that's OK, I would like to address that.

[00:37:17] Speaker 05:
So as I mentioned, the statute has never included all expenditures under subsection B. So the plain language proves that because under section 337, relief is available only if an industry in the United States related to the articles exists as in the process of being established.

[00:37:36] Speaker 05:
The plain language also proves that Congress did not include all expenditures in subsection B. Otherwise, subsection C would not have been needed, which expanded the scope

[00:37:45] Speaker 05:
of the domestic industry by adding three activities that had previously been excluded by the commission and this court.

[00:37:52] Speaker 02:
So the three subsections we have are distribution and or servicing, not industries.

[00:38:02] Speaker 05:
It depends.

[00:38:03] Speaker 05:
So in each investigation, we have to look at the nature and significance

[00:38:07] Speaker 05:
of those activities.

[00:38:09] Speaker 05:
So in some cases, like for example, the male prophylactics investigation, there is substantial value added within the domestic activities to make a product saleable within the U.S.

[00:38:22] Speaker 05:
So that might be something we would look at as value added.

[00:38:24] Speaker 05:
But typically, warehousing and distribution is not credited towards an industry.

[00:38:29] Speaker 05:
And we see that even from prior to the 88 amendments.

[00:38:33] Speaker 02:
You understand, right, that this case presents the question whether the commission has been wrong for decades.

[00:38:40] Speaker 02:
Yes.

[00:38:40] Speaker 02:
So the fact that this is what the Commission has done doesn't answer the question whether it was right or wrong in doing it.

[00:38:46] Speaker 05:
Absolutely.

[00:38:47] Speaker 05:
Thank you, Your Honor.

[00:38:48] Speaker 05:
I agree.

[00:38:48] Speaker 05:
I would just state that when we're looking at the 1980 amendment, which was the last major amendment, it actually codified

[00:38:55] Speaker 05:
prior commission practice.

[00:38:57] Speaker 05:
So subsection A, plant and equipment, that comes from a 1978 commission decision in luggage investigation.

[00:39:04] Speaker 05:
Labor and capital and subsection B comes from a 1980 commission decision in the airtight cast iron stoves.

[00:39:10] Speaker 05:
So Congress was aware of what the Commission was doing, but we weren't crediting all activities in an industry, and chose to codify the language that we had been using.

[00:39:19] Speaker 05:
Subsection C was added to expand the scope, but we were excluding, the Commission was excluding a number of activities, and Congress chose to only add three of those, engineering, licensing, research and development.

[00:39:31] Speaker 05:
So sales and marketing, for example, had been excluded in the Shopper case and other investigations.

[00:39:39] Speaker 05:
And Congress did not add that to the 1980 amendment of the statute.

[00:39:43] Speaker 01:
Your position, or the commission's position, is that marketing can include sales and marketing only if there are, quote, sufficient other qualifying expenditures.

[00:39:55] Speaker 01:
Well, if there are sufficient other qualifying expenditures, then why do you need sales and marketing?

[00:40:00] Speaker 01:
If there's sufficient, then that means you'd never need to look at the sales.

[00:40:04] Speaker 01:
So it just makes no sense to me at a common sense level what you're talking about.

[00:40:08] Speaker 05:
No, thank you, Your Honor.

[00:40:09] Speaker 05:
It's a good comment.

[00:40:10] Speaker 01:
It's true, and that's why when we say... So the typically believe that the test doesn't make any sense.

[00:40:16] Speaker 05:
I'm sorry.

[00:40:16] Speaker 05:
I would respectfully disagree there.

[00:40:19] Speaker 05:
The commission is... The commission is reasonably relied on the statutory tools of interpretation and Congress's intent from the legislative history.

[00:40:29] Speaker 05:
But when we're looking at things like sales and marketing, we know that the Congress has told us sales and marketing alone would never be enough.

[00:40:38] Speaker 05:
So if we were to read subsection B, as Lashify argues, that it includes all expenditures, we could end up with a situation where a complainant can prove a domestic industry based on sales and marketing alone.

[00:40:49] Speaker 05:
That's directly contrary to Congress's intent.

[00:40:51] Speaker 01:
That's not what you're saying.

[00:40:52] Speaker 01:
That's just not what I'm talking about, what you're saying.

[00:40:56] Speaker 01:
We're not talking about sales and marketing alone.

[00:40:58] Speaker 01:
We're talking about the commission's position, is you can count them, but only if there are sufficient other expenditures.

[00:41:05] Speaker 01:
And that makes no sense.

[00:41:08] Speaker 05:
So I think the issue might be in whether we're counting versus we're not excluding.

[00:41:13] Speaker 01:
So in the case where there's... Well, if you have sufficient other qualifying expenditures, sufficient to establish a domestic industry, which means that under your test, you never look at marketing and sales, correct?

