{"id":98629,"date":"2018-06-22T13:25:34","date_gmt":"2018-06-22T17:25:34","guid":{"rendered":"https:\/\/ipwatchdog.com\/?p=98629"},"modified":"2019-02-26T10:52:34","modified_gmt":"2019-02-26T15:52:34","slug":"supreme-court-win-patent-owners-lost-foreign-profits-westerngeco-v-ion-geophysical","status":"publish","type":"post","link":"https:\/\/ipwatchdog.com\/2018\/06\/22\/supreme-court-win-patent-owners-lost-foreign-profits-westerngeco-v-ion-geophysical\/id=98629\/","title":{"rendered":"Supreme Court win for Patent Owners on Lost Foreign Profits in WesternGeco v. ION Geophysical"},"content":{"rendered":"

\u201dThe question in this case is whether these statutes allow the patent owner to recover for lost foreign profits. We hold that they do.\u201d<\/p>\n<\/div>\n

\"\"<\/a>

Justice Clarence Thomas. Public Domain.<\/p><\/div>\n

Earlier today the United States Supreme Court issued a decision in WesternGeco LLC v. ION Geophysical Corp.<\/em><\/a>, which in a 7-2 decision ruled that a patent owner may recover lost foreign profits for infringement under 35 U. S. C. 271(f)(2)<\/a>. \u00a0The question decided, as set forth in the opinion by Justice Thomas, writing for the majority, was: \u201cThe question in this case is whether these statutes allow the patent owner to recover for lost foreign profits.\u201d Thomas simply answered the question in the opening paragraph saying: \u201cWe hold that they do.\u201d<\/p>\n

The prototypical patent infringement action occurs when someone without authority makes, uses, offers for sale, sells, or imports any patented invention within the United States. See <\/em>35 U.S.C. 271(a)<\/a>. Section 271(f)(2) expands the definition of what qualifies as infringement to encompass the supplying of a patented invention\u2019s components from within the United States. There are caveats in Section 271(f)(2), such as the component must not be a \u201cstaple article or commodity of commerce suitable for substantial noninfringing use\u201d. Further, the supplier must know that the component supplied from within the United States is made or adapted that \u201csuch component will be combined outside the United States in a manner that would infringe the patent is such combination occurred within the United States.\u201d Further still, there must be intent.<\/p>\n

\"[[Advertisement]]\"<\/a><\/div>\n

The dispute between WesternGeco, a company that develops technology for surveying the ocean floor, and ION Geophysical Corporation, a competitor, dates back to late 2007. In late 2007, ION began manufacturing components for its competing surveying system and shipping them to companies abroad. Those companies combined the components to create the surveying system that was indistinguishable from WesternGeco\u2019s patented systems.<\/p>\n

WesternGeco sued for patent infringement under \u00a7\u00a7271(f)(1) and (f)(2). At trial, WesternGeco proved that it had lost 10 specific survey contracts due to ION\u2019s infringement. The jury found ION liable and awarded WesternGeco damages of $12.5 million in royalties and $93.4 million in lost profits. ION filed a post-trial motion to set aside the verdict, arguing that WesternGeco could not recover damages for lost profits because \u00a7271(f) does not apply extraterritorially. The District Court denied the motion. 953 F. Supp. 2d 731, 755\u2013756 (SD Tex. 2013).<\/p>\n

On appeal, the Federal Circuit found ION liable for infringement under \u00a7271(f)(1) but reversed the award of lost-profits damages under \u00a7271(f)(2). WesternGeco LLC <\/em>v. ION Geophysical Corp<\/em>.<\/a>, 791 F. 3d 1340 (2015). The Federal Circuit had previously held that \u00a7271(a), the general infringement provision, does not allow patent owners to recover for lost foreign sales. See Power Integrations, Inc. v. Fairchild Semiconductor Int\u2019l, Inc.<\/a><\/em>, 711 F. 3d 1348 (Fed. Cir. 2013). The Federal Circuit reasoned that Section 271(f) should be interpreted the same way.<\/p>\n

