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Supreme Court Holds Patent Owners May Recover Damages for Foreign Lost Profits

WesternGeco LLC v. ION Geophysical Corp., 585 U.S. ___ (2018)

In WesternGeco, the Supreme Court held that a plaintiff may recover foreign lost profit damages that occurred as a result of domestic infringement. The Court’s holding is relevant to instances where a domestic act of infringement leads to damages accrued in a foreign state. The opinion was delivered by Justice Thomas and joined by Chief Justice Roberts and Justices Kennedy, Ginsberg, Alito, Sotomayor, and Kagan. Justice Gorsuch filed a dissenting opinion in which Justice Breyer joined.

The key issue in WesternGeco was whether the presumption against extraterritoriality (ref. 1) prevents a plaintiff from recovering damages that accrue outside the United States, where those damages are the result of a domestic act of infringement. A jury awarded WesternGeco lost profit damages for contracts lost outside of the United States, based on ION Geophysical’s infringing acts within the United States. The Federal Circuit reversed, holding that the presumption against extraterritoriality prohibited recovery of foreign damages.

In reaching its decision, the Supreme Court reaffirmed its two-step framework for deciding questions of extraterritoriality as articulated in RJR Nabisco.

WesternGeco, 585 U.S. ___ (slip op., at 5) (“The first step asks ‘whether the presumption against extraterritoriality has been rebutted.’ It can be rebutted only if the text provides a ‘clear indication of an extraterritorial application.’ If the presumption against extraterritoriality has not been rebutted, the second step of our framework asks ‘whether the case involves a domestic application of the statute.’”) (internal citations omitted). Exercising its discretion, the Court declined to perform the first step, stating that such an analysis would “require resolving ‘difficult questions’ that do not change ‘the outcome of the case,’ but could have far-reaching effects in future cases.” Id.

Applying step two of the analysis, the Court first looked at the damages statute (35 U.S.C. § 284) and found that the focus of this statute is “the infringement.” Id. at 6. Looking next at “the type of infringement,” the Court analyzed the statute under which the infringement occurred (35 U.S.C. § 271(f)(2)) and found that its focus is “the act of exporting components from the United States.” Id. at 7. The Court therefore held, “[t]he conduct in this case that is relevant to that focus clearly occurred in the United States . . . [t]hus, the lost profits damages that were awarded to WesternGeco were a domestic application of § 284.” Id. at 8. The case was remanded for further proceedings consistent with the opinion.

In dissent, Justices Gorsuch and Breyer disagreed that the statutory language of the Patent Act permits any award of foreign damages. See, e.g., WesternGeco, 585 U.S. ___ (slip op., dissent at 2-3).

1 “Absent clearly expressed congressional intent to the contrary, federal laws will be construed to have only domestic application.” RJR Nabisco, Inc. v. European Community, 136 S.Ct. 2090, 2100 (2016).

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