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The Supreme Court to Consider Patent Infringement Damages Accrued Abroad

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By Robert A. Clarke and David G. Barker

The Supreme Court has granted certiorari to consider whether damages for infringement of a U.S. patent include lost profits resulting from activities outside the U.S.

In WesternGeco L.L.C., v. Ion Geophysical Corporation, the Federal Circuit affirmed a jury verdict that Ion infringed WesternGeco’s patent for a device used to search for oil and gas beneath the ocean floor, but the Federal Circuit reversed an award of damages for lost profits.  The district court awarded lost profits from the use of the infringing devices abroad because WesternGeco would have been awarded the contracts involving such use but for Ion’s infringement.  The Federal Circuit held, however, that lost profits cannot be awarded for damages resulting from lost contracts to be performed outside the U.S. and its territories. Disagreeing, the dissent emphasized that Ion’s infringement liability is not based on the foreign use of the infringing products.  Rather, the issue involves only the amount of resulting damages, which previously has not been limited to activities within the U.S.  Therefore, according to the dissent, the damages award should include any lost profits with a sufficient connection to the infringement, including those resulting from transactions abroad.

Ion was found to infringe under 35 U.S.C. § 271(f), which prohibits an entity that creates components in the U.S. from actively inducing their combination abroad in a manner that infringes a U.S. patent.  The cert petition asked the Supreme Court to consider whether, under § 271(f), lost profits arising from prohibited combinations occurring outside of the U.S. are “categorically unavailable.”  However, the Court could decide the issue of foreign-related damages more broadly, which the U.S. Solicitor General urged in an amicus brief, presenting this question for the Court: “Whether a patentee that has proved a domestic act of patent infringement may recover lost profits that it would have earned outside of the United States if the infringement had not occurred.”  Therefore, this decision has the potential to increase the value of patent infringement cases by expanding foreign-related damages, such as lost market share outside of the U.S.