U.S. SUPREME COURT PERMITS RECOVERY OF LOST FOREIGN PROFITS FOR U.S. PATENT INFRINGEMENT
Posted on Jun 25, 2018 in News
The U.S. Supreme Court has now ruled that a U.S. Patent holder can recover lost foreign profits outside of the United States – that resulted from U.S. patent infringement. WesternGeco v. Ion Geophysical, 16-1011,June 22, 2018.
WesternGeco owns several U.S. patents for a system that surveys the ocean floor. Ion infringed those U.S. patents when Ion shipped components of an infringing system to companies abroad. Those foreign companies subsequently received ocean survey contracts that WesternGeco would have received – if the components of the infringing system had not been sold to those companies by Ion. The court ruled that WesternGeco was entitled to the lost foreign profits that resulted from Ion’s infringing acts.
The question came down to what is called the “presumption against extraterritoriality.” Courts presume that federal statutes “apply only within the territorial jurisdiction of the United States.” But there is a two-step process for determining if the presumption exists. Step 1 is to determine “whether the presumption against extraterritoriality has been rebutted.” This step requires that the text of a statute provide a “clear indication of an extraterritorial application.” Step 2 is to determine “whether the case involves a domestic application of the statute.”
The statute in question, 35 U.S.C. 271(f)(2), defines a U.S. patent infringer as one who “without authority supplies …from the United States any component of a patented invention…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…” The court analyzed the statute and concluded that the focus of the statute was on the act of exporting components from the United States. Ion’s actions that created the lost profits – infringement by exporting components of patented systems – occurred in the United States. Therefore the court concluded that WesternGeco was entitled to lost profits.
This opinion allows U.S. patent owners to pursue damages that were previously unavailable to them, and thus may significantly increase damage awards.