WesternGeco LLC. V. ION Geophysical Corp

This is a follow-up on WesternGeco LLC v. ION Geophysical Corp., (respectively, “WesternGeco” and “ION”) from our article in the Winter 2018 newsletter.  On June 22, 2018, the Supreme Court of the United States (“Supreme Court”) reversed the judgment of the United States Court of Appeals for the Federal Circuit. In doing so, the Supreme Court held that a patent owner may recover lost foreign profits, under 35 U.S.C. § 284, for infringement under 35 U.S.C § 271(f)(2).

With Justice Clarence Thomas writing the majority opinion for this case, the Supreme Court first stated the two-prong framework used to decide whether § 271(f)(2) applied to damages outside the United States was: (1) whether the presumption of extraterritoriality has been rebutted, and (2) whether the case involves a domestic application of the statute. However, the Supreme Court used its discretion to refrain from resolving the first prong because addressing it would require the analysis of several other statutes that were not a subject of the WesternGeco”™s case.

The Supreme Court proceeded to resolve the second prong by identifying the focus of the relevant statutory provisions, and determining whether the conduct relevant to that focus occurred in the United States. The Supreme Court emphasized that statutory provisions must be assessed in light of any accompanying provisions.  Subsequently, the Supreme Court analyzed the general patent infringement damages provision and found that “§ 284, in a case involving infringement under § 271(f)(2), is on the act of exporting components from the United States.” Accordingly, the Supreme Court concluded ION”™s domestic act of supplying certain infringed components from the United States constituted infringement under § 271(f)(2).

Additionally, the Supreme Court rejected ION”™s argument that this case required an extraterritorial application of §284 by concluding that the foreign conduct was merely incidental to ION”™s infringement, and therefore, the analysis of extraterritorial application did not need consideration.

Lastly, the Supreme Court majority stated that adequate compensation for domestic acts of infringement under § 284 required placing the patent owner “in as good a position as he would have been in if the patent had not been infringed.”  Because WesternGeco successfully demonstrated ION’s domestic act – supplying the components that infringed WesternGeco’s patents – resulted in the loss of at several foreign contracts, the Supreme Court held that the district court correctly awarded damages based on WesternGeco”™s  foreign lost-profits caused by ION”™s infringement under § 271(f)(2).  

However, it is important to note that the majority did not address the topic of proximate cause, which could limit or preclude damages in particular cases, due its fact specific nature.