Supreme Court: Three Patent Cases This Term!

by Dennis Crouch

The Supreme Court patent docket is light this year – at least in terms of granted petitions.  We all await the outcome of Oil States. Conventional wisdom is that the case will be a dud and that the Supreme Court confirm the viability of Inter Partes Review proceedings.  Still, the case is fascinating for its potential dramatic outcome; historic antecedents and core constitutional arguments.  The companion to Oil States is SAS Institute, which focuses on the more nuanced issue of whether the PTO can partially-grant an IPR petition.  [I’ll note here that SAS is something of a sleeper case this term being overshadowed by Oil States (I actually forgot about it when writing this post).  The outcome though could substantially change IPR strategy.]

The third case – WesternGeco v. ION Geophysical has a much more narrow focus – whether lost profit damages are available for an infringer’s extra-territorial use of an unlicensed export.  The case would have been much bigger but for the 2007 Supreme Court decision in Microsoft v. AT&T holding that electronic files don’t count as components under the export provisions of 35 U.S.C. 271(f).

Question presented in WesternGeco:

Whether the U.S. Court of Appeals for the Federal Circuit erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases in which patent infringement is proven under 35 U.S.C. § 271(f).

I previously discussed WesternGeco’s opening brief and supporting amici (including USDOJ) arguing that lost profits should be available under the Patent Act.  The basic argument is that 271(f) is a form of infringement, and 35 U.S.C. § 284 requires an award of “damages adequate to compensate for the infringement.”  WesternGeco argues that this provision includes lost-profits when proven.  The Federal Circuit disagreed — holding that, after considering the presumption against extraterritorial application of US law, those eventual profits were too remote from the actual act of infringement (component export) to be actionable.

SCOTUS: Damages for Foreign Lost Profits Stemming from US Infringement

The adjudged infringer Ion has now responded along with two supporting briefs.

Respondent’s Brief: The respondent begins its brief with a restatement of the question presented — focusing on the fact that the claimed lost profits are associated with a “third party’s subsequent foreign use of the infringing product.”

Whether a patentee that establishes infringement of its patent is entitled to recover lost profits under 35 U.S.C. 284 for a third party’s subsequent foreign use of the infringing product.

In its brief ION walks through its position:

Petitioner seeks to recover the profits it would have earned for conducting marine surveys in international waters. . . The Patent Act, however, does not allow recovery for an injury that occurred outside the territorial jurisdiction of the United States. The presumption against extraterritoriality forecloses petitioner’s claimed lost-profits damages in this case. . . .

Applying this Court’s two-step framework for analyzing the extraterritorial effect of a statute. . . As to the first step: Section 284, which instructs a court to “award the claimant damages adequate to compensate for the infringement,” gives no “clear, affirmative indication” of extraterritorial reach. RJR Nabisco. . . . As to the second step: it cannot seriously be disputed that awarding lost-profits damages here requires a foreign application
of the statute, because it compensates petitioner
for a foreign injury—one that occurred outside the United States only after third parties took actions abroad. Indeed, petitioner repeatedly dubs its lost profits “foreign.” The only link that petitioner’s foreign injury has to the United States is that respondent’s act of domestic infringement is a but-for cause of that injury—a link the Court has deemed insufficient in applying the presumption against extraterritoriality.

The brief here does a nice job of directly addressing and confronting particular points made by petitioner and the US Gov’t in their briefs.

Both the EFF brief and the Fairchild Semiconductor brief argue, inter alia, that the proposed “worldwide damage regime” will have the negative consequence of overcompensating patent owners.  (quoting EFF brief).

The closest companion case this term is another Microsoft case — this one involving the extraterritorial scope of a U.S. warrant — does Microsoft need to turn-over data stored on a foreign server?

Oral arguments in WesternGeco are set for April 16.

 

46 thoughts on “Supreme Court: Three Patent Cases This Term!

  1. 5

    I realize most attorneys that read this blog cannot conceive of life without the PTAB. It has become a massive industry and integral to daily life/practice. SaS is so much more satisfying, right? Keep tweaking and legally engineering the practice. For goodness sakes, keep the juries far away!

