Westerngeco LLC v. ION Geophysical Corp.

138 S.Ct. 2129

201 L.Ed.2d 584

WESTERNGECO LLC, Petitioner

v.ION Geophysical Corporation.

No. 16–1011.

Supreme Court of the United States

Argued April 16, 2018.

Decided June 22, 2018.

Timothy K. Gilman, Leslie M. Schmidt, Kirkland & Ellis LLP, New York, NY, Paul D. Clement, Gregg F. LoCascio, P.C., John C. O'Quinn, William H. Burgess, Kirkland & Ellis LLP, Washington, DC, for Petitioner.

Danielle J. Healey, Brian G. Strand, Bailey K. Benedict, Fish & Richardson P.C., Houston, TX, Justin M. Barnes, Troutman Sanders LLP, San Diego, CA, Kannon K. Shanmugam, David I. Berl, Amy Mason Saharia, Masha G. Hansford, William T. Marks, J. Matthew Rice, Williams & Connolly LLP, Washington, DC, for Respondent.

Justice THOMAS delivered the opinion of the Court.

Under the Patent Act, a company can be liable for patent infringement if it ships components of a patented invention overseas to be assembled there. See 35 U.S.C. § 271(f)(2). A patent owner who proves infringement under this provision is entitled to recover damages. § 284. The question in this case is whether these statutes allow the patent owner to recover for lost foreign profits. We hold that they do.

I

The Patent Act gives patent owners a "civil action for infringement." § 281. Section 271 outlines several types of infringement. The general infringement provision, § 271(a), covers most infringements that occur "within the United States." The subsection at issue in this case, § 271(f), "expands the definition of infringement to include supplying from the United States a patented invention's components." Microsoft Corp. v. AT & T Corp., 550 U.S. 437, 444–445, 127 S.Ct. 1746, 167 L.Ed.2d 737 (2007). It contains two provisions that "work in tandem" by addressing "different scenarios." Life Technologies Corp. v. Promega Corp., 580 U.S. ––––, ––––, 137 S.Ct. 734, 742, 197 L.Ed.2d 33 (2017). Section 271(f)(1) addresses the act of exporting a substantial portion of an invention's components:

"Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such 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, shall be liable as an infringer."

Section 271(f)(2), the provision at issue here, addresses the act of exporting components that are specially adapted for an invention:

"Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and 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."

Patent owners who prove infringement under § 271 are entitled to relief under § 284, which authorizes "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."

II

Petitioner WesternGeco LLC owns four patents relating to a system that it developed for surveying the ocean floor. The system uses lateral-steering technology to produce higher quality data than previous survey systems. WesternGeco does not sell its technology or license it to competitors. Instead, it uses the technology itself, performing surveys for oil and gas companies. For several years, WesternGeco was the only surveyor that used such lateral-steering technology.

In late 2007, respondent ION Geophysical Corporation began selling a competing system. It manufactured the components for its competing system in the United States and then shipped them to companies abroad. Those companies combined the components to create a surveying system indistinguishable from WesternGeco's and used the system to compete with WesternGeco.

WesternGeco sued for patent infringement under §§ 271(f)(1) and (f)(2). At trial, WesternGeco proved that it had lost 10 specific survey contracts due to ION's infringement. The jury found ION liable and awarded WesternGeco damages of $12.5 million in royalties and $93.4 million in lost profits. ION filed a post-trial motion to set aside the verdict, arguing that WesternGeco could not recover damages for lost profits because § 271(f) does not apply extraterritorially. The District Court denied the motion. 953 F.Supp.2d 731, 755–756 (S.D.Tex.2013).

On appeal, the Court of Appeals for the Federal Circuit reversed the award of lost-profits damages. WesternGeco LLC v. ION Geophysical Corp ., 791 F.3d 1340, 1343 (2015).¹ The Federal Circuit had previously held that § 271(a), the general infringement provision, does not allow patent owners to recover for lost foreign sales. See id., at 1350–1351 (citing Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 711 F.3d 1348 (C.A.Fed.2013) ). Section 271(f) should be interpreted the same way, the Federal Circuit reasoned, because it was "designed" to put patent infringers "in a similar position." WesternGeco, 791 F.3d, at 1351. Judge Wallach dissented. See id., at 1354–1364. WesternGeco petitioned for review in this Court. We granted the petition, vacated the Federal Circuit's judgment, and remanded for further consideration in light of our decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. ––––, 136 S.Ct. 1923, 195 L.Ed.2d 278 (2016). WesternGeco LLC v. ION Geophysical Corp., 579 U.S. ––––, 136 S.Ct. 2486, 195 L.Ed.2d 820 (2016).

