Supreme Court Includes Lost Foreign Profits In Patentee's Recovery

June 26, 2018

By: Susan G. L. Glovsky and Lawrence P. Cogswell III, Ph.D.

SUPREME COURT INCLUDES LOST FOREIGN PROFITS IN PATENTEE’S RECOVERY

Decision limited to infringing components manufactured in the U.S. and shipped abroad

  • Damages adequate to compensate for infringement include lost foreign profits when the underlying infringement is for supplying components of a patented invention in or from the United States.
  • The Supreme Court determined that its decision did not violate the presumption against extraterritoriality because the case involves permissible domestic application of the damages statute.
  • According to the Supreme Court, the type of infringement that occurred will determine the focus of the damages statute, requiring a case-by-case analysis in the future.

The Supreme Court in WesternGeco LLC v. Ion Geophysical Corp. held that patent owners can include lost foreign profits in their recovery of lost profits for United States patent infringement in the case before it.  The Patent Act gives patent owners a civil action for infringement, and it describes several types of infringement, such as the unauthorized making, using, or selling of the patented invention within the United States.  Although the Patent Act does not prohibit making, using, or selling a patented invention outside the United States, it does prohibit—as relates to this case—the unauthorized supplying in or from the United States of a component known to be “especially made or … adapted” for use in a patented invention with the intent that it be combined outside of the United States to make the patented invention. 

Patent owners who prove infringement are generally entitled to “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.”  35 U.S.C. § 284. 

In the present case, the act of infringement occurred in the United States, but the lost profits resulted from overseas sales.  Can the patentee recover for lost profits arising from overseas activity and sales; or is such a recovery prohibited by the principles of extraterritoriality, which holds as a general matter that U.S. laws do not regulate overseas conduct?

The Supreme Court held that the patentee could recover for lost foreign profits, holding that nothing in the text of the statute nor the principles of extraterritoriality prohibited a measure of damages that is based on foreign conduct, so long as those damages flowed from an infringing act in the United States.  Here the act of infringement was supplying in or from the United States components “especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use,” with the intent that they be combined outside the United States in a manner that would infringe if the combination occurred in the United States. 

The Supreme Court determined that its decision did not violate the presumption against extraterritoriality because the case involves permissible domestic application of the damages statute, § 284.  According to the Supreme Court, the type of infringement that occurred will determine the focus of § 284, requiring a case-by-case analysis in the future.  In this case, the Supreme Court concludes that the domestic act of supplying in or from the United States vindicates domestic interests, supporting its conclusion that the damages flowed from an infringing act in the United States.

Overview

June 26, 2018

By: Susan G. L. Glovsky and Lawrence P. Cogswell III, Ph.D.

SUPREME COURT INCLUDES LOST FOREIGN PROFITS IN PATENTEE’S RECOVERY

Decision limited to infringing components manufactured in the U.S. and shipped abroad

  • Damages adequate to compensate for infringement include lost foreign profits when the underlying infringement is for supplying components of a patented invention in or from the United States.
  • The Supreme Court determined that its decision did not violate the presumption against extraterritoriality because the case involves permissible domestic application of the damages statute.
  • According to the Supreme Court, the type of infringement that occurred will determine the focus of the damages statute, requiring a case-by-case analysis in the future.

The Supreme Court in WesternGeco LLC v. Ion Geophysical Corp. held that patent owners can include lost foreign profits in their recovery of lost profits for United States patent infringement in the case before it.  The Patent Act gives patent owners a civil action for infringement, and it describes several types of infringement, such as the unauthorized making, using, or selling of the patented invention within the United States.  Although the Patent Act does not prohibit making, using, or selling a patented invention outside the United States, it does prohibit—as relates to this case—the unauthorized supplying in or from the United States of a component known to be “especially made or … adapted” for use in a patented invention with the intent that it be combined outside of the United States to make the patented invention. 

Patent owners who prove infringement are generally entitled to “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.”  35 U.S.C. § 284. 

In the present case, the act of infringement occurred in the United States, but the lost profits resulted from overseas sales.  Can the patentee recover for lost profits arising from overseas activity and sales; or is such a recovery prohibited by the principles of extraterritoriality, which holds as a general matter that U.S. laws do not regulate overseas conduct?

The Supreme Court held that the patentee could recover for lost foreign profits, holding that nothing in the text of the statute nor the principles of extraterritoriality prohibited a measure of damages that is based on foreign conduct, so long as those damages flowed from an infringing act in the United States.  Here the act of infringement was supplying in or from the United States components “especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use,” with the intent that they be combined outside the United States in a manner that would infringe if the combination occurred in the United States. 

The Supreme Court determined that its decision did not violate the presumption against extraterritoriality because the case involves permissible domestic application of the damages statute, § 284.  According to the Supreme Court, the type of infringement that occurred will determine the focus of § 284, requiring a case-by-case analysis in the future.  In this case, the Supreme Court concludes that the domestic act of supplying in or from the United States vindicates domestic interests, supporting its conclusion that the damages flowed from an infringing act in the United States.

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