[00:41:27] Speaker 05:
It would never be credited towards the domestic industry.

[00:41:30] Speaker 05:
So let's say we're in a situation where a complainant has other expenditures, but the only way that they can show significance is by also including their sales and marketing.

[00:41:39] Speaker 05:
That would not be sufficient to prove the domestic industry requirement is met.

[00:41:44] Speaker 01:
Well, yeah, except that the language we're talking about is sufficient other qualifying expenditures.

[00:41:48] Speaker 01:
Anyway, we can move on.

[00:41:50] Speaker 05:
Okay, I would just note, for other, we look at things that are more traditional industry expenses or the things that have shown to add value.

[00:41:56] Speaker 03:
What are those other so-called traditional expenses that count as qualifying expenses?

[00:42:02] Speaker 03:
So we know... Besides production.

[00:42:04] Speaker 05:
Production is a cornerstone, of course.

[00:42:07] Speaker 05:
And we can see from the addition of the 1988 Amendment, engineering, licensing, research, and development, the commission looks at a value-added analysis.

[00:42:16] Speaker 05:
So when we're looking at the nature and significance of the complainants' activities, we look at the facts of the investigation, the article of commerce,

[00:42:24] Speaker 05:
and the reality is in the marketplace.

[00:42:26] Speaker 05:
Because sometimes we may have cases where there's substantial production type value that's added domestically.

[00:42:33] Speaker 02:
Where in that does a sales force of people who not only persuade a purchaser to buy, but also teach the purchaser how to use FIT?

[00:42:48] Speaker 05:
So if I could separate those two just really quickly.

[00:42:51] Speaker 05:
So persuading to buy, just simply sales.

[00:42:53] Speaker 05:
Sales has always been a problem because it could be something that an importer would do.

[00:42:58] Speaker 05:
We don't want to have the, this is a trade remedy.

[00:43:01] Speaker 05:
Section 337 provides trade relief.

[00:43:03] Speaker 05:
So if you're simply selling a product in the country, you should not be entitled to trade relief before the commission.

[00:43:08] Speaker 05:
There are other options like district court that you could pursue.

[00:43:12] Speaker 05:
If we're talking about whether your, I would say, customer education or things like that is not necessarily marketing in the cases where it's credited.

[00:43:23] Speaker 05:
So, for example, the IVF investigation.

[00:43:26] Speaker 05:
There's a good example there because there's both education that was credited, very specific to a doctor on how to use the article in question, and then there was general continuing medical education that was not credited.

[00:43:40] Speaker 05:
Because it was just a general expense that someone who's selling a medical product may need to reach a doctor or the public about their product.

[00:43:48] Speaker 05:
So you can think of it, I don't know, like a spectrum when we're looking at each investigation.

[00:43:52] Speaker 02:
So I don't remember the facts even.

[00:43:54] Speaker 02:
I'm not even sure they were developed, but anyway, I don't remember them.

[00:43:58] Speaker 02:
So suppose Lashify has 500

[00:44:02] Speaker 02:
salespeople and they go around and they show people how to put these lashes underneath the natural lashes.

[00:44:16] Speaker 02:
What's that?

[00:44:18] Speaker 05:
I would argue that is sales and marketing and that's actually how Lashify characterized it as well, was that that was sales and marketing.

[00:44:25] Speaker 05:
And you think it doesn't count?

[00:44:26] Speaker 05:
I don't believe that that should count towards a domestic industry.

[00:44:29] Speaker 05:
I think that's something where if we're simply having people who can pay social media influencers or pay Amazon fees, that's not an industry within the United States that requires protection.

[00:44:41] Speaker 02:
But now you changed the example.

[00:44:43] Speaker 02:
My example was you've got 500 people who, I don't know, at malls or wherever, they actually show people how to put these things on.

[00:44:56] Speaker 02:
That's not just the things you switch to about influencers.

[00:45:02] Speaker 05:
So even if you're employing people to show people how to do it though, it depends on the facts of the investigation.

[00:45:07] Speaker 05:
So here, I believe you're talking about someone demonstrating how to apply a false eyelash, which I would argue would be a completely

[00:45:15] Speaker 05:
different set of facts than places where we have credited customer service, like in the usage and the technical aspects of like an IVF drug, for example.

[00:45:27] Speaker 03:
I guess these are the sorts of things that would be sorted out on remand.

[00:45:32] Speaker 05:
It could be.

[00:45:33] Speaker 05:
I mean, this is the type of thing that it should have been argued below.

[00:45:36] Speaker 05:
But we also have just a lack of evidence from Lashify on quantification for all of these issues as well.

[00:45:41] Speaker 05:
So we have a qualitative case.

