Justices Set to Hear Arguments in WesternGeco v. ION Geophysical; Finnegan’s Jacob Schroeder Explains What’s at Stake

IP Law Daily interviewed Finnegan partner Jacob Schroeder to discuss the WesternGeco v. ION Geophysical case at the Supreme Court. The case addresses a patent owner's ability to recover damages resulting from sales or uses of infringing products occurring internationally. 

WesternGeco sued ION Geophysical for infringing four patents covering technologies that search for oil and gas deposits underneath the ocean. A Texas jury found that ION willfully infringed all of the asserted claims under 35 U.S.C. §271(f), which prohibits the supply from the United States of "all or a substantial portion of the components of a patented invention" for combination abroad. WesternGeco was awarded $12 million in reasonable royalties and over $93 million in lost profits caused by ION's infringement. ION appealed, and the Federal Circuit affirmed the royalties award but reversed the lost profits award on the ground that the Patent Act does not permit the recovery of lost profits for third parties’ extraterritorial uses of a system patented in the United States. WesternGeco appealed to the Supreme Court to determine whether the Federal Circuit "erred holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases in which patent infringement is proven under 35 U.S.C. §271(f)."

According to Jacob, Congress enacted Section 271(f) in response to Deepsouth Packing Co. v. Laitram, 406 U.S. 518 (1972). In that case, the Supreme Court applied the presumption against extraterritorial application to find that a company avoided continued infringement of a competitor’s patented shrimp deveining machine by exporting all of the components of shrimp deveining machine for assembly abroad. The defendant did not violate Section 271(a) because the completed invention was not "made" in the United States. Congress closed this loophole by adding subsection (f) to Section 271 to extend infringement liability to the domestic supply of the components of a patented invention for assembly abroad. He also noted that there is nothing in Section 284 that territorially limits recovery of damages. The restriction appears in the general liability provision, Section 271(a). Section 271(f) territorially expands liability, but mentions nothing about the recovery of damages. Considered narrowly, the question is whether "adequate compensation" under Section 284 may include foreign lost profits caused by infringement under the expanded liability provided by Section 271(f). However, the broader and more significant question is whether Section 284’s "adequate compensation" language may include the recovery of lost profits from any infringing foreign uses or sales that are caused by domestic infringement. 

Jacob believes that the Court’s decision could have a major impact on the innovation in the United States. If the Court allows a patent owner to recover all damages for which it can show causation—including possibly large world-wide damages for a relatively trivial act of infringement occurring in the United States—that could discourage innovation in the United States. Such a ruling potentially could have a detrimental impact on certain industries, like semiconductor manufacturers, that provide one component for a product manufactured or assembled overseas.