Shearman & Sterling LLP | IP Blog | Supreme Court Hears Oral Argument In Key Patent Damages Case<br >  
IP Litigation
This links to the home page
  • Supreme Court Hears Oral Argument In Key Patent Damages Case

    On April 16, 2018, the United States Supreme Court heard oral argument in the case of WesternGeco LLC v. ION Geophysical Corporation, which presents the question whether a patent owner can recover damages suffered outside of the United States for infringing acts that occurred within the United States.

    35 U.S.C. § 271(f) provides that it is an act of U.S. patent infringement to supply in or from the United States a component or components of a patented invention to be combined outside the United States in a manner that would infringe if done within the United States.  The statute was enacted by Congress specifically in response to a 1972 Supreme Court case holding that such conduct did not constitute an act of infringement. 

    In the case at hand, a jury found that defendant/respondent ION violated Section 271(f) by exporting components of petitioners’/plaintiffs’ patented invention for assembly and use abroad.  The intended foreign combination occurred, and the jury awarded $90 million in lost-profit damages, which the District Court upheld.  The United States Court of Appeals for the Federal Circuit reversed, holding that the presumption against extraterritoriality precluded WesternGeco from recovering lost profits resulting from its failure to win foreign contracts.

    At the Supreme Court, WesternGeco argued that Congress explicitly wrote Section 271(f) to cover conduct occurring partially outside the United States, and the damages statute requires an award to the patentee adequate to compensate for the infringement.  According to WesternGeco, prior Supreme Court cases make clear that where domestic acts of infringement foreseeably cause patent holders to lose sales abroad, the patent holders can recover damages as measured by those overseas lost sales.  ION responded that Section 271(f) was enacted merely to plug a gap in domestic liability, and was not intended as a mechanism to expand the scope of available damages beyond what had been previously available.  Moreover, ION asserted that the damages statute is written to compensate for “the infringement,” which, in ION’s view, is just the act of exporting.

    During oral argument, several Justices appeared to agree with WesternGeco that contract, tort and copyright law have long provided for damages incurred overseas, and that there were no prior cases holding that patent law should operate differently.  However, Justice Breyer expressed comity concerns, including how foreign governments would react if the U.S. applied its patent law to award damages for profits lost overseas.  The United States, as amicus curiae, supported petitioner and argued that the Patent Act should compensate the victim, regardless of the situs of the injury, subject to principles of proximate causation.  Respondent ION argued that the U.S. patent laws should not be a springboard for worldwide damages and that patent owners can choose to seek relief in other countries where they have patent protection.