Supreme Court Allows for Patent Damages Incurred Outside the United States

Knobbe Martens

Knobbe Martens

The Supreme Court issued an important pro-patent-owner decision affecting multinational corporations.  In WesternGeco LLC v. ION Geophysical Corp., in a 7-2 decision, the Supreme Court held that a patentee may recover foreign lost profits from an infringer who violates 35 U.S.C. § 271(f)(2) by exporting from the United States a component especially adapted for use in a patented invention.  The issue on appeal was whether the damages award was a permissible domestic application of the patent statute, or whether the damages award violated the presumption that federal statutes apply only within the territorial jurisdiction of the United States.  The Court held that the focus of § 271(f)(2) is on domestic conduct—exporting components of a patented invention from the United States.  A damages award for violation of § 271(f)(2) is “merely the means by which the statute achieves its end of remedying infringements.”  Accordingly, an award of foreign lost profits is not an extraterritorial application of the patent statute. 

This decision directly impacts cases involving international sales, where the accused infringer exports components especially adapted for use in infringing products for assembly abroad.  The Court’s decision was limited to § 271(f)(2) and expressly left open the question as to whether the result would be the same for violations of § 271(f)(1).  However, the Court’s reasoning would appear to extend to infringements under § 271(f)(1), where the accused infringer exports all or a substantial portion of an invention’s components, even if none of those components is especially adapted for use in that invention.  It also remains to be seen whether the Court’s decision will affect other sections of the patent statute. 

While the Supreme Court’s decision exposes accused infringers to worldwide damages, points of contention remain.  For example, accused infringers in future cases may argue they could have avoided infringement by manufacturing the accused component internationally, thereby foreclosing lost profits on any lost international sales.  Juries, therefore, will need to weigh whether shifting manufacturing overseas would have been practical or realistic.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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