Case No. 16-1011 | Fed. Cir.
When patent infringement is proved, the patent holder is entitled to damages. However, when an infringer builds and sells a patented product outside of the United States, the remedy is less clear.
Section 271 of the Patent Act describes acts within the United States that impose liability for infringement. Prior to the Supreme Court’s decision in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), products could be partially manufactured in the United States, shipped abroad, and assembled into infringing products. Because the acts that would normally constitute infringement did not occur within the United States, there was no patent infringement liability under § 271. This ruling created a loophole that was later closed when Congress enacted § 271(f) in 1984. This subsection creates liability for patent infringement when anyone “supplies or causes to be supplied in or from the United States any component of a patented invention” in a way that induces infringement or with the intent that the components be combined outside of the United States in an infringing way. 35 U.S.C. § 271(f)(2) (2012). Effectively, if patent infringement would occur when components are combined in the United States, there is patent infringement if this occurs abroad when the component parts come from the United States.
The lower court in this case determined that Petitioner incurred reasonably foreseeable harms, namely $90 million in lost profits. Respondent made more than $3 billion for itself and its customers by using the infringing product. Petitioner was awarded both lost profits and reasonable royalties.
The Federal Circuit found that if foreign profits could not be recovered under § 271(a), then foreign profits cannot be recovered under § 271(f) due to the presumption against extraterritoriality. With this ruling, Petitioner’s $93 million award for lost profits was eliminated.
Petitioner alleges that because § 271(f) was expressly created to impose liability for infringing acts outside of the United States for acts that would constitute infringement if they had occurred in the United States, lost profits from foreign sales should still be available because the patent “damages provision does not distinguish among types of infringement.” Brief for Petitioner at 9, WesternGeco LLC v. ION Geophysical Corp., No. 16-1011 (U.S. filed Feb. 23, 2018). Respondent, however, claims that lost profits due to competition from foreign third-party purchasers of the infringing product are unavailable as “an impermissible extraterritorial application of [U.S. patent law].” Brief for the Respondent at 24, WesternGeco LLC v. ION Geophysical Corp., No. 16-1011 (U.S. filed Mar. 26, 2018).
If the Court sides with Petitioners, infringers who are found liable under § 271(f) will be subject to damages for foreign profits and patentees will be able to be made whole. If the Court sides with Respondent, however, infringement under § 271(f) will result in remedies that may be inadequate to fully compensate the patentee.
The American Intellectual Property Law Association filed an amicus brief supporting neither party, but arguing that foreign profits should not be unavailable when there is infringement under § 271(f).