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SCOTUS Will Decide Whether Foreign Infringement Can Create Lost Profits

Last Friday, the Supreme Court granted certiorari in WesternGeco v. ION Geophysical.  Essentially, the case asks whether, when components for a patented process or machine are manufactured in the U.S. and combined or used abroad, the profits lost due to the foreign activities can be considered lost profits and awarded as damages under U.S. patent law.

Let’s Go Back to Deepsouth, A Real Shrimp Of A Case

This case stems from a case called Deepsouth Packing v. Laitram.  In Deepsouth, two separate pieces of two separate machines for shrimp deveining were made in the U.S.  The individual pieces did not infringe any patents.  However, when combined, they would infringe.  The pieces were sold individually in the U.S. and combined overseas.  The Supreme Court decided that there was no infringement of a patent in this situation.

In response, Congress passed a new patent law, 35 U.S.C. § 271(f), which states:

(f)

  1. Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer
  2. Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer

This change in law made it so that selling components in the U.S. for combination abroad was considered infringement.

WesternGeco v. ION—Lower Courts

In WesternGeco, the technology isn’t shrimp deveining.  This time it’s technology used in oil exploration.  WesternGeco owns patents on a technique for mapping the seafloor.  However, they don’t sell their product to other companies; instead, they perform surveys for those companies using their technology.  ION manufactures components that are assembled into a technology that was found to infringe WesternGeco’s patents.  But they don’t assemble the component in the U.S.; instead, they sell them to foreign customers who assemble them and use them in performing surveys.  At trial, a jury found that ION had infringed under 271(f) and awarded lost profits based on ten survey contracts they found WesternGeco would have won if not for ION customers winning them.

Lost profits damages are available in order to “award the claimant damages adequate to compensate for the infringement.”  But U.S. law generally doesn’t apply to things that happen overseas—the “presumption against extraterritoriality.”  Based on this presumption, the Federal Circuit vacated the award of lost profits for the overseas contracts.

WesternGeco v. ION—SCOTUS

So the question is—when 271(f) infringement happens in the U.S., but causes loss of profit due to overseas activities, do you get those profits back?

That’s what the Supreme Court is going to decide later this term.

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