[00:45:44] Speaker 05:
I think your honors are exactly right that most of their cases built on the qualitative arguments.

[00:45:49] Speaker 05:
And we know from Lilo.

[00:45:51] Speaker 05:
qualitative factors alone are not enough to prove a domestic industry.

[00:45:56] Speaker 05:
They could have quantitatively identified their research and development or their pre-startup activities, but they came in with that information too late.

[00:46:05] Speaker 01:
I don't think anyone is saying qualitative alone, so I guess it makes me nervous when we start setting up straw mat.

[00:46:11] Speaker 01:
Do you agree that qualitative factors can be included in the significance test?

[00:46:18] Speaker 05:
I believe Lilo states that for quantitative significance, if you have modest or insignificant investments, you cannot rely on qualitative factors to overcome that lack of quantitative evidence.

[00:46:33] Speaker 03:
Under Lilo, you need both.

[00:46:35] Speaker 05:
Under Lilo, you would need both.

[00:46:36] Speaker 05:
So here, the commission did credit the research and development investments that Lashify was able to quantify, but that amount was not even modest compared to its others.

[00:46:48] Speaker 03:
The commission didn't comment on whether the qualitative factor was satisfied here, is that right?

[00:46:53] Speaker 03:
It was pretty much purely a quantitative factor analysis.

[00:46:58] Speaker 05:
It was a quantitative factor analysis because there was not significant quantitative evidence to be able to allow us to take that next step into looking at a qualitative factor.

[00:47:08] Speaker 03:
After excluding the sales and marketing and warehousing costs.

[00:47:11] Speaker 01:
That's correct.

[00:47:11] Speaker 01:
But you need to reach a certain threshold in quantitative before you jump over to concluding qualitative.

[00:47:17] Speaker 01:
Is that what you're saying?

[00:47:19] Speaker 01:
Is that the way the test works?

[00:47:20] Speaker 01:
I agree.

[00:47:21] Speaker 01:
OK, one thing you said, I'm not sure I take issue with, is if you have no quantity, you can't rely exclusively on quality.

[00:47:28] Speaker 01:
But are you saying there has to be, is there a specific point?

[00:47:33] Speaker 01:
You have to reach a specific level of quantitative before you can jump over to qualitative?

[00:47:38] Speaker 01:
And what is that specific level?

[00:47:40] Speaker 05:
I think you'd have to be able to show at least some quantitative significance before you can jump over to qualitative.

[00:47:46] Speaker 05:
Because otherwise, that would run the file of this court's instruction to the commission in Lilo, where modest or insignificant investment, we couldn't go to qualitative in that particular case.

[00:47:58] Speaker 01:
Before we turn, we should turn to claim construction.

[00:48:00] Speaker 01:
But before we turn there, I just want to clarify that because you made the point repeatedly that they hadn't made their case and part of that was because they smushed together all of these.

[00:48:11] Speaker 01:
So in fact, if the claim construction is correct, that's a problem.

[00:48:16] Speaker 01:
We agreed that they would have a further opportunity on remand given

[00:48:22] Speaker 01:
what we do here to reconfigure the amounts and the numbers with respect to the products and so forth?

[00:48:31] Speaker 05:
I think the commission will follow whatever instruction this court gives.

[00:48:35] Speaker 05:
And I don't want to speak on behalf of the commission as far as how to remand the specifics of it, like if additional briefing, or I believe the commission can sometimes even remand

[00:48:45] Speaker 05:
an investigation to the administrative law judge if additional fact findings are necessary.

[00:48:49] Speaker 05:
So I don't want to presume to speak.

[00:48:51] Speaker 02:
Right, so there's additional briefing, additional fact finding, and additional evidence.

[00:48:55] Speaker 02:
I think we're chiefly talking here about additional evidence.

[00:48:59] Speaker 02:
That is possible, but only if we order it.

[00:49:02] Speaker 05:
I mean, if you order it, obviously the commission will follow the court's instructions.

[00:49:08] Speaker 05:
I'm stating on the remand, different times the remand.

[00:49:12] Speaker 05:
It depends on which issues are being remanded and what instructions the court has given as far as how the commission can execute the remand.

[00:49:19] Speaker 01:
I hope that answers your question.

[00:49:21] Speaker 01:
OK.

[00:49:21] Speaker 01:
Unclaimed construction.

[00:49:22] Speaker 01:
Can you point me to the best disclosure you have in the patent that suggests there's a single entity requirement for heat fused?

[00:49:32] Speaker 05:
So I would point to the claim that there's itself, I think, is actually very strong when it talks about creating a heat fused connection.

[00:49:42] Speaker 05:
And I think that the specification as well hits a home that point that we were talking about

[00:49:51] Speaker 05:
You know, I agree completely with Judge Toronto that fuse means more.

