Lost Foreign Profits Available To US Patent Owners under 271(f) when Relevant Infringing Conduct Occurs in the US

On June 22, 2018, the U.S. Supreme Court held that manufacturing components in the United States for a patented system and then shipping the components abroad for final assembly was eligible for lost foreign profits for patent infringement. [1]

WesternGeco asserted four issued patents claiming a system for surveying the ocean floor against ION. [2] ION manufactured components that, when assembled, are a competing system to the WesternGeco system.[3] Once the components sold by ION were combined by the customer outside the US, WesternGeco argued that the combination infringed the WesternGeco patents. 35 U.S.C. 271(f)(1) provides: “Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.”

At trial, the jury found ION liable and awarded WesternGeco $12.5 million in royalties and $93.4 million in lost profits.[4] On appeal to the Federal Circuit ION argued that WesternGeco could not recover damages for lost profits based on foreign profits.

Patent infringement under Section 271(f) had been interpreted under the general patent infringement Section, § 271(a), which only provided damages for activities occurring in the United States. The Federal Circuit agreed with ION’s position and reversed the award of lost profits on the basis that the general infringement provision of Section 271(a) does not allow the patent owner to recover lost profits on foreign sales and that patent infringement under Section 271(f) was subject to the same interpretation as Section 271(a). [5]

In overturning the Federal Circuit, the Supreme Court held that the process of supplying in or from the United States was a domestic act and that Section 271(f)(2), which provides infringement when components of a patented invention are combined outside the US, invoked a domestic interest because it reached “’components that are manufactured in the United States but assembled overseas.’” [6] Following this decision, patent owners may recover lost foreign profits. [7]

[1] WesternGeco LLC v. ION Geophysical Corp., S.Ct. 16-1011, June 22, 2018.

[2] U.S. Patent 7,293,520, U.S. Patent 7,162,967, U.S. Patent 7,080,607, and U.S. Patent 6,691,038

[3] WesternGeco, slip op. at p. 3.

[4] Id.

[5] Id. at p. 4.

[6] Id. at p. 7 citing Life Technologies, 580 U.S., at __ (slip op. at 11).

[7] Id. at pp. 9-10.