Is the Federal Circuit’s Holding that the Presumption Against Extraterritoriality Making
Unavailable Damages Based on a Patentee’s Foreign Lost Profits from Patent Infringement
Consistent with 35 U.S.C. § 271(f)?
This article originally was published in PREVIEW of United States Supreme Court Cases, a
publication of the American Bar Association.
By Kean DeCarlo
WesternGeco LLC v. ION Geophysical Corporation
Docket No. 16-1011
Argument Date: April 16, 2018
From: The Federal Circuit
Case at a Glance: The Court will consider whether the text of 35 U.S.C. § 271(f) imposes
liability on those supplying from the United States components of a patented invention “in such a
manner as to actively induce the combination of such components outside of the United States in
a manner that would infringe the patent if such combination occurred within the United States,”
and whether that liability also relates to the issuance of full compensatory damages where such
infringement is found. Section 271(f) specifically targets domestic conduct (supplying
components in or from the United States) with an intent that the components will be assembled
abroad. The jury here found that respondents violated Section 271(f) by shipping components of
petitioners’ patented invention for assembly and use abroad. Because the intended foreign
combination occurred and caused petitioners reasonably foreseeable harms, the jury awarded
over $93 million in lost profits. The Federal Circuit, however, through application of the
presumption against extraterritoriality, reversed the award of lost profits that would have been
earned abroad. The Supreme Court will now consider whether the Federal Circuit’s holding that
lost profits arising from prohibited combinations occurring outside of the United States are
unavailable in cases in which patent infringement is proven under Section 271(f) is proper under
the statute.
Issue
Did the Federal Circuit err in holding that lost profits arising from prohibited combinations
occurring outside of the United States are categorically unavailable in cases in which patent
infringement is proven under 35 U.S.C. § 271(f)?
Introduction
By statute, patent owners who prove infringement are entitled to “damages adequate to
compensate for the infringement, but in no event less than a reasonable royalty for the use made
of the invention by the infringer.” 35 U.S.C. § 284 (emphasis added). What damages are
“adequate to compensate for the infringement” depends on the application of general tort
principles to the facts of each case and can include lost profits in appropriate cases. Section 284
applies to damages for infringement under Section 271(f).
Congress adopted Section 271(f) in response to the Supreme Court’s decision in Deepsouth
Packing Co. v. Laitram Corp., 406 U.S. 518 (1972). In Deepsouth, the defendant sold a machine
covered by a patent, but never assembled the full machine in the United States. Instead, the
defendant shipped components in three boxes to customers abroad, who could assemble the
machine within an hour. By a 5–4 vote, the Court held that the defendant could not be liable for
infringement under then-existing Section 271 because the defendant’s customers’ acts all took
place abroad and the defendant did not make, use, sell, or offer to sell the entire patented
machine in the United States, nor induce or contribute to such acts occurring in the United States.
Congress enacted Section 271(f) to close what it viewed as “a loop-hole” in patent law. 130
Cong. Rec. H10525 (1984). The Senate Report accompanying the final bill described Section
271(f) as a “reversal of Deepsouth.” S. Rep. No. 98-663 (1984).
As enacted, Section 271(f) defined liability as an infringer for whoever, with the requisite mental
state, exports components of a patented invention from the United States for combination
“outside of the United States in a manner that would infringe the patent if such combination
occurred within the United States.” In enacting Section 271(f), Congress treated a specific action
within the United States (exporting from the United States with the intent to combine abroad) as
sufficient to impose liability, knowing full well that the combination and ultimate use would
occur abroad. The Court has previously described Section 271(f) as an “exception” to “the
general rule under United States patent law that no infringement occurs when a patented product
is made and sold in another country.” Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007).
The instant case requires the Court to assess whether the Federal Circuit’s adoption of a
presumption against extraterritoriality in denying lost profit damages arising from proven
infringement by prohibited combinations occurring outside of the United States is consistent with
the statutory text and intent of 35 U.S.C. § 271(f).
Facts
WesternGeco LLC. v. ION Geophysical Corp. (WesternGeco II), 791 F.3d 1340 (Fed. Cir.
2015), addressed a patent infringement suit by WesternGeco LLC (petitioner) against ION
Geophysical Corp. (respondent) for infringement of, inter alia, United States Patent Nos.
6,691,038, 7,080,607, 7,162,967, and 7,293,520. WesternGeco’s patents relate to marine seismic
surveys, which are used to search for oil and gas beneath the ocean floor. WesternGeco’s patents
cover a system for controlling the movement of towed streamers in a manner that produces more
efficient surveys and higher-quality data. ION manufactures components of a similar survey
system in the United States that, when assembled, embodies WesternGeco’s patented invention
and exported the components to customers abroad, who assembled the system and used it to
perform surveys on the high seas in competition with petitioner.