[00:49:56] Speaker 05:
It has to mean something.

[00:49:57] Speaker 05:
So if we look at the claim language itself, we have a first heat-fuse connection, and that's between the first artificial hairs.

[00:50:05] Speaker 05:
So therefore, we no longer have separate artificial hairs.

[00:50:08] Speaker 05:
Now we have

[00:50:09] Speaker 05:
connected artificial hairs in a single entity.

[00:50:12] Speaker 05:
And the reason why that language was even added was to address some of these issues on that glue or cured glue itself is just simply not enough.

[00:50:24] Speaker 01:
Okay, so you think that the single entity is not drawn out explicitly in the patent, but it necessarily follows as part of the definition of heat fuse?

[00:50:37] Speaker 01:
Because when I ask you where they talk about single entity, you direct me towards heat fuse.

[00:50:41] Speaker 01:
I'm not sure, you may be right, but is that it?

[00:50:45] Speaker 05:
I think many of them, let me make sure I'm understanding your question.

[00:50:48] Speaker 03:
We're trying to understand the meaning of fuse in the context of this patent.

[00:50:52] Speaker 03:
Absolutely.

[00:50:52] Speaker 03:
So pointing us to the word fuse in the patent doesn't by itself tell us enough about what does fuse actually mean in the context of this patent.

[00:51:01] Speaker 05:
I understand.

[00:51:01] Speaker 05:
I guess maybe I would point more to the connection that you're creating something.

[00:51:06] Speaker 05:
It's not just a process pattern.

[00:51:09] Speaker 05:
We're talking about, even if we go to column seven, which we've spent a lot of time talking about, once there is a connection between individual artificial hairs, it becomes something else, like a cluster, for example.

[00:51:23] Speaker 03:
You're not suggesting all connections are fusions, are you?

[00:51:26] Speaker 03:
No, I think that... Then the word connection doesn't quite get us there either.

[00:51:31] Speaker 05:
Okay, but I think that if we look at something like cluster, that's another example.

[00:51:37] Speaker 03:
If we go from individual hairs to create a... You can create clusters just by gluing them, gluing the individual hairs together though, right?

[00:51:44] Speaker 05:
Not under the claims that are asserted.

[00:51:47] Speaker 05:
So under the claims that have been asserted in the investigation requires that the artificial hairs are heat fused together.

[00:51:54] Speaker 05:
And I'd also note that at the end of the bottom of column seven, which my friend kept pointing to when it's talking about gluing, it's actually talking about gluing clusters together, not artificial hairs.

[00:52:05] Speaker 05:
So we need to step back through how these are actually put together.

[00:52:08] Speaker 05:
We start with individual artificial hairs.

[00:52:11] Speaker 05:
There has to be a heat-fused connection of those artificial hairs.

[00:52:15] Speaker 05:
And then that, let's call it a cluster that's created, that cluster can be either attached to other clusters with a common base.

[00:52:25] Speaker 05:
And that connection could either be through heat fusion or could be through glue.

[00:52:30] Speaker 02:
Is there any difference in your view between the claim, like claim one that talks about heat fused connection and other claims that talk about the hairs being heat fused without the word connection?

[00:52:46] Speaker 05:
Yes, I would agree with you that there are claims that use the other language, for example, claim 23, which is also asserted states that the end portions are heat fused together.

[00:52:57] Speaker 02:
I'll just tell you what I was, I guess, musing about.

[00:53:02] Speaker 02:
So without the word connection, it seems to me the hairs have to be fused.

[00:53:07] Speaker 02:
Not end to end, but some portion of it.

[00:53:11] Speaker 02:
With the word connection, it seems to me there's more running room for Lashify that the hairs

[00:53:21] Speaker 02:
are being connected and maybe the connection is doing the fusing with heat, but I'm not quite sure that heat-fused connection carries quite the implication of just heat-fused fibers.

[00:53:46] Speaker 02:
And I don't remember whether in this court or in the commission or before the ALJ, anything was made of that difference in language.

[00:53:59] Speaker 05:
From my memory, there was no difference because when the claim construction briefing and the claim construction hearing before the ALJ, the parties agreed that those heat fuse terms would all be construed together.

[00:54:10] Speaker 05:
Initially, the parent application for the 984 patent was also in the investigation, and then it dropped out due to a summary termination finding.

[00:54:18] Speaker 05:
but the heat-fused terms that were used in the 388 patent and the 984 patent, the parties agreed that those should all be construed the same.

[00:54:27] Speaker 02:
So I think when we're talking about a heat-fused connection... What I keep thinking about as the key thing at issue is you put two fibers next to each other.

[00:54:37] Speaker 02:
You put a bunch of glue between it.

[00:54:39] Speaker 02:
The glue doesn't set without heat.

