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Westerngeco LLC v. Ion Geophysical Corp.

United States Supreme Court

June 22, 2018

WESTERNGECO LLC, PETITIONER
v.
ION GEOPHYSICAL CORPORATION

          Argued April 16, 2018

          ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT No. 16-1011.

         Petitioner WesternGeco LLC owns patents for a system used to survey the ocean floor. Respondent ION Geophysical Corp. began selling a competing system that was built from components manufactured in the United States, shipped to companies abroad, and assembled there into a system indistinguishable from WesternGeco's. WesternGeco sued for patent infringement under 35 U.S.C. §§271(f)(1) and (f)(2). The jury found ION liable and awarded WesternGeco damages in royalties and lost profits under §284. ION moved to set aside the verdict, arguing that WesternGeco could not recover damages for lost profits because §271(f) does not apply extraterritorially. The District Court denied the motion, but the Federal Circuit reversed. ION was liable for infringement under §271(f)(2), the court reasoned, but §271(f) does not allow patent owners to recover for lost foreign profits On remand from this Court in light of Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S.__, the Federal Circuit reinstated the portion of its decision regarding §271(f)'s extraterritoriality.

         Held: WesternGeco's award for lost profits was a permissible domestic application of §284 of the Patent Act. Pp. 4-10.

(a) The presumption against extraterritoriality assumes that federal statutes "apply only within the territorial jurisdiction of the United States." Foley Bros., Inc. v. Filardo, 336 U.S. 281, 285. The two-step framework for deciding extraterritoriality questions asks, first, "whether the presumption . . . has been rebutted." RJR Nabisco, Inc. v. European Community, 579 U.S.__, __. If not, the second step asks "whether the case involves a domestic application of the statute." Id., at. Courts make the second determination by identifying "the statute's 'focus'" and then asking whether the conduct relevant to that focus occurred in United States territory. Ibid.
If so, the case involves a permissible domestic application of the statute. It is "usually . . . preferable" to begin with step one, but courts have the discretion to begin with step two "in appropriate cases." Id., at__, n. 5. The Court exercises that discretion here. Pp. 4-5.
(b)When determining "the statute's 'focus'"-i.e., "the objec[t] of [its] solicitude," Morrison v. National Australia Bank Ltd., 561 U.S. 247, 267-the provision at issue is not analyzed in a vacuum. If it works in tandem with other provisions, it must be assessed in concert with those provisions. Section 284, the Patent Act's general damages provision, states that "the court shall award the claimant damages adequate to compensate for the infringement." The focus of that provision is "the infringement." The "overriding purpose" of §284 is to "affor[d] patent owners complete compensation" for infringements. General Motors Corp. v. Devex Corp., 461 U.S. 648, 655. Section 271 identifies several ways that a patent can be infringed. Thus, to determine §284's focus in a given case, the type of infringement that occurred must be identified. Here, §271(f)(2) was the basis for West-ernGeco's infringement claim and the lost-profits damages that it received. That provision regulates the domestic act of "suppl[ying] in or from the United States," and this Court has acknowledged that it vindicates domestic interests, see, e.g., Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 457. In sum, the focus of §284 in a case involving infringement under §271(f)(2) is on the act of exporting components from the United States. So the conduct in this case that is relevant to the statutory focus clearly occurred in the United States. Pp. 5-8.
(c) ION's contrary arguments are unpersuasive. The award of damages is not the statutory focus here. The damages themselves are merely the means by which the statute achieves its end of remedying infringements, and the overseas events giving rise to the lost-profit damages here were merely incidental to the infringement. In asserting that damages awards for foreign injuries are always an extraterritorial application of a damages provision, ION misreads a portion of RJR Nabisco that interpreted a substantive element of a cause of action, not a remedial damages provision. See 579 U.S.__, at . Pp. 8-9.

837 F.3d 1358, reversed and remanded.

          THOMAS, J., delivered the opinion of the Court, in which ROBERTS, C. J., and Kennedy, Ginsburg, Alito, Sotomayor, and Kagan, JJ., joined. GORSUCH, J., filed a dissenting opinion, in which, BREYER, J., joined.

          OPINION

          THOMAS JUSTICE.

         Under the Patent Act, a company can be liable for patent infringement if it ships components of a patented invention overseas to be assembled there. See 35 U.S.C. §271(f)(2). A patent owner who proves infringement under this provision is entitled to recover damages. §284. The question in this case is whether these statutes allow the patent owner to recover for lost foreign profits. We hold that they do.

         I

         The Patent Act gives patent owners a "civil action for infringement." §281. Section 271 outlines several types of infringement. The general infringement provision, §271(a), covers most infringements that occur "within the United States." The subsection at issue in this case, §271(f), "expands the definition of infringement to include supplying from the United States a patented invention's components." Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 444-445 (2007). It contains two provisions that "work in tandem" by addressing "different scenarios." Life Technologies Corp. v. Promega Corp., 580 U.S.__, __(2017) (slip op., at 9). Section 271(f)(1) addresses the act of exporting a substantial portion of an invention's components:

"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."

         Section 271(f)(2), the provision at issue here, addresses the act of exporting components that are specially adapted for an invention:

"Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined 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."

         Patent owners who prove infringement under §271 are entitled to relief under §284, which authorizes "damages adequate to compensate for the infringement, but in no event less than a reasonable royalty ...


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