Infringement and extraterritoriality: SCOTUS decision in WesternGeco captures foreign damages

In WesternGeco LLC v. ION Geophysical Corp., decided June 22, 2018, the Supreme Court rejected a bright-line rule against awarding lost foreign profits for patent infringement. In particular, the Supreme Court’s decision clarified that a presumption against extraterritoriality does not preclude awarding infringement damages arising from overseas activities when the basis for infringement involves domestic conduct.

Courts typically presume that federal laws only apply within the territorial jurisdiction of the United States (i.e., presumption against extraterritoriality). The general infringement provision, 35 U.S.C. § 271(a), provides that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention...infringes the patent.” Once infringement is found, the patent remedy statute, 35 U.S.C. § 284, provides that “the court shall award the claimant damages adequate to compensate for the infringement.”

WesternGeco involved infringement under 35 U.S.C. § 271(f)(2), a specific infringement provision that defines infringement to include supplying one or more components that have no substantial non-infringing uses from the United States, so long as the infringer knows that there are no other uses and intends to assemble the complete, infringing device overseas. Using a strict territorial limit on infringement damages, the Federal Circuit concluded that remedies for foreign activities were not available, even where there was a predicate act of infringement under Section 271(f)(2).

The Supreme Court rejected this strict presumption by applying a two-part framework for deciding questions of extraterritoriality established in RJR Nabisco Inc. v. European Cmty. The Court explained that at step one, courts should determine whether the presumption against extraterritoriality has been rebutted—whether “the statute gives a clear, affirmative indication that it applies extraterritorially.” If the presumption is not rebutted, a court proceeds to step two to assess the focus of the statute to determine whether, under the facts of the case, the statute regulates domestic conduct, even if there may be some conduct that occurred abroad.

Under this framework, the Court concluded that infringement damages arising from foreign activity are permitted under the particular facts of WesternGeco. Noting that remedies under Section 284 depend on the infringement at issue, the Court determined that the focus of Section 271(f)(2) is on the exportation of components from the United States. On that basis, the Court concluded that the infringing, domestic acts in WesternGeco (e.g., exportation of components for overseas assembly) resulted in the consequences for which foreign damages were sought (e.g., competition using the foreign-assembled system). As such, the Court explained that damages attributed to overseas activities that are merely incidental to domestic, infringing conduct are not precluded by the presumption against extraterritoriality.

Moving forward, WesternGeco demonstrates that the two-part extraterritoriality framework of RJR Nabisco shall be used to determine whether infringement remedies arising from overseas activities may be available. Also, any foreign remedy determinations will depend on the liability-creating portion of the statute at issue (e.g., 35 U.S. Code § 271(a)–(g)) and on the particular facts of the case.

Finally, the Court expressly declined to address proximate causation issues, noting that “[i]n reaching this holding, we do not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.” With that in mind, a failure to establish proximate cause may provide an important limitation on a patent owner’s ability to obtain foreign damages for Section 271(f)(2) infringement in particular, and/or other infringement provisions in general.