    But as red-blooded American and actual grass roots inventor, Oil States is our only hope. While my notoriety is for a toy that perhaps we could all live without – and we would be living without it if I had known about the PTAB before I risked my 401K and kids’ college fun – I have a background and interest in high tech. So do thousands of other inventors that are quickly learning not to share their ideas with their employer, the invention promoters, their attorney, and certainly not the USPTO.

    Most readers of this blog do not understand what’s at stake. They think they can keep billing $200, $400, $800, or in the case of Telebrands latest hired gun $2,000 per hour. Perhaps. But your kids won’t. They’ll be doing admin work for their Chinese employers.

    I hope and pray that the Supreme Court gives us another chance by eliminating the PTAB in Oil States, the only case that matters.

    1. 5.1

      It really is quite dire. From my little perspective on the world what I see is big corporations not longer having great respect for patents. It would not surprise me in the next downturn if some big corporations cut their patent prosecution spending by 50% to get their Wall Street numbers.

      We are at an inflection point. They still have some value and they still want some patents, but the way the top management views patents has changed dramatically in the last 10 years.

    2. 5.2

      Josh :

      Just FYI. That $200 an hour goes to pay for rent, electricity, toner, paper, administrative assistants, IT department staff and coffee. Lots and lots of coffee. And you probably don’t get charged for all the hours actually put in.

      I wonder how many bird have died choking on ex-water balloons….

    3. 5.3

      “But your kids won’t. They’ll be doing admin work for their Chinese employers.”

      Probably going to happen anyway #1965act

  2. 4

    Conventional wisdom is that… the Supreme Court confirm the viability of Inter Partes Review proceedings.

    I certainly agree that this is the CW, but I really cannot understand why that is. The SCotUS rarely takes a case to affirm the CAFC, so it seems to me that the default assumption should be that major changes are coming. Also, this is a case with big admin law implications, and the right wing of the court has been wanting for some time now to strike a blot against administrative adjudications. I am expecting a decision that will unsettle a lot of what we “all know” about the constitutionality of administrative adjudications. Why else would the Court take this case?

    1. 4.1

      to strike a blot

      Er, I meant “to strike a blow…”

    2. 4.2

      I think the admin law and APA aspects of Oil States are much more important to SCOTUS than the patent law.

      Most American’s don’t know what a patent is and don’t care. They don’t care which company sells products and which gets royalties. They don’t care if pharma company A makes a bazillion dollars or generic company B makes a bazillion dollars. Which makes this the perfect case for SCOTUS to go after the administrative state. Unlike violence against women, gun control, and healthcare, SCOTUS will receive no bad publicity. Opportunities like this come infrequently for SCOTUS so smart money is they will take it.

      1. 4.2.1

        Plus if they hold that IPRs are unconstitutional then there will be more patent cases at the district court level which the SCOTUS does not want.

        1. 4.2.1.1

          They may not have agreed with the manner in which cases were distributed among the district courts, but they could care less about the number.

          1. 4.2.1.1.1

            Of course they care about the number. The CJ is in charge of the district courts.

            The district courts are way overloaded.

            1. 4.2.1.1.1.1

              The “way overloaded” aspect belongs to the “O H N O E S – Tr011s!” brand of kool-aid.

              1. 4.2.1.1.1.1.1

                Not really. You know prior to the PTAB what the district courts were trying to do was set up magistrate judges with patent expertise to handle the patent cases because they were overloading the system. One of my law professors actually asked me if I was interested in one of those positions.

                Plus, if you read outside of patent law like in criminal law, you will see that criminal law has dramatically changed over the last 30 years because of the overloading of the district courts.

                1. Not really

                  Really.

                  How many actual patent cases are there out there?

                  Contrast with the number of cases for other areas of law – as well as normalize against the possible number of cases**, and you would see that the “overload” is not really there – leastwise from patents.

                  **(don’t forget to account for the AIA non-joinder rule which Congress passed that forces an artificial inflation in the numbers.

                  Careful of the Kool-Aid you quaff, as you appear to be blindly accepting the massive amount of rhetoric out there (courtesy of the Efficient Infringer propaganda machine).

