In a June 22, 2018 decision, the U.S. Supreme Court confronted the intersection between patent law and the increasing pace of globalization. With increasing frequency, accused infringers have been citing the presumption against extraterritorial application of U.S. patent laws to limit damage awards in global markets. In WesternGeco L.L.C. v. ION Geophysical Corp., [1] a 7-2 majority of the Court confirmed that the presumption against extraterritoriality does not preclude patent owners from recovering complete compensation for domestic infringement, even if the profits from that infringement arose as a result of subsequent conduct outside of the United States.
In a trilogy of cases decided over the last few years, the Federal Circuit used the presumption against extraterritorial application of U.S. patent law to limit damages awards. [2] By rejecting that approach and focusing on the location of the infringing conduct, the Supreme Court’s decision in WesternGeco enhances the likelihood that, in cases involving global markets, patent owners will recover full compensation for damages suffered from injurious conduct in the United States, regardless of where the damages arising from that injury accrued.
The claim of infringement in WesternGeco arose under 35 U.S.C. § 271(f), a statute enacted primarily to close a loophole in the Patent Act that left patent holders vulnerable to attempts to avoid infringement by moving abroad the mere final combination of components into a patented combination. [3] Specifically, § 271(f) provides that “whoever without authority supplies … from the United States all or a substantial portion of the components of a patented invention … to actively induce the combination of such components outside of the United States in a manner that would infringe the patent … shall be liable as an infringer.”
The precise question presented in WesternGeco was whether “lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f),” but the rationale for the Court’s decision likely will expand the damages available to patent owners generally.
Factual Background
WesternGeco LLC (“WesternGeco”) sued ION Geophysical Corp. (“ION”) alleging that ION had infringed certain patents covering marine seismic survey systems, which are used to search for oil and gas under the ocean floor. The patented systems comprise an array of “streamers” (long floating cables filled with sensors) that can be steered laterally to maintain their spacing and to prevent them from tangling when pulled behind a boat. WesternGeco manufactures and sells products that practice these patents and also performs surveys using those products.
ION made and sold a competing product that helps control the steering of the streamers during marine seismic surveys. ION sold a number of these products to foreign entities that performed surveys using the products at sea, in a manner that would have infringed on WesternGeco’s patents if used in the United States.
At trial, the jury found that ION had infringed four WesternGeco patents under § 271(f) and awarded $93.4 million in lost profits, as well as reasonable royalty from the foreign uses ($12.5 million) and other remedies. [4]
On appeal of the damages award, the Federal Circuit reversed, holding that lost profits could not be awarded on surveys contracted and performed by foreign third parties entirely outside the United States, even where the use of ION’s...
