WesternGeco v. ION was decided by the Supreme Court on June 21, 2018 on appeal from the Southern District of Texas. At trial, the jury found defendant ION liable and awarded plaintiff WesternGeco $12.5 million in royalties and $93.4 million in lost profits. WesternGeco claimed it was entitled to lost profits after “it lost lucrative foreign surveying contracts because ION’s customers used its invention overseas to steal that business.” After trial, ION moved 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. On appeal, the Federal Circuit reversed the lost profits award, holding that the statute does not allow patent owners to recover for lost foreign sales. WesternGeco appealed.
The Supreme Court reversed the Federal Circuit and remanded, holding that Sections 271(f)(2) and 284 “allow the patent owner to recover for lost foreign profits.”
Section 271(f)(2) makes it an act of infringement to supply “in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention.” Patent owners who prove infringement under §271 are entitled to relief under §284, which includes lost profits.
The Supreme Court had to determine whether the case here involved a domestic application of §284 sufficient to make inapplicable the presumption against extraterritoriality. “Courts make this determination by identifying the statute’s ‘focus and asking whether the conduct relevant to that focus occurred in United States territory. If it did, then the case involves a permissible domestic application of the statute.”
The Supreme Court concluded that “the conduct relevant to the statutory focus in this case is domestic,” and thus that “the lost-profits damages that were awarded to WesternGeco were a domestic application of §284.” Section 284 states that “the court shall award the claimant damages adequate to compensate for the infringement.” (emphasis added). According to the Supreme Court, “the infringement” is the focus of §284. And looking to the basis for WesternGeco’s infringement, “[s]ection 271(f)(2) focuses on domestic conduct.” “The conduct that §271(f)(2) regulates—i.e., its focus—is the domestic act of supplying in or from the United States.” Section 271(f)(2) “protects against domestic entities who export components from the United States.”
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Accordingly, “the focus of §284, in a case involving infringement under §271(f)(2), is on the act of exporting components from the United States.” The relevant conduct in this case “clearly occurred in the United States, as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents. Thus, the lost-profits damages that were awarded to WesternGeco were a domestic application of §284.” The focus of §284 is not on the award of damages, as ION argued, because “the damages themselves are merely the means by which the statute achieves its end of remedying infringements.” Moreover, the fact that “lost-profits damages occurred extraterritorially, and [that] foreign conduct subsequent to ION’s infringement was necessary to give rise to the injury” do “not have primacy for purposes of the extraterritoriality analysis.” These “overseas events were merely incidental to the infringement.”
Justice Gorsuch, joined by Justice Breyer dissented, arguing that the Patent Act prohibits lost profits sought for uses of an invention beyond the United States’ borders because “[a] U. S. patent provides a lawful monopoly over the manufacture, use, and sale of an invention within this country only.”
WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129 (2018)