        2. 4.2.1.2

          Patent cases are a tiny part of the number of Fed Court cases. While patents may be a big part of our lives, the SC doesn’t see patent cases as a huge load – especially in terms of constitutional issues.

      2. 4.2.2

        No bad publicity?

        Of course they’ll get bad publicity. The regressive left love the administrative state when it acts in favor of their politics… and the antipatent lobby is based on socialist sentiments.

        In the exact same way as the regressive left’s unprincipled view of freedom of speech is… “you should be free to say what I agree with”, their take on the administrative state is the same “you should be free from the state to do, own, and keep what (and to the extent) I approve”

        1. 4.2.2.1

          Look back at the publicity after the Morrison decision. The headlines were “the law is patriarchal” “violence against women is ruled a local issue.” Most Americans are women or know a woman and will internalize those headlines. What are they going to say here where 99.9% of Americans don’t own a patent and don’t know anybody that does?

          1. 4.2.2.1.1

            If publicity is mainstream front page media… yes I agree it is will wont get any “publicity”.

            But political or economic and business periodicals like to publish articles from time to time targeting what they disagree with … and since the anti-patent forces would not like such a potent weapon in their arsenal “defused” in any way, something unfavorable to SCOTUS would likely get published somewhere if they came down hard.

            1. 4.2.2.1.1.1

              If all you mean by “bad publicity” is that someone, somewhere will write something critical about a given decision, then you are certainly correct that a decision for the patentee in Oil States will get “bad publicity.” Come to that, a decision against the patentee will also get “bad publicity” under that standard.

              Without wishing to put words in H2H’s mouth, I imagine that H2H was thinking of “bad publicity” more in the sense of NYT op-eds or first-five-minutes coverage on FOX news. You know, something that a larger percentage of the American public is likely to hear about. Under that definition, I suspect that H2H is correct that no decision in Oil States is likely to generate as much “bad publicity” as an analogous decision would in an appeal from the FCC or EEOC, or some other such administrative agency that gets a lot of popular press attention.

    3. 4.3

      How does the “conventional wisdom” break down the vote by each justice?

  3. 3

    271(f) was adopted as a response to Deepsouth Packing Co. v. Laitram Corp., 406 U. S. 518 (1972), which recognized a loophole allowing manufacturers to avoid infringement by shipping otherwise infringing products as components for assembly overseas.

    Consequently, 271(f) inherently applies to “foreign” activity and should cover third party sales overseas to the extent that they would otherwise fall within 284. Otherwise, compensation for infringement may be avoided by locating sales, as well as assembly, overseas.

    1. 3.1

      And…?

      That is a logical and natural consequence of the patent system, no matter how many band aids we try to put on it.

      1. 3.1.1

        I cannot tell what your point is. OSitA.

        To which side of the fence does your “logical and natural consequence” fall to?

        Side 1: the loop hole side (to the benefit of infringers)
        Side 2: the closed loop hole side (to the benefit of the innovator or her assigns)

        1. 3.1.1.1

          Simply that the natural consequence of our patent regime is to send sales and assembly overseas.

          I do, however, reject your phrasing that 35 U.S.C. 271(f) fixed a loophole. It extended the reach of U.S. patent law in regards to U.S. based entities. However, a loophole implies that the previous rule was do to some ambiguity or inadequacy in the law. Exporting components was once a lawful activity that was in line with patent law. It was a logical position based on the law. Now it is not because patent law was changed (and now arguably represents a non-intuitive application of law).

          1. 3.1.1.1.1

            [T]he natural consequence of our patent regime is to send sales and assembly overseas.

            Hm, I see where you are going with this, but I cannot agree with the statement as it is phrased. For one thing, the existence of a patent does not really change your incentives to make sales. That is to say, if I am a seller of widgets, and there are Chinese buyers wanting to buy widgets, my incentive to sell those widgets to the Chinese buyers is exactly the same regardless of whether there be a U.S. patent that covers the widgets. Nothing about the U.S. patent drives sales overseas.

