On Monday, April 16, 2018, the Supreme Court heard oral argument in WesternGeco LLC, v. ION Geophysical Corporation, No. 16-1011, a case with broad implications for patent holders that sell products abroad. The case addresses whether lost profits accrued outside of the United States can be recovered for patent infringement occurring domestically. In the decision below, 791 F.3d 1340 (Fed. Cir. 2015), the Federal Circuit adopted a per se bar to recovery of such foreign damages, even when domestic patent infringement is established and proximately caused. Although WesternGeco involves infringement under 35 U.S.C.§ 271(f) – which prohibits the supply of components of a patented invention in the U.S. with the intent that they be combined abroad – in its argument in support of the petitioner, the Solicitor General framed the question more broadly as whether lost profits accrued outside of the United States can be recovered for any domestic act of patent infringement under § 271. Four key takeaways from the oral argument are discussed below.
First, the Court seemed receptive to the Solicitor General’s argument that it made sense to address the broader question of whether foreign damages are recoverable under the patent damages provision, 35 U.S.C. § 284, for any category of patent infringement under § 271. For example, Justices Kagan and Gorsuch both seemed to suggest that adopting a single rule for all domestic acts of patent infringement would avoid potential incongruity between § 271(a) and § 271(f). And Justices Kennedy and Sotomayor both appeared to suggest that the recoverability of damages should not depend on the particular business model the defendant adopts.
Second, in response to a question by Justice Kennedy, counsel for the respondent conceded that lost profits could be awarded in a case where the infringer sells the product to customers abroad. This concession appears to give away that foreign damages are recoverable, since there is then no principled basis for categorically barring the recovery of foreign damages under some fact patterns but not others. ION argued for a bright-line rule prohibiting the recovery of foreign lost profits where there is some “intervening” use of the patented product abroad. But as the Solicitor General noted, “the right way to approach it is . . . not through this ham-handed rule that basically, as soon as you get across the international border, the causal chain is automatically severed, no matter what, no matter how clear the causal link is.”
Third, the respondent relied heavily on the Supreme Court’s decision in RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (2016), to suggest that the Court should apply the presumption against extraterritoriality to prohibit the recovery of damages for domestic patent infringement in cases where there is foreign use of the patented invention. But Justice Alito, who authored RJR Nabisco, said that there were “differences between this case and RJR Nabisco,” and asked ION to “forget about RJR Nabisco” and instead explain “what sense does it make” to apply the presumption against extraterritoriality to the remedial provision in the patent infringement context.
Fourth, the Court seemed receptive to WesternGeco’s and the United States’ arguments that proximate cause should supply the test to determine whether foreign damages are owed to the patentee in a given case. For instance, while Justice Breyer expressed concerns about potential comity issues that could arise with awarding foreign damages, he suggested that “tough proximate-cause law” could be a solution. Justice Ginsburg asked petitioner to confirm whether the patentee would have to establish proximate cause to collect foreign lost profits, and Justice Kagan noted that respondent’s hypothetical fact pattern involving the use of patented inventions on foreign ships raised a “classic law school proximate-cause hypo.”
The Supreme Court is expected to release its decision sometime before the end of June.