WesternGeco LLC v. ION GeoPhysical: U.S. Supreme Court Issues Decision on Patent Damages

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On June 22, the Supreme Court issued its opinion in WesternGeco LLC v. ION GeoPhysical, which addresses the ability of a patent owner to collect lost profits from sales abroad for infringement under 35 U.S.C. § 271(f)(2). Under this subsection of the Patent Act, it is an act of infringement to supply components of an invention to be combined overseas in an infringing device. The Court—in a 7-to-2 decision—held that lost profits are available from foreign sales for a patent owner who proves such infringement.

Importantly, the Court rejected the categorical rule that damages must be limited to domestic sales. On the other hand, it expressly did not address the broader issues of causation raised during oral argument. Moreover, Justice Thomas—and the six justices who joined in the majority opinion—indicated in a footnote that the Court’s analysis was limited to infringement under 35 U.S.C. §271(f)(2) thus signaling that this decision is intended to apply only to damages associated with infringement under that very specific subsection of the Patent Act. 

Nonetheless, it can be expected that there will be much consternation about the broader implications of the Court’s ruling. For example, the Court drew what it deemed to be an important distinction between “legal injury” and the “damages arising from that injury.” It held that, because § 271(f)(2)—which is focused on the act of exporting components from the United States—is directed to a domestic injury, the lost profits damages suffered by WesternGeco were simply those damages flowing from that injury. It is likely that patentees in future cases will grasp to apply this same logic to justify capturing damages from extraterritorial sales in other situations.

In the end, regardless of its breadth, the Court’s holding will have real world implications. While the White House has been focused on bringing manufacturing back to America, U.S. companies that do business globally now have an additional motivation to move the entirety of their manufacturing offshores.

 

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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