            Meanwhile, I would say that the U.S. patent—at most—drives some assembly overseas. If I am going to sell patented widgets in the U.S., I am going either (1) to acquire rights under that patent or (2) to infringe. I do not infringe more by both assembling and selling in the U.S. Therefore, my (patent-specific) incentive to move assembly overseas is only relevant as to product that I sell overseas. There is no (patent specific) incentive to offshore assembly of product intended for the U.S. market.

            35 U.S.C. 271(f)… extended the reach of U.S. patent law in regards to U.S. based entities.

            Exactly. Paragraph (f) extended the reach of U.S. law. Paragraph (f) did not completely undo the territorial nature of U.S. patent law. Even under §271(f), there still needs to be some connection to an act (a sale, for example) within our territorial jurisdiction. There is no reason in the text of §271(f) to suppose that Congress wanted to award damages for any making, using, or selling of an article patented in the U.S., regardless of whether there be any connection or not to our territorial jurisdiction.

          2. 3.1.1.1.2

            I do, however, reject your phrasing that 35 U.S.C. 271(f) fixed a loophole.

            That’s NOT my phrasing, and your rejection does not change the fact of what Congress did.

            To help me gauge your footing (well, I already suspect your footing, so more like to make it abundantly clear to everyone), Please pick Side 1 or Side 2.

            1. 3.1.1.1.2.1

              How can I be on

              Side 1: the loop hole side (to the benefit of infringers)
              or
              Side 2: the closed loop hole side (to the benefit of the innovator or her assigns)

              if I do not recognize believe there is a loophole?

              Even if there was a loophole, someone exploiting that loophole would not by definition, be an infringer (though, in the specifics of this case as I understand them, the defendant was adjudged to be an infringer under 35 U.S.C. 271(f) but not necessarily for any right connected with extraterritorial profits).

              1. 3.1.1.1.2.1.1

                How can I be…?

                Easy.

                Remove the word that offends you, realizing that there are STILL two sides to this decision.

                Which side are you on?

                Your “not deciding” is indeed telling me something, by the way.

                1. So if I remove the offending words… to clarify, you are asking me to choose between:

                  Side 1: The side that believes there is no statutory basis for collecting lost profits due to extraterritorial acts of a third party
                  or
                  Side 2: The side that believes there is a statutory basis for collecting lost profits due to extraterritorial acts of a third party

                  I just want clarity before I make my choice. A choice, depending on which side I choose, which may end up branding me as a heretic forever.

                2. Because I view 35 U.S.C. 271(f) as extending patent law in to a certain class of extraterritorial activity that was not previously covered by patent law (as opposed to closing a loophole in an area that patent law already covered), I am currently more persuaded by the side that believes there is no statutory basis for collecting lost profits due to extraterritorial acts of a third party (i.e., a different, though related, class of extraterritorial activity) absent explicit authorization of such a further extension of patent law by an act of Congress.

                  Though I am currently more persuaded by that argument, I am not ideologically bound to that position such that, upon further consideration and reasoned argument, I cannot foreclose the possibility that the other side is, ultimately in the fullness of times, correct.

                  I sincerely hope that clears up my position for you.

                3. I am currently more persuaded by the side that believes there is no statutory basis

                  You mean – except for the law itself?

                  Seeing how “worried” you are about being branded a heretic, you should at least try to understand the situation at hand, and how utter nonsensical it is to postulate about an absence of statutory basis.

                  As it is, you only cement the view that you are nothing more than a know-nothing lemming of the Efficient Infringer crowd.

                  Your mewling caveat only signifies your weakness and lack of conviction. Figure things out BEFORE you get on your soapbox.

                4. Hah! Let the branding begin!

                  I expressed my opinion, which you asked for. I have a view, but I am not so proud as to not being willing to consider arguments on the other side. Its called approaching an issue in an honest and fair manner. You should try it sometime, you may even like the concept.

                  Prattling on about “know-nothing lemming” this and “mewling” that is silly and really goes to show a general lack of candor and character on your part. Believe it or not, it is possible to disagree on this subject and not be a raging j about it. I commend this idea to you. I bet people wouldn’t dismiss you as often.

