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IP Alert UPDATE: Patent Owners Can Recover Lost Profits in Export Cases

June 22, 2018

UPDATE: Today, in WesternGeco LLC v. ION Geophysical Corp., the U.S. Supreme Court reversed the earlier decision of the Federal Circuit, holding that, in fact, “lost profits” damages are available in cases of patent infringement under 35 U.S.C. § 271(f)(2).

Section 271 (f)(2) of the Patent Act specifies as follows:

Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

WesternGeco holds a number of patents relating to surveying equipment. Defendant ION Geophysical Corp. manufactured components of WesternGeco’s patented invention and shipped them to companies abroad. Those companies combined the components, and, once so combined, the components formed an infringing system. ION’s customers then used the system to compete with WesternGeco. WesternGeco sued ION and obtained a damages award that included tens of millions of dollars of lost profits, including profits lost because of foreign activity.

When ION appealed to the Federal Circuit, that court determined that “lost profits” damages were not available for infringement under section 271(f)(2). As reported in our earlier alert on this case, the Federal Circuit reasoned that the presumption against extraterritoriality of U.S. law precluded such damages. WesternGeco then successfully petitioned the Supreme Court for review.

Today, in a 7–2 decision, the Supreme Court reversed. The Court concluded that because the infringing conduct occurred within the United States, lost profits damages were properly awarded. The Court reasoned that the injury remained a domestic injury, and the foreign lost profits were a consequence of that domestic injury.

This case settles an important question of the application of damages under section 271(f)(2). Please contact a Fitch Even attorney with any questions concerning this decision.

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