WesternGeco LLC v. Ion Geophysical Corp.


Docket No. 16-1011

PROST, MOORE, STOLL
June 22, 2018

Brief summary: SCOTUS reversed the FC, holding that WG’s “award for [extraterritorial] lost profits was a permissible domestic application of §284”.

Summary: WesternGeco (WG) sued Ion Geophysical (ION), alleging ION infringed claims of four patents under §§271(f)(1) and (f)(2) (“address[ing] the act of exporting components that are specially adapted for an invention”; enacted as “a direct response to a gap in our patent law” (Microsoft, US 2007)) by selling a competing system for surveying the ocean floor “built from components manufactured in the [US], shipped to companies abroad, and assembled there into a system indistinguishable from” WG’s. The jury found ION liable and awarded [WG] damages in royalties and lost profits under §284”, the DC denied ION’s motion to set aside the verdict “arguing that [WG] could not recover damages for lost profits because §271(f) does not apply extraterritorially”, and in 2015 an FC panel reversed (stating that “§271(a), the general infringement provision, does not allow patent owners to recover for for lost foreign sales” (citing Power Integrations, FC 2013)). SCOTUS remanded the FC’s decision under Halo (US 2016) and in 2016 the FC “reinstated the portion of its decision regarding §271(f)’s extraterritoriality.” In this decision, SCOTUS reversed the FC, holding that WG’s “award for [extraterritorial] lost profits was a permissible domestic application of §284”. SCOTUS explained that “[t]he presumption against extraterritoriality assumes that federal statutes ‘apply only within the territorial jurisdication of the” US, and whether that presumption has been rebutted is determined by asking “whether the case involves a domestic application of the statute” (“identifying ‘the statute’s ‘focus’”). That question is answered by “asking whether the conduct relevant to that focus occurred in [US] territory”, which is “not analyzed in a vacuum” (“If it works in tandem with other provisions, it must be assessed with those provisions.”) “Here, §271(f)(2) was the basis for WG’s infringement claim and lost-profits damages” and “the focus of §284 in a case involving infringement under §271(f)(2) is on the act of exporting components from the” US (“[p]atent owners who prove infringement under §271 are entitled to relief under §284”) (Microsoft, US 2007; Life Tech., US 2017). And “the conduct of this case that is relevant to the statutory focus clearly occurred in the” US, “[t]he award of damages…not” being “the focus here”. Instead, SCOTUS wrote, “[t]he damages themselves are merely the means by which the statute achieves its end of remedying infringements,” (“‘the infringement’ is the focus of this statute”) “and the overseas events giving rise to the lost-profit damages here were merely incidental to the infringement.” SCOTUS explained that “[i]n asserting that damages awards for foreign injuries are always an extraterritorial application of a damages provision, ION misreads a portion of RJR Nabisco that interpreted a substantive element of a cause of action, not a remedial damages provision” (RJR, US 2016; General Motors, US 1983 (“the overriding purpose’ of §284 is to ‘affor[d] patent owners complete compensation’ for infringements”)). Justice Gorsuch (joined by Justice Breyer) dissented, arguing, e.g., that “[a] U.S. patent provides a lawful monopoly over the manufacture, use, and sale of an invention within this country only” but WG “seeks lost profits for uses of its invention beyond our borders.”

This entry was posted in Damages, Lost Profits, U.S. Supreme Court. Bookmark the permalink.

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