                5. Hah! Let the branding begin!

                  An accurate description of you is not “branding”

                  Own your position, my friend.

                  Its called approaching an issue in an honest and fair manner.

                  CLEARLY NOT – for the reasons provided. You have NOT come to this in an honest and fair manner at all. You have come loaded with your preconceptions and tainted views, bot even bothering to understand that the facts of the matter INCLUDE a statutory basis (and you won’t even consider the plain facts as to WHY that statutory basis exists).

                  really goes to show a general lack of candor and character on your part. ” – along with honest and fair? – how about the opposite of that. MY part is the one that includes the parts that you want to shunt aside and not bother with. My part is the complete part. THAT is what shows candor and proper character.

                  I care not at all if those who will not be convinced when looking at the full picture (or those NOT even bothering to look at the full picture) “dismiss” me. Such are unreachable anyway. Such are shown for their own lacking of character, candor and fairness – when in the spotlight that I provide.

                  I “get” that you don’t like the jarring effect that this spotlight presents.

                  Too bad.

                  For you.

                  I commend the idea of being informed before you climb atop your soapbox.

                6. Man, I’ve really got you worked up this morning. Your bloviate setting is all the way up to 10. Now breath. 1… 2… 3… 4… 5… 6… 7… 8… 9… 10… Feeling better?

                  Remind me what spotlight you have shown on anything? The intelligibleness of your rants is decreasing as time passes. At this point, a caption of you might as well read “Old man yells at clouds.”

                  We disagree on this subject. That is fine. I get that it makes you feel good about yourself to try to demean and dismiss those that you don’t agree with as somehow not understanding the issue as well as you or not caring about the right things. I guess that is fine too, if it helps you get through the day.

                7. Your bloviate setting is all the way up to 10.

                  That Accuse Others Tactic does not work for Malcolm – and it certainly does not work for you. (look at the positions you and I have taken – it is you that is bloviating here).

                  We disagree on this subject. That is fine. I get that it makes you feel good about yourself to try to demean and dismiss those that you don’t agree with as somehow not understanding the issue as well as you or not caring about the right things.

                  The disagreement is coming from YOUR lack of understanding the issue – as clearly shown in your comment about lacking statutory basis.

                  The “demean and dismiss” is merely a proper response to YOUR bloviating and unwillingness to acknowledge the facts of the matter at hand.

                  Your attempted denigration of “old man yell at the clouds” does NOT reflect the exchange here. Just like you are off on the underlying matter, your attempt to portray the exchange in this manner is simply a false representation.

                  btw, that is not “disagreement” per se in the sense that reasonable minds may disagree upon a point – rather, it is that you disagree with reality without wanting to actually admit what reality is, and that you would rather stay on your soapbox and then claim that you are doing so “honestly and fairly” and such is clearly not so.

                8. You like to assert your opinions as incontrovertible facts and you get upset when people don’t agree. Upset is not quite the right word. You though a tantrum. Let’s not pretend it is anything else. You don’t like the idea of other questioning your opinions. If only you were some god who could hand decrees down from the heavens.

                9. You though a tantrum. Let’s not pretend it is anything else

                  Too funny.

                  You are clearly wrong here and I am merely pointing it out.

                  That you want to project this as some type of “me upset” thing is just that: you projecting.

                  You clearly misunderstand the level of smack down that I deliver to you as some type of barometer of my emotion.

                  It isn’t.

                  Not sure why you would think that (other than you are just not thinking). Once gain, try reading what I have written and note the objective legal positions of both you and I. One of us is deep into the weeds and that would be you.

                  You don’t like the idea of other questioning your opinions.

                  You could not be more wrong. I love the questioning of my opinions (as well as the questioning of things that are NOT my opinion – as mentioned, you should read what I have written and note that what I have written is most definitely NOT limited to opinion).

                  I love the questioning especially from you, as your questioning only highlights how little you know or appreciate the law and yet are so willing to climb atop your soapbox. I love it because in the objective analysis of what each of us have to contribute, YOU are shown to be particularly lacking, and the viewpoint that you wish to espouse is what suffers.

                  I suppose that I might even want to say “thank you” for you being you.

