Presented by Kyle Coleman
By a 7-2 vote, in an opinion by Justice Thomas, the Supreme Court held that a patent owner can recover lost foreign profits as damages under 35 U.S.C. § 284 for infringement under § 271(f)(2). Applying the presumption-against-extraterritoriality framework, the Court concluded that the statute's focus is the domestic act of supplying components from the United States, so awarding lost profits from foreign surveys was a permissible domestic application of § 284. Justice Gorsuch dissented. The Court vacated and remanded, expressly declining to address whether doctrines such as proximate cause might limit such damages.
WesternGeco versus ION Geophysical, decided June 22nd, 2018. By a vote of seven to two, in an opinion by Justice Thomas, the Supreme Court reversed the Federal Circuit and held that a patent owner who proves infringement under section 271(f)(2) — supplying components from the United States for combination abroad — may recover lost foreign profits as damages under section 284. That award was a permissible domestic application of the statute. Here's the brief.
WesternGeco owns patents on a system for surveying the ocean floor. The system uses lateral-steering technology to produce higher-quality data, and WesternGeco does not sell or license it — it performs the surveys itself, for oil and gas companies.
In late 2007, ION Geophysical began selling a competing system. It manufactured the components in the United States, shipped them to companies abroad, and those companies assembled them into a system indistinguishable from WesternGeco's, then used it to compete.
WesternGeco sued for infringement under sections 271(f)(1) and (f)(2). At trial it proved it had lost ten specific survey contracts to ION's infringement. The jury found ION liable and awarded twelve and a half million dollars in royalties and ninety-three point four million dollars in lost profits.
ION moved to set aside the lost-profits award, arguing that section 271(f) does not apply extraterritorially. The District Court refused, but the Federal Circuit reversed that award: ION was liable under section 271(f)(2), the court said, but section 271(f) does not let patent owners recover for lost foreign sales. After a remand from the Supreme Court on an unrelated issue, the Federal Circuit reinstated that ruling, and the Court granted cert.
The question was whether sections 271(f)(2) and 284, together, allow recovery of lost foreign profits.
Section 271(f)(2) makes it infringement to supply from the United States a component specially adapted for a patented invention, intending it be combined abroad. Section 284 provides that the court shall award damages adequate to compensate for the infringement.
To decide whether applying a statute is domestic or extraterritorial, the Court used the two-step framework from RJR Nabisco. Step one asks whether the presumption against extraterritoriality has been rebutted by a clear indication in the text. Step two asks whether the case is a domestic application of the statute — by identifying the statute's focus and asking whether the conduct relevant to that focus occurred here. The Court resolved the case at step two.
Its reasoning turned on that focus. Because section 284 works in tandem with section 271, the Court said its focus cannot be assessed in a vacuum; it depends on the type of infringement that occurred. The overriding purpose of section 284 is to afford patent owners complete compensation, so the infringement is its focus. And here the infringement was supplying components under section 271(f)(2).
Because that domestic conduct — ION's supplying of components — is what the statute focuses on, and it occurred in the United States, the lost-profits award was a domestic application. The overseas surveys were merely incidental to the infringement. The Court rejected ION's argument that the focus was the award of damages, and distinguished RJR Nabisco, which had interpreted a substantive injury element of a cause of action, not a remedial damages provision.
The Court placed one express limit on the holding: it did not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.
Justice Gorsuch dissented, joined by Justice Breyer. He agreed the presumption against extraterritoriality was no bar, but read the Patent Act's own terms to forbid recovery for foreign uses, which a U.S. patent does not reach.
WesternGeco stands for a narrow but consequential proposition: when the infringement is the domestic act of supplying components under section 271(f)(2), section 284 permits recovery of lost foreign profits caused by that infringement, because the statute's focus is domestic. The Court reached that result through the RJR Nabisco focus test rather than any patent-specific rule, and it expressly declined to decide whether doctrines like proximate cause might cabin such damages — leaving the outer limits of foreign-profits recovery to later cases.
WesternGeco LLC v. ION Geophysical Corp., 585 U.S. 407, decided June 22nd, 2018. I'm Kyle Coleman. Thanks for watching.
These videos are educational case briefs, not legal advice, and watching them does not create an attorney-client relationship with the presenter or the firm. Case law and its interpretation evolves, always check a decision's subsequent history. Do not rely on these case briefs, but read the case yourself or have your attorney read them. Videos are presented via an AI avatar and voice clone of Kyle Coleman, created with his participation and consent.
