Patent Owners can Recover for Lost Foreign Profits

July 03, 2018
Post by Blog Staff

On June 22, 2018, in WesternGeco, LLC v. ION Geophysical Corporation, the Supreme Court held that patent owners can recover for lost foreign profits based on 35 U.S.C. § 271(f)(2). The statute states that “[W]however without authority supplies or causes to be supplied in or from the United States any component of a patented invention ... intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.”

WesternGeco, LLC owns four patents related to surveying the ocean floor. In 2007, ION Geophysical Corporation began selling components for an ocean floor surveying system. The components were manufactured in the United States and then shipped overseas where they were assembled to produce a system indistinguishable from WesterGeco’s system.

WesternGeco sued under 35 U.S.C. § 271(f)(1) and (f)(2), and the trial court found that ION had infringed and awarded WesternGeco damages for lost profits. The Federal Circuit reversed the award of lost profits, and the Supreme Court vacated and remanded the decision. The Federal Circuit then reinstated its holding of no damages for loss of profit based on extraterritoriality. The Supreme Court now reversed that decision holding that patent owners can recover for lost foreign profits.

The Court addressed the presumption against extraterritoriality that federal statutes should only apply within the United States. The Court identified a two-step test when considering extraterritoriality. The first step is to determine “whether the presumption against extraterritoriality has been rebutted.” The Court exercised its discretion and ignored this step because pursing it may have created extraterritoriality questions for other statutes. The second step is to determine “whether the case involves a domestic application of the statute.” Courts consider the “the statute’s focus” when answering step 2.

The Court considered 35 U.S.C § 284, which regulates damages related to patent infringement, and § 271(f)(2). Based on the § 271(f)(2)’s language regulating the supply of components “in or from the United States”, the Court concluded that the focus of these two statutes in conjunction is the domestic act of exporting components of patented inventions from the United States. Therefore, the Court held that the award of damages for lost profits was a domestic application of § 284 and reversed the Federal Circuit’s decision to not allow the damages. This decision opens the door for patent owners being able to recover for lost foreign profits.

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