                10. Funny, because I am the only one in the discussion between the two of us that has provided a foundation for their opinion on the subject matter. The chief way you accomplish the feat of avoiding talking about the basis of your opinion is to claim that your opinion is not really an opinion. Its hard to imagine someone being so transparent. I have told you have no clothes, and now you are merely failing about.

                11. I am the only one in the discussion between the two of us that has provided a foundation for their opinion on the subject matter.”

                  Your feelings and clear error of the law (no statutory basis) is NOT a foundation.

                  The fact that you do not like the fact that Congress DID act to close a loophole (because you “feel” that closing a loophole is not accurate) does not change the fact of THAT foundation.

                  The chief way you accomplish the feat of avoiding talking about the basis of your opinion is to claim that your opinion is not really an opinion.

                  Believe it or not, not everything stated IS opinion. Facts are stated. Laws are stated. These things are NOT opinion (even if it is I that states them).

                  That YOU do not understand what is a fact or what is a law and the difference therein between such and an actual opinion does NOT change non-opinion matter into opinion.

                  CLEARLY, it is not I that is “failing about.”

                  That would be you.

                  Still.

                  (I already told you that that Accuse Others meme that Malcolm is famous for does not work for him, and certainly does not work for you.)

                  Try something else.

                  For starters, try understanding the difference between facts, law and opinions about such things.

                12. Congress did not close a loophole. Congress extended the reach of U.S. patent law. You perspective and over zealous advocacy blind you to the fact that you are allowing the ends of justify the means no matter if the means are actually justified.

                  You are the one who is guilty of accusing others of which you are guilty.

                  I know the difference between law, fact, and opinion. That is how I know that no matter how many times you express your opinion, it does not magically become fact.

                  One thing is abundantly clear. This issue is not as cut and dry as you try to make it, no matter how many time to try to belittle others who have come to the opposite conclusion.

                13. Your first two sentences immediately above are in contradiction.

                  Congress “may have” extended the law, but they did so BECAUSE they were closing a loophole.

                  You keep on repeating your first error here without regard to the actual facts (and no, these are NOT “my facts,” even as you continue to attempt to make it seem so).

    2. 3.2

      Otherwise, compensation for infringement may be avoided by locating sales, as well as assembly, overseas.

      Huh? That is the point of §271(f)—to compensate for sales inside the U.S. If the sales take place outside the U.S., then there really is no domestic hook for U.S. law to apply, and therefore no infringement of a U.S. patent.

      Like Mr. Squirrel, I am not clear on why this outcome is supposed to be regarded as intuitively horrible, so as to justify the application of your preferred reading of the statute. To my mind, it is perfectly natural that U.S. patents are infringed by activity that occurs inside our territorial jurisdiction and not by activity that occurs outside.

      1. 3.2.1

        To my mind, it is perfectly natural that U.S. patents are infringed by activity that occurs inside our territorial jurisdiction and not by activity that occurs outside

        Sure – that is ONE aspect of “perfectly natural.”

        And just like Mr. Squirrel, I wonder if you recognize just what loophole was closed (and that actions OUTSIDE OF our territorial jurisdiction may yet yield infringement/damages based on the fact that Congress clearly choose to close a loophole).

        Are you insisting that the closing of the loophole has NO extra-territorial dimensions?

        I would find that to be a serious sign of a lack of ability of understanding patent law from you, Greg.

  4. 2

    but for the 2007 Supreme Court decision in Microsoft v. AT&T holding that electronic files don’t count as components under the export provisions of 35 U.S.C. 271(f).

    As bad as that case was, your restatement misses an important nuance.

    It was the Gold Master that was exported and deemed not to be a component because once exported, the Gold Master was not “put into” each machine, but rather a copy of the master (said copy being generated overseas) that was used as the machine components.

  5. 1

    The case would have been much bigger but for the 2007 Supreme Court decision in Microsoft v. AT&T holding that electronic files don’t count as components under the export provisions of 35 U.S.C. 271(f).

    How amusing. Do they ever?

    1. 1.1

      Absolutely, bert. See above for the nuance that is simply too often glossed over with that atrocious 2007 case.

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