[00:54:41] Speaker 02:
You use heat to make the glue set.

[00:54:43] Speaker 02:
And I think the dispute here is whether that's covered or not covered.

[00:54:48] Speaker 02:
I think that's fair.

[00:54:49] Speaker 02:
That's easier to get with heat-fused connection than just heat-fused fibers.

[00:54:55] Speaker 02:
And that's, I guess, the point I'm inquiring about, but I don't recall seeing discussion of that.

[00:55:02] Speaker 05:
I don't believe that that was specifically discussed because I think that heat fuse has been the topic of discussion because of the glue issue, which your honor identifies correctly.

[00:55:13] Speaker 05:
The construction that the ALJ came up with was specifically meant to limit this to heat causing the fusion.

[00:55:21] Speaker 02:
Of the fibers.

[00:55:22] Speaker 05:
Of the fibers.

[00:55:23] Speaker 05:
So when we're talking about using heated glue, I agree with your honors for column seven, column four.

[00:55:32] Speaker 05:
There's a clear distinction between those in the specification.

[00:55:35] Speaker 05:
We can also look at the prosecution history of this.

[00:55:37] Speaker 01:
Before you leave the claims, the column seven and the column four, do you disagree with your friend that when the reference in both of those to hot melt process was just one aspect of heat fusion, or was the patent owner talking about heat fusion here when they talked about hot melt process?

[00:55:56] Speaker 05:
I think my interpretation is that, and I think the ALJ's finding was that that talks about the heat fusion process altogether.

[00:56:04] Speaker 05:
It's not talking about a subset of it.

[00:56:06] Speaker 05:
Because we know heat CO is a process that would then use possibly temperature and pressure.

[00:56:11] Speaker 05:
The ALJ's construction was not exclusive of ways to obtain the heat that would be required to have heat fusion.

[00:56:25] Speaker 01:
Thank you.

[00:56:26] Speaker 05:
Thank you.

[00:56:31] Speaker 01:
Okay, Mr. Halls, we've got you for five minutes.

[00:56:39] Speaker 01:
We obviously don't want to go on overterritories.

[00:56:43] Speaker 00:
I'm well aware of the time, in your honor.

[00:56:45] Speaker 00:
But may it please the court, Michael Haas, for the interveners, Kissel, to Salon, Walmart, and CBS.

[00:56:51] Speaker 00:
Given the time, I'd like to focus on a question that I think is really important.

[00:56:54] Speaker 00:
And you raised it, Judge Chen, which is, if the technical prong is not met, how does that kind of ripple through the rest of the case?

[00:57:02] Speaker 00:
I think it's really important.

[00:57:03] Speaker 00:
Because what we don't have here is an appeal of two key issues.

[00:57:08] Speaker 00:
First, there was no appeal of the findings regarding the manufacturing process that was used by Lashafah.

[00:57:17] Speaker 00:
And I'll point the court to appendix page 22.

[00:57:21] Speaker 00:
So for the first manufacturer, the ITC found, quote, joined with glue, comma, not heat, quote.

[00:57:30] Speaker 00:
Doesn't matter which clay construction you use.

[00:57:33] Speaker 00:
That's sufficient, and that's a finding that was not challenged.

[00:57:36] Speaker 00:
So that, let me get to the second manufacturer.

[00:57:38] Speaker 03:
The nature of their appeal is that there is heat involved in the process of making these lash extensions, either from manufacturer one or manufacturer two.

[00:57:51] Speaker 00:
They asserted that and they had an expert report, but that the finding of the commission is that what the joining uses glue, not heat, with regard to one of the manufacturers.

[00:58:03] Speaker 00:
We're only talking about one of them right now.

[00:58:05] Speaker 00:
But that's the finding, and it was not challenged on appeal.

[00:58:08] Speaker 00:
So from this court's point of view, when it's not challenged on appeal, that finding is how we address the appeal.

[00:58:15] Speaker 00:
So that's on page 22.

[00:58:17] Speaker 00:
And I'll get you the exact point on the page, Judge Drondos.

[00:58:22] Speaker 00:
You're looking for it, so let me get it.

[00:58:28] Speaker 00:
It's right at the bottom, Your Honor.

[00:58:29] Speaker 00:
If you look at the very last statement, respondents' evidence confirms that, I won't use the confidential term, the products were joined with glue, not heat.

[00:58:39] Speaker 00:
That's a finding of the commission.

[00:58:42] Speaker 02:
So let's move to the second manufacturer.

[00:58:45] Speaker 02:
This commission opinion is actually a majority, is that right?

[00:58:49] Speaker 02:
It is a majority, yes.

[00:58:50] Speaker 02:
Thank you.

[00:58:51] Speaker 00:
So the second manufacturer, let's move to page 26.

