Supreme Court Backs Award of Overseas Patent Damages

(CN) – The U.S. Supreme Court ruled Friday that companies can recover profits lost because of the unauthorized use of their patented technology overseas.

The plaintiff in the underlying case, WesternGeco, a Houston-based company, developed and patented a technology used in  geological surveys to search for oil and gas under the ocean floor.

What made the company’s technology unique, court documents say, is a proprietary method of “lateral steering,” which allows surveyors to control the movement of survey devices, rather than simply pulling them behind the ship.

In 2007, Ion Geophysical Corp., also based in Houston, rolled out its own system and began selling it overseas. WesternGeco said the new system, “DigiFin,” which also relied on a lateral controller, directly violated its four of its patents.

A jury found Ion liable for infringement and awarded WesternGeco $12.5 million in royalties and $93.4 million in lost profits. A district court later upheld the infringement verdict,   as did the U.S. Court of Appeals for the Federal Circuit.

But the appeals court went further, saying WesternGeco could not recoup the lost profits portion because U.S. patent law does not cover the overseas use of infringing products.

The Trump administration took issue with that position, arguing that it would result in court’s systematically under-compensating patent owners who engage in cross-border business.

With Friday’s 7-2 decision, the justices overturned the lower court’s ruling, which had enforced limits on applying U.S. patent law overseas.

Writing for the majority, Justice Clarence Thomas said it was clear from the record that Ion Geophysical had infringed on WesternGeco’s patents and the “overseas events were merely incidental to the infringement.”

According to Thomas, under the Patent Act damages are intended to compensate patent holders and place [them] “in as good a position as [they] would have been if the patent had not been infringed.”

“This recovery can include lost profits,” he said, quoting from the 1986 case Yale Lock Mfg. Co. v. Sargent,
“And, as we hold today, it can include lost foreign profits when the patent owner proves infringement …”

Justice Neil Gorsuch wrote a dissent, which Justice Stephen Breyer joined.

In dissent the two justices argue that the Patent Act does not permit damages awards for lost foreign profits.

“In my view the Act’s terms prohibit the lost profits sought in this case, whatever the general presumption against extraterritoriality applicable to all statutes might allow,” Gorsuch wrote. “While the Federal Circuit may have relied in part on a mistaken extraterritoriality analysis, I respectfully submit it reached the right result in concluding that the Patent Act forecloses WesternGeco’s claim for lost profits.”

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