Supreme Court to Address International Patent Damages

Supreme Court to Address International Patent Damages

The U.S. Supreme Court recently granted certiorari in WesternGeco LLC (Schlumberger) v. ION Geophysical Corp. The key question before the Court is whether lost profits incurred outside of the United States are recoverable in patent infringement cases.

Recovering Patent Damages 

Under the Patent Act of 1952, when a patent owner prevails in an infringement action, “the court shall award the claimant 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.” Such damages may include lost profits that the patent owner would have earned but for the infringement. Yale Lock Mfg. Co. v. Sargent, 117 U.S. 536, 552-553 (1886).

Issues in WesternGeco LLC (Schlumberger) v. ION Geophysical Corp.

WesternGeco developed and patented technology used in geological surveys to search for oil and gas under the ocean floor. In late 2007, ION Geophysical Corp. began selling a competing survey system. ION shipped components of its system from its Louisiana warehouse to surveying companies abroad for those companies to combine the components into a surveying system. Equipped with ION’s system, ION’s customers would compete directly with WesternGeco for survey contracts.

WesternGeco sued ION for infringement under 35 U.S.C. §§ 271(f). Under 35 U.S.C. § 271(f), it is an act of patent infringement to supply “components of a patented invention,” “from the United States,” knowing or intending that the components be combined “outside of the United States,” in a manner that “would infringe the patent if such combination occurred within the United States.”

The jury found ION liable for patent infringement and awarded damages, which included a $12.5 million royalty component and a $93.4 million lost profits component. The district court upheld the verdict.

Despite affirming ION was liable for infringement under § 271(f), the majority of a divided panel of Federal Circuit held that WesternGeco was not entitled to lost profits. The court of appeals reasoned that even when Congress has overridden the presumption against extraterritorial application of the law in creating liability, the presumption must be applied a second time to restrict damages. The dissenters disagreed with the interpretation, arguing that it created a “near-absolute bar to the consideration of a patentee’s foreign lost profits [that] is contrary to the precedent both of this court and was rejected by the Federal Circuit of the Supreme Court.”

After WesternGeco’s petition for rehearing en banc was rejected by the Federal Circuit, it appealed to the U.S. Supreme Court. The specific question the Court has agreed to consider is:

Whether the U.S. Court of Appeals for the Federal Circuit erred 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)?

The Court has scheduled oral arguments in this case for April 16, 2018(with Justice Alito being recused). A decision is expected before the term ends in June. We will continue to track the progress of this case and will post updates as they become available.

If you have any questions about the case, please contact us

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, David Einhorn, or the Scarinci Hollenbeck attorney with whom you work at 201-806-3364.