[00:58:56] Speaker 00:
And the analysis actually changed to the second manufacturer on page 23, but the key language is on page 26.

[00:59:04] Speaker 00:
And this is something that has been discussed, which is these fibers are coming down, and they're not connecting at all.

[00:59:13] Speaker 00:
And this is the language you'll see at the bottom of the first paragraph, where the commission concludes that they are pushed into and held in place by the base.

[00:59:27] Speaker 00:
So that's important because in the claims, the only claims, which are claims 1 and 23, that were asserted as the basis for technical prong by Lashafy, the connection has to be between the fibers, not in the face.

[00:59:43] Speaker 02:
Go ahead, John.

[00:59:44] Speaker 02:
Just to be clear, these are manufacturers for Lashafy, so this is for technical prong, not for infringement.

[00:59:51] Speaker 02:
Exactly.

[00:59:53] Speaker 03:
But the words that cannot be spoken, they have a theory that heat application is involved.

[01:00:02] Speaker 03:
That's what they're arguing in their appeal.

[01:00:05] Speaker 00:
But they are not challenging these particular findings.

[01:00:09] Speaker 00:
And for this one, the issue isn't heat.

[01:00:11] Speaker 00:
The issue for this manufacturer on appendix page 26 is whether there's any connection between the hairs.

[01:00:18] Speaker 00:
What they found using cross-sectional photography was that the hairs go all the way down and are inserted into the base.

[01:00:25] Speaker 00:
And if you look at the claims that they're relying on for technical prong, specifically claims 1 and 23,

[01:00:34] Speaker 00:
there has to be a connection between the hairs.

[01:00:38] Speaker 00:
Now, separately, those hairs, of course, become clusters, and the clusters are connected.

[01:00:42] Speaker 00:
But that's separate in the claim.

[01:00:44] Speaker 00:
Each of those claims has two paragraphs.

[01:00:47] Speaker 00:
First paragraph tells you there's a connection between the hairs.

[01:00:51] Speaker 02:
I think you recognize the difference between 22 and 26.

[01:00:53] Speaker 02:
And 22 has this fairly clean phrase, from your point of view.

[01:00:59] Speaker 02:
Respondent's evidence confirms that the

[01:01:02] Speaker 02:
you know, manufacturer one product, were joined with glue, not heat.

[01:01:08] Speaker 02:
And the other one, 26, says the fibers are pushed into and held in place by the base.

[01:01:14] Speaker 02:
The base physically holds the fibers despite there being no heat fused connection between the fibers.

[01:01:21] Speaker 02:
So that's a more limited point.

[01:01:23] Speaker 02:
I mean, if you look at the discussion here, the point with the cross section.

[01:01:29] Speaker 00:
The point with the cross section is we never get to the heat question.

[01:01:33] Speaker 00:
The fibers come down into the base without ever touching.

[01:01:37] Speaker 00:
They're not connected between because they're put into the base rather than having a connection fiber to fiber.

[01:01:44] Speaker 00:
Fiber into base, base holds them relative to each other.

[01:01:48] Speaker 00:
And the claims, both 1 and 23, have separate requirements, a requirement for how the fibers are connected to each other, and then in the second paragraph, a requirement about how that base is put together.

[01:02:01] Speaker 00:
So the point, Your Honor, is this whole claim construction issue we have doesn't reach the findings.

[01:02:09] Speaker 00:
And because the findings by themselves under either construction support the commission, you can affirm that there's no technical problem here with regard to the 984.

[01:02:19] Speaker 00:
Now that leaves us with the design patents.

[01:02:21] Speaker 00:
And Judge Chen, you asked the key question there, which is, if you don't have the 984, what happens with regard to the design patents?

[01:02:29] Speaker 00:
And the one point that hasn't been discussed, I think, is really important is that Lashify is very much depending on the dissenting commissioners.

[01:02:38] Speaker 00:
But if you look at the opinion of the commissioners in dissent,

[01:02:43] Speaker 00:
There is a key issue, which is that they found that the design patents by themselves, that the articles corresponding should be the entire system, not just the applicator, not just the container, the entire system.

[01:02:59] Speaker 00:
Obviously, that was the dissent.

[01:03:01] Speaker 00:
That was not the commission.

[01:03:03] Speaker 00:
And the commission specifically, as it always does, says, we're adopting what the final initial decision said, except for it's inconsistent.

[01:03:12] Speaker 00:
And it is not inconsistent, and the final initial decision found that each of those design patents was not entitled to rely on the entire system, only on what was shown in the design patent, the applicator and the storage case.

[01:03:28] Speaker 00:
Flashify hasn't appealed that determination, even though it was a linchpin of what the dissenting commissioners were doing.

