In a much-anticipated patent infringement ruling, the U.S. Supreme Court recently expanded the scope of damages under certain circumstances. The issue was whether the patent holder, which had proven a domestic act of infringement, was entitled to lost profits related to the use of components of a patented device outside the United States.
WesternGeco LLC developed and patented technology used in geological surveys to search for oil and gas under the ocean floor. The company never sold its technology or licensed its patents. Instead, it performed surveys directly for oil companies. It had no competitors. In 2007, ION began shipping components to surveying companies abroad, which those companies combined into a surveying system that violated WesternGeco’s patents. In 2009, WesternGeco sued, claiming it lost survey contracts to ION’s foreign customers and also was forced to lower its prices to compete with the latter.
A jury awarded WesternGeco $12.5 million in reasonable royalty and $93.4 million in lost profits. On appeal, a majority of the Federal Circuit found liability but struck the lost profits award, finding, under the applicable law, WesternGeco could not recover for lost foreign profits. WesternGeco petitioned the Supreme Court for review.
The case implicated Sections 271(f)(1) and (f)(2) of the Patent Act as well as the presumption against extraterritoriality. Section 271(f) addresses the exporting of components of a patented invention. The extraterritoriality presumption states that U.S. laws apply only within the territorial jurisdiction of the United States. Patent owners proving infringement under § 271 are entitled to relief under § 284 of the Patent Act’s general damages provision, which provides for “damages adequate to compensate for the infringement” and no less than a reasonable royalty.
In a very technical opinion by Justice Clarence Thomas, the Supreme Court said the focus of § 284 is “the infringement.” To determine the focus in a given case, it is necessary to identify the type of infringement that occurred. The focus of § 284 in a case arising under § 271(f)(2) was the act of exporting components from the U.S., not the overseas use, said the court. In the instant case, the conduct relevant to “that focus clearly occurred in the United States, as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents,” the court said.
The Supreme Court dismissed ION’s argument that the focus of the statute was “self-evidently on the award of damages.” According to the high court, “the damages themselves are merely the means by which the statute achieves its end of remedying infringements.” Further, the overseas events that gave rise to the lost profit damages were “merely incidental to the infringement,” the court found.
The Supreme Court reversed the Federal Circuit’s decision and remanded.
A copy of the Supreme Court’s opinion in WesternGeco LLC v. ION Geophysial Corp., 585 U.S. ___ (June 22, 2018), and further analysis, is available at scotusblog.