Supreme Court Makes Waves in Ruling That Foreign Conduct Can Be Used In Determining Patent Damages And Supports WesternGeco’s $93 Million Jury Award for Lost Foreign Contracts

Written by: Christopher H. Blaszkowski

Today, by 7-2 vote, the Supreme Court reversed the Federal Circuit’s determination that WesternGeco was precluded from most of a nearly $100 million jury award. The Federal Circuit had previously determined that much of that jury award (approximately $93 million dollars) was attributable to foreign conduct and, as a result, was prohibited by extraterritoriality principles.

By way of brief background, WesternGeco held four patents relating to a system for surveying the ocean floor for oil deposits. WesternGeco did not sell or license this technology, instead it used the patented technology to performed surveys itself on behalf of its customers. Ion infringed these patents when it manufactured components of WesternGeco’s patented invention, and then exported these components to customers overseas. WesternGeco demonstrated at trial that Ion’s customers, many of which operated in foreign countries or on the high seas, diverted millions of dollars in lost contracts that would have otherwise gone to WesternGeco by infringing the patents at issue. Following a determination that Ion infringed, the jury awarded WesternGeco $12.5 million in reasonable royalties and $93.4 million in lost profits from the use of the devices by Ion’s customers. The Federal Circuit reversed the lost profits award as described above.

In the majority opinion authored by Justice Thomas, the Supreme Court ruled that lost foreign profits were not, per se, excluded by the judicial extraterritoriality doctrine. In reaching this determination, the Court considered the question of “whether the conduct relevant to the [statute’s] focus occurred domestically, in United States territory.” Concluding that it did, the Court explained that Ion’s “domestic act of supplying the components that infringed WesternGeco’s patent” rendered the jury’s award of WesternGeco’s lost contract damages—regardless of the jurisdiction in which those losses occurred—proper.

Justices Gorsuch and Breyer dissented. While agreeing that the judicially created extraterritoriality doctrine did not preclude WesternGeco’s requested relief, the dissent found that the Patent Act itself forbids such awards, limiting damages to those arising purely from conduct within the United States. Writing for the dissent, Justice Gorsuch posed the question “what happens when foreign courts return the favor?”—exploring the possibility that foreign courts could (using the majority’s logic) regulate purely U.S. markets based on a single predicate foreign act. The impact of this case may be far reaching.