[01:03:35] Speaker 00:
Which means in their appellate brief, they needed to show how there wasn't substantial evidence to find that the specific economic industry associated with the design patents was sufficient.

[01:03:47] Speaker 00:
And they never did that in their brief.

[01:03:49] Speaker 00:
So we're left with a situation where they made two key decisions not to appeal.

[01:03:53] Speaker 00:
They didn't appeal the findings with regard to their manufacturing process, findings that whatever the claim construction resolved the case.

[01:04:03] Speaker 00:
And they didn't appeal the determination that the design patents are not properly associated with all of the expenses of the system.

[01:04:13] Speaker 01:
And as a result, they hadn't put the... So you're saying under the hypothetical, if we reverse the commission's construction of the text of the statute, and we say they're wrong on sales and marketing, yadada, but we affirm the claim construction on appeal,

[01:04:31] Speaker 01:
What is the impact of that?

[01:04:33] Speaker 01:
Because what we were talking about with your friend from the ITC was that they get to go back now that the chairs have been switched over, that they get to go back and make a further showing that just the amounts allotted to the two standing patents are sufficient or significant.

[01:04:56] Speaker 00:
I'm sorry.

[01:04:59] Speaker 00:
I'm sorry.

[01:05:06] Speaker 00:
I'm sorry.

[01:05:09] Speaker ?:
I'm

[01:05:10] Speaker 00:
The FID said, disagree with you.

[01:05:13] Speaker 00:
And they have not appealed that point.

[01:05:15] Speaker 00:
So that's a failure of proof.

[01:05:17] Speaker 00:
And it's a failure of proof that they had the chance to put on the proof.

[01:05:20] Speaker 00:
They even had the chance on appeal to come to you and say, the FID was wrong.

[01:05:25] Speaker 00:
Those design patents really do correspond to the whole system.

[01:05:27] Speaker 00:
And they didn't do.

[01:05:29] Speaker 00:
So you're left with a situation where they didn't appeal the key of findings on technical problem, and then because that, with the 984 out, they aren't appealing, and they didn't appeal, that these design patents don't correspond to the evidence they put on below, the only evidence they put on below.

[01:05:49] Speaker 00:
And that's why you should affirm, because there just isn't evidence that would allow them to find domestic industry with regard to the design patents without that system capture point that the dissenting commissioners put forward that they haven't supported on appeal, haven't even tried.

[01:06:07] Speaker 00:
So the respondents kiss Ulta Salon, Walmart, and CVS, or judge the court to affirm.

[01:06:13] Speaker 00:
On the basis, there isn't a prejudicial error shown by Lashford.

[01:06:26] Speaker 01:
We'll restore five minutes for rebuttal if you need it.

[01:06:34] Speaker 03:
Thank you.

[01:06:34] Speaker 03:
Could you lead with that last point that was raised by Mr. Hawes on what to do or are you in some kind of hopeless conundrum because your evidence, the way you presented it, didn't break it out sufficiently enough or if the hypothetical remand needs to be done for just the design practices, you didn't make the grade.

[01:06:56] Speaker 06:
I respectfully disagree with my colleague on the other side.

[01:07:00] Speaker 06:
What happened below, Lashify put forth three separate allocations.

[01:07:05] Speaker 06:
In one of some of those allocations, it did look at the Lashify system as a whole.

[01:07:10] Speaker 06:
Now the commission below rejected those Lashify system as a whole allocations.

[01:07:15] Speaker 06:
It accepted one allocation with respect to how the numbers were allocated per patent and that's the second alternative allocation.

[01:07:22] Speaker 06:
So in that second alternative allocation was not based on Lashify system on the whole.

[01:07:26] Speaker 06:
The commission below said this is the allocation that uses the correct products in each patent bucket.

[01:07:32] Speaker 06:
This is the only allocation we put up for an appeal.

[01:07:36] Speaker 06:
What Descent said, well, not only the second allocation was correct, but even the broader one should have been considered by the commission, the first alternative allocation that should have included additional products to make the appeal easier.

[01:07:50] Speaker 06:
We don't need that, right?

[01:07:51] Speaker 06:
We've appealed the second alternative allocation, which the commission did not have any issues with how the products were allocated per each patent.

[01:08:00] Speaker 02:
So that's- Did the ALJ or the commission make a determination

[01:08:05] Speaker 02:
of the significance for each of the two design patents of the investments under the second allocation.

[01:08:21] Speaker 06:
Their reasoning for the significance was the same for all three allocations, including for the second allocation by saying exclude wholesale, exclude, and that you left with no significance.

[01:08:33] Speaker 06:
So that's the issue with the second point for allocation.

[01:08:37] Speaker 06:
So if this court decides to remand, there is no failure of proof.

