Supreme Court Reverses Federal Circuit And Holds That Patent-Infringement Damages Suffered Overseas May Be Recoverable Under U.S. Patent Law
On June 22, 2018, the United States Supreme Court reversed the Court of Appeals for the Federal Circuit (CAFC) on the issue of whether damages suffered overseas can be recovered as remedy for infringement under the U.S. patent laws. WesternGeco LLC v. ION Geophysical Corp., 585 U.S. ____, case no. 16-1011. The Supreme Court ruled that such damages can be recoverable.
One way to infringe a U.S. patent is to supply specialized components of a patented invention in or from the United States, knowing that the components are especially made for use in the invention and intending that the components will be combined into the patented invention outside the United States. 35 U.S.C. 271(f)(2). In this case, alleged infringer ION made components of a patented surveying system in the United States and shipped them to companies overseas, who combined the components into the patented system. Patent owner WesternGeco sued for infringement and sought to collect as damages the profits that, it alleged, it would have garnered from overseas customers had ION not infringed.
The CAFC had considered the issue and held that damages could not be calculated based on use of the patented inventions overseas, finding that it would be an improperly extraterritorial application of United States patent law to award damages for overseas use. The Supreme Court reversed.
The Supreme Court’s majority opinion explained that in this case, the act of infringement was supplying the components, and that the infringement had occurred in the United States. Thus, assessing damages for the infringement did not represent an extraterritorial application of U.S. patent law.
With that issue resolved, the only question that remained was how to determine the but-for world, that is, “the difference between [the patent owner’s] pecuniary condition after the infringement, and what its condition would have been if the infringement had not occurred.” In this case, the opinion implies, were it not for the infringement, the patent owner would have made the overseas sales in question, and would have profited as a result. Thus, lost profits on those sales was a permissible element of actual damages.
Patent owners seeking actual damages still need to prove that their losses were caused by the infringement. But as long as United States infringement was the proximate cause of lost sales, lost profits can be recovered, regardless of where the sales were made.