While the Supreme Court acknowledged that courts ordinarily presume that statutes apply only within the territorial jurisdiction of the United States, quoting Foley Bros. v. Filardo<\/em><\/a>, 336 U.S. 281, 285 (1949), Justice Thomas explained there is an established two-step framework to decide questions of extraterritoriality. RJR Nabisco, Inc. <\/em>v. European Community<\/em><\/a>,\u00a0136 S.Ct. 2090 (2016). The first step asks whether the presumption of extraterritoriality has been rebutted. If the presumption of extraterritoriality has not been rebutted, the second step asks whether the case involves a domestic application of a statute, and whether the conduct relevant to that focus occurred in the United States territory. If it did, then the case involves a permissible domestic application of the statute.<\/p>\n

While ordinarily courts address the first step first, in this case the Supreme Court exercised its discretion to forgo the first step and address the second prong of the test. They did this, no doubt, because they concluded that the conduct relevant to the statutory focus was domestic.<\/p>\n

Justice Thomas explained:<\/p>\n

Section 271(f)(2) focuses on domestic conduct. It provides that a company \u201cshall be liable as an infringer\u201d if it \u201csupplies\u201d certain components of a patented invention \u201cin or from the United States\u201d with the intent that they \u201cwill be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States.\u201d The conduct that \u00a7271(f)(2) regulates\u2014i.e., its focus\u2014is the domestic act of \u201csuppl[ying] in or from the United States.\u201d As this Court has acknowledged, \u00a7271(f) vindicates domestic interests: It \u201cwas a direct response to a gap in our patent law,\u201d Microsoft Corp., 550 U. S., at 457, and \u201creach[es] components that are manufactured in the United States but assembled overseas,\u201d Life Technologies, 580 U. S., at ___ (slip op., at 11). As the Federal Circuit explained, \u00a7271(f)(2) protects against \u201cdomestic entities who export components . . . from the United States.\u201d 791 F. 3d, at 1351.<\/p><\/blockquote>\n

Thomas would go on to rather emphatically state: \u201cThe conduct in this case that is relevant to that focus clearly occurred in the United States, as it was ION\u2019s domestic act of supplying the components that infringed WesternGeco\u2019s patents.\u201d<\/p>\n

To the dissenters \u2013 Justices Gorsuch and Breyer \u2013 Thomas and the majority made a rather stinging rebuke, correctly recognizing: \u201cTheir position wrongly conflates legal injury with the damages arising from that injury.\u201d<\/p>\n

The opinion concludes rather powerfully stating:<\/p>\n

[A] patent owner is entitled to recover \u201c\u2018the difference between [its] pecuniary condition after the infringement, and what [its] condition would have been if the infringement had not occurred.\u2019\u201d Aro Mfg. Co., supra, at 507. This recovery can include lost profits. See Yale Lock Mfg. Co. v. Sargent, 117 U. S. 536, 552\u2013553 (1886). And, as we hold today, it can include lost foreign profits when the patent owner proves infringement under \u00a7271(f)(2).<\/p><\/blockquote>\n

The only caveat of consequence is found in footnote 3, which states the Court did not address matters of proximate cause that could limit or preclude damages in particular cases, which obviously makes sense.<\/p>\n

This one is a win for patent owners. About time!<\/p>\n","protected":false},"excerpt":{"rendered":"

Earlier today the United States Supreme Court issued a decision in WesternGeco LLC v. ION Geophysical Corp., which in a 7-2 decision ruled that a patent owner may recover lost foreign profits for infringement under 35 U. S. C. 271(f)(2). The question decided, as set forth in the opinion by Justice Thomas, writing for the majority, was: \u201cThe question in this case is whether these statutes allow the patent owner to recover for lost foreign profits.\u201d Thomas simply answered the question in the opening paragraph saying: \u201cWe hold that they do.\u201d<\/p>\n","protected":false},"author":19234,"featured_media":98635,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","footnotes":"","_links_to":"","_links_to_target":""},"categories":[7202,228,3,586],"tags":[10730,3076,14834,10063,317,12050,1241,248],"yst_prominent_words":[28784,15330,28790,28789,28788,28786,28776,28782,28780,15834,28785,28787,28779,28778,28791,28783,28777,16486,28781,28792],"acf":[],"_links":{"self":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/posts\/98629"}],"collection":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/users\/19234"}],"replies":[{"embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/comments?post=98629"}],"version-history":[{"count":0,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/posts\/98629\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/media\/98635"}],"wp:attachment":[{"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/media?parent=98629"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/categories?post=98629"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/tags?post=98629"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/ipwatchdog.com\/wp-json\/wp\/v2\/yst_prominent_words?post=98629"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}