[01:08:42] Speaker 06:
The numbers below, if the commission needs more, we're obviously available to give them more.

[01:08:47] Speaker 06:
And that's what we're going to do.

[01:08:50] Speaker 02:
We're going to do whatever guidance the court provides to the commission.

[01:09:02] Speaker 02:
But do you think benefit from or are you asking for?

[01:09:06] Speaker 06:
I think if this court remands for the analysis of substantiality and not just the firms, then I think I ask that we have an opportunity based on, because I don't know yet what the opinion is going to say, that if we need to present additional evidence below in light of the new standard or new guidance to the commission, that we can address that and present evidence with respect to how to allocate it per the three patents.

[01:09:33] Speaker 01:
It wouldn't really be new evidence, right?

[01:09:35] Speaker 01:
I mean, you put the numbers in, it's a question of your slicing and dicing whatever the numbers were to fit the new categorization.

[01:09:42] Speaker 06:
That's precisely right, Your Honor.

[01:09:43] Speaker 06:
Yes, yes, correct.

[01:09:45] Speaker 06:
But it might entail new expert testimony, which would be evidence, for example, right, that would need that.

[01:09:52] Speaker 06:
So that's respect to the domestic industry issue.

[01:09:54] Speaker 06:
With respect to the claim construction issue, I just have one couple of brief points.

[01:09:59] Speaker 06:
Pages 22 and 24 that my colleague on the other side mentioned, they all predicate on this single entity requirement.

[01:10:08] Speaker 06:
And if you actually look at the opinion on page 22 in the middle, they say, well, in this particular

[01:10:15] Speaker 06:
process, the welding process, the temperatures do not rise to the level to reach heat fusion.

[01:10:21] Speaker 06:
And then later, and it has a string of definitions of that welding as requiring melting.

[01:10:28] Speaker 06:
But if you also look at the claim language, and Johanna pointed that claim one, for example, says he has heat fused connections, right?

[01:10:36] Speaker 06:
So the commission below was in the opinion that glue has to be excluded completely from the analysis of heat fusion.

[01:10:42] Speaker 06:
But there are different types of glues.

[01:10:43] Speaker 06:
And there is nothing in claim one that precludes a product from having a heat-fused connection via, for example, glue between the fibers, right?

[01:10:52] Speaker 06:
A fiber can have a heat-fused connection with the glue because you chose to use a specific polymer glue that reacts to heat in a way that heat fusion occurs.

[01:11:02] Speaker 06:
So claim one, it requires this for two fibers to have heat-fused connections.

[01:11:07] Speaker 06:
You can achieve those heat-fuse connections by picking a specific polymer glue and getting heat-fuse connections between fibers and the glue, for example, and that would be within the scope of claim one.

[01:11:18] Speaker 06:
The way that the court construed the term and then applied the term completely excluded, for example, that

[01:11:27] Speaker 06:
that scope from claim one and said you have to have two fibers melted together into a single entity where the single entity definition was so it's not easily separated.

[01:11:39] Speaker 06:
No support in the intrinsic evidence and the intrinsic evidence talks about, the patent talks about that you apply heat so the lashes can begin to fuse, for example, right?

[01:11:50] Speaker 06:
So beginning of fusion is heat fusion, right?

[01:11:54] Speaker 06:
There's the final stage of pure melting

[01:11:57] Speaker 06:
That may be a degree of heat fusion, but that's not the only heat fusion that's within the scope of the claims with respect to that.

[01:12:04] Speaker 06:
And all the findings below with respect to domestic industry were fundamentally rooted in the construction of the requirement of the single entity, so it's not easily separated, followed by interpretations that that requires melting.

[01:12:20] Speaker 06:
and everything becoming one single mass.

[01:12:23] Speaker 06:
And so these factual findings that my colleague on the other side mentioned, they're just wrong because they're based on the wrong construction.

[01:12:30] Speaker 06:
So if the construction is corrected, the commission below has to perform a different analysis.

[01:12:38] Speaker 03:
You have a number of confidential markings in the Joint Appendix.

[01:12:41] Speaker 03:
Yes, one.

[01:12:42] Speaker 03:
It's a little challenging to potentially run an opinion.

[01:12:46] Speaker 03:
Is there a way you can take a second look at some of these markings?

[01:12:53] Speaker 03:
Or are you confident that you have to keep all of them?

[01:12:59] Speaker 06:
There was a district court, there was a trial a few months ago that some of this information became public.

[01:13:05] Speaker 06:
We absolutely can take a look.

[01:13:07] Speaker 06:
And now, in light of that record and see what we can redact if the court would like us to do so.

[01:13:13] Speaker 01:
Thank you.

[01:13:15] Speaker 01:
Thank you.

[01:13:15] Speaker 01:
Thank both sides for cases submitted.