Lost-Foreign-Profits-IP

$105+ Million Awarded Including Lost Foreign Profits

Intellectual Property, Patents

The U.S. Supreme Court awarded lost foreign profits for U.S. Patent infringement.

In a landmark case regarding patent damages, the Supreme Court has endorsed including lost foreign profits in damages calculations. Even though the Patent Act is a highly territorial entity, covering infringements that occur “within the United States” §271(a), there is more to this area of law than meets the eye. Related §271(f), includes the extension: “supplying from the United States a patented invention’s components.” This means that patent protection covers the invention and the associated components, and the protection follows the movement of the same when the event originates in the United States.

In the case that prompted this opinion, Houston, TX based WesternGeco LLC, held that a competitor, ION Geophysical Corporation, infringed on its patented technology for a system for producing surveys of the ocean floor when it manufactured the components in the U.S. and then exported the components for assembly and use abroad. The Court’s opinion stated that the newly produced technology was “indistinguishable” from WesternGeco’s proprietary technology. As part of its infringement case, WesternGeco sought compensation for damages due to lost foreign profits.

To answer the question of whether lost foreign profits are recoverable for infringement of a U.S. Patent, the Supreme Court referenced Patent Act section §284. “Section 284, the Patent Act’s general damages provision, states that ‘the court shall award the claimant damages adequate to compensate for the infringement.’ The focus of that provision is ‘the infringement.’ The ‘overriding purpose’ of §284 is to ‘affor[d] patent owners complete compensation’ for infringements.”

Because the focus of infringement occurred in the United States, i.e., it was a domestic act of supplying the components that infringed the patents at issue, the Court determined that compensation for loss of foreign profits was appropriate: ”the lost-profits damages that were awarded to WesternGeco were a domestic application of §284.”  Thus, despite the transactions having taken place outside of the U.S., WesternGeco was awarded $93.4 million in lost foreign profits. The Court deemed this adequate compensation per the combined rules of §271(f)(2) and §284.

The Supreme Court published its opinion June 22, 2018, in WesternGeco LLC v. Ion Geophysical Corporation, in the decision written by Justice Gorsuch.

This case brings to the surface two key points:

  1. The territory of the U.S. Patent Act extends outside of the U.S. when the base infringement is domestic.
  2. When the base infringement is domestic, and the claimant endures a loss of foreign profits as a result of that infringement, then the claimant is entitled to compensation for those damages.

Even for a U.S. patent, the damage calculations for infringement may be far reaching.

References

1: https://www.supremecourt.gov/opinions/17pdf/16-1011_6j37.pdf. SUPREME COURT OF THE UNITED STATES Syllabus WESTERNGECO LLC v. ION GEOPHYSICAL CORP. (Accessed 7/10/2018)

2: https://ladas.com/education-center/scotus-grants-the-loss-of-overseas-profits-to-be-included-in-damages-in-western-geco-llc-v-ion-geophysical-corporation/. SCOTUS GRANTS THE LOSS OF OVERSEAS PROFITS TO BE INCLUDED IN DAMAGES IN WESTERN GECO LLC V. ION GEOPHYSICAL CORPORATION. (Accessed 7/12/2018)