ANNOUNCEMENT 22 Jun 2018
This decision may strengthen the extraterritorial application of U.S. patent law, especially in cases involving the assembly abroad of exported U.S. components.
NUMBER OF INTERVENTIONS
On June 22, 2018, the U.S. Supreme Court reached a 7-2 decision in the case of WesternGeco LLC v. Ion Geophysical Corp. (Docket No. 16-1011) that may extend the territorial reach of U.S. patents. The majority found that damages awards for infringement under U.S. patent law (35 U.S.C. §271(f)(2)) may include foreign lost profits, a ruling that may have a significant effect on companies that export components that are assembled abroad into finished products. “The principal result of WesternGeco,” according to one legal analysis, “is that companies exporting components of potentially-infringing products can be subject to claims for lost profit damages when those products used abroad infringe United States patents.” That same analysis observed that “it is possible that the WesternGeco decision may spur Congress to address patent damages for foreign uses of infringing products under other provisions of 35 U.S.C. §271.”
In this case the patent holder (WesternGeco) owned the intellectual property for “streamer positioning devices,” machines that map the ocean floor and thus aid in natural resource discovery. The accused infringer (Ion Geophysical Corp.) exported components of an infringing survey system from the United States to foreign companies that then assembled these components into finished systems. WesternGeco sued Ion for infringement based on the export of a patented invention’s components, winning damages in court both for a royalty award ($12.5 million) and a lost profits award ($93.4 million). It is that latter part of the award that was at issue in the Supreme Court decision. The court held that foreign lost profits are available to a patent owner under U.S. patent law, and do not violate the presumption against the extraterritorial application of statutes. “The conduct in this case that is relevant … clearly occurred in the United States,” according to the majority, focusing on the infringing company’s “domestic act of supplying the components that infringed WesternGeco’s patents.”
Justices Gorsuch and Breyer dissented from this opinion. “A U.S. patent provides a lawful monopoly over the manufacture, use, and sale of an invention within this country only,” according to the dissenting justices’ opinion, but permitting the recovery of damages “of this sort would effectively allow U.S. patent owners to use American courts to extend their monopolies to foreign markets. That, in turn, would invite other countries to use their own patent laws and courts to assert control over our economy. Nothing in the terms of the Patent Act supports that result and much militates against it.”