On remand, the panel majority reinstated the portion of its decision regarding the extraterritoriality of § 271(f). 837 F.3d 1358, 1361, 1364 (C.A.Fed.2016). Judge Wallach dissented again, id., at 1364–1369, and we granted certiorari again, 583 U.S. ––––, 138 S.Ct. 734, 199 L.Ed.2d 601 (2018). We now reverse.

III

Courts presume that federal statutes "apply only within the territorial jurisdiction of the United States." Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285, 69 S.Ct. 575, 93 L.Ed. 680 (1949). This principle, commonly called the presumption against extraterritoriality, has deep roots. See A. Scalia & B. Garner, Reading Law: The Interpretation of Legal Texts § 43, p. 268 (2012) (tracing it to the medieval maxim Statuta suo clauduntur territorio, nec ultra territorium disponunt ); e.g., United States v. Palmer, 3 Wheat. 610, 631, 4 L.Ed. 471 (1818) (Marshall, C.J.) ("[G]eneral words must ... be limited to cases within the jurisdiction of the state"). The presumption rests on "the commonsense notion that Congress generally legislates with domestic concerns in mind." Smith v. United States, 507 U.S. 197, 204, n. 5, 113 S.Ct. 1178, 122 L.Ed.2d 548 (1993). And it prevents "unintended clashes between our laws and those of other nations which could result in international discord." EEOC v. Arabian American Oil Co., 499 U.S. 244, 248, 111 S.Ct. 1227, 113 L.Ed.2d 274 (1991).

This Court has established a two-step framework for deciding questions of extraterritoriality. The first step asks "whether the presumption against extraterritoriality has been rebutted." RJR Nabisco, Inc. v. European Community, 579 U.S. ––––, ––––, 136 S.Ct. 2090, 2101, 195 L.Ed.2d 476 (2016). It can be rebutted only if the text provides a "clear indication of an extraterritorial application." Morrison v. National Australia Bank Ltd., 561 U.S. 247, 255, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010). If the presumption against extraterritoriality has not been rebutted, the second step of our framework asks "whether the case involves a domestic application of the statute." RJR Nabisco, 579 U.S., at ––––, 136 S.Ct., at 2101. Courts make this determination by identifying "the statute's ‘focus' " and asking whether the conduct relevant to that focus occurred in United States territory. Ibid. If it did, then the case involves a permissible domestic application of the statute. See ibid.

We resolve this case at step two. While "it will usually be preferable" to begin with step one, courts have the discretion to begin at step two "in appropriate cases." See id., at ––––, n. 5, 136 S.Ct., at 2101, n. 5 (citing Pearson v. Callahan, 555 U.S. 223, 236–243, 129 S.Ct. 808, 172 L.Ed.2d 565 (2009) ). One reason to exercise that discretion is if addressing step one would require resolving "difficult questions" that do not change "the outcome of the case," but could have far-reaching effects in future cases. See id., at 236–237, 129 S.Ct. 808. That is true here. WesternGeco argues that the presumption against extraterritoriality should never apply to statutes, such as § 284, that merely provide a general damages remedy for conduct that Congress has declared unlawful. Resolving that question could implicate many other statutes besides the Patent Act. We therefore exercise our discretion to forgo the first step of our extraterritoriality framework.

A

Under the second step of our framework, we must identify "the statute's ‘focus.’ " RJR Nabisco, supra, at ––––, 136 S.Ct., at 2101. The focus of a statute is "the objec[t] of [its] solicitude," which can include the conduct it "seeks to ‘regulate,’ " as well as the parties and interests it "seeks to ‘protec[t]’ " or vindicate. Morrison, supra, at 267, 130 S.Ct. 2869 (quoting Superintendent of Ins. of N.Y. v. Bankers Life & Casualty Co., 404 U.S. 6, 12, 10, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971) ). "If the conduct relevant to the statute's focus occurred in the United States, then the case involves a permissible domestic application" of the statute, "even if other conduct occurred abroad." RJR Nabisco, 579 U.S., at ––––, 136 S.Ct., at 2101. But if the relevant...