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WesternGeco LLC v. Geophysical Corp. – Whether lost profits cumulated abroad for infringement can be brought into U.S. court

| Category: Intellectual Property News

On January 12, 2018, the U.S. Supreme Court (“Supreme Court”) granted certiorari in WesternGeco LLC v. ION Geophysical Corporation, to determine “[w]hether the court of appeals erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven 35 U.S.C. § 271(f).”  Petition for a Writ of Certiorari at i., 2018 WL 386561 (No. 16-1011).  This case questions whether a remedy of enhanced damages from a patent infringement case includes damages accrued outside the United States.

The case stems from a complaint filed by WesternGeco L.L.C. (“WesternGeco”), alleging that ION Geophysical Corp. (“ION”) infringed upon WesternGeco’s four patents, U.S. Patent Nos. 6,691,038, 7,080,607, 7,162,967, and 7,293,520.  At District Court, the jury found infringement and no invalidity and awarded WesternGeco $93.4 million in lost profits and a reasonable royalty of $12.5 million.  After some back and forth between the District Court, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”), and the Supreme Court, the Federal Circuit ruled on July 2015 that ION cannot be liable for lost profits that have occurred outside of the United States and reversed the District Court’s award of the lost profits. Federal Circuit Judge Dyk, writing for the majority, reasoned his decision by stating that “[t]here is no indication in [enacting Section 271(f)], Congress intended to extend the United States patent law to cover uses abroad of the articles created from the exported components.”  791 F.3d 1340, 1350 (2015).

However, this judgment was vacated and remanded back to the Federal Circuit for further consideration in light of Halo Electronics, Inc. v. Pulse Electronics. On remand, the Federal Circuit in September 2016 vacated the District Court’s judgment of no willful infringement by ION and asked the District Court to reconsider the enhanced damages, reaffirming Halo’s holding that the determination of enhanced damages for patent infringement is left to the discretion of the District Court and that the preponderance of the evidence standard was to be used in evaluating sufficiency of evidence of willful infringement.

Subsequently, WesternGeco filed a petition for certiorari to the Supreme Court, arguing that even though U.S. patent law does not apply outside the United States when determining liability, there should not be any similar limit on damages.  ION filed a brief in opposition, providing that nothing in patent law “permits for damages based on subsequent use overseas, especially in light of the presumption against extraterritorial application of the patent laws.”  The U.S. Government, however, disagreed with ION and filed a brief in support of WesternGeco, asserting that the Federal Circuit erred in its holding because “the Patent Act guarantees to a prevailing patent owner ‘damages adequate to compensate for the infringement.’”

By granting certiorari to this issue, the Supreme Court is finally answering the question of lost profits for infringement abroad.  Getting an answer from the Supreme Court will shed light on U.S. patent law and its territorial limits on damages generally and potentially on proximate cause.  In any case, multinational companies should pay close attention to this case; if the Supreme Court finds in favor of WesternGeco, multinational companies will soon find a reason to file suits against infringers in the United States, even if the infringement occurred outside the United States.

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