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.
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.