Reaction to WesternGeco SCOTUS decision: significant yet disappointing
Patent owners were handed a significant win by the US Supreme Court on Friday, according to one lawyer, but others have described the decision as disappointing and narrow.
In a 7-2 ruling delivered on June 22, the Supreme Court reversed and remanded the US Court of Appeals for the Federal Circuit’s decision which had held that US patent law doesn’t apply extraterritorially.
The dispute, between WesternGeco and competitor Ion Geophysical Corporation, dates back to 2009, when WesternGeco filed a claim for patent infringement at the US District Court for the Southern District of Texas, Houston Division.
WesternGeco alleged that Ion developed and sold a seismic survey system, which used elements of its patented technology, to surveying companies outside of the US. The Texas jury found in favour of WesternGeco and awarded the company $93.4 million in lost profits and $12.5 million of royalties.
However, in 2015, the Federal Circuit reversed the award of lost profits, holding that US patent law does not apply extraterritorially and therefore that those profits could not be recovered.
WesternGeco petitioned for certiorari in February 2016, after the oral arguments in Halo Electronics v Pulse Electronics had been heard.
The Supreme Court remanded the matter to the Federal Circuit for further consideration in light of Halo, which changed the landscape for determining damages in cases of wilful patent infringement.
In 2016 the Federal Circuit again held that the profits could not be recouped, but the Supreme Court reversed and remanded this decision on Friday.
Irena Royzman, partner at Patterson Belknap Webb & Tyler, welcomed the ruling, saying the Federal Circuit’s decision had been at odds with the statute on patent damages and “risked systemically under-compensating patent owners for damages resulting from US infringement”.
However, this has not been the unanimous reaction.
The Electronic Frontier Foundation (EFF) called the Supreme Court’s decision “disappointing”.
“Worldwide damages are not consistent with the domestic focus of the Patent Act,” the EFF argued, adding that “when patent law discourages domestic innovation, it achieves the opposite of its intended purpose”.
Dissenting Justices Neil Gorsuch and Stephen Breyer had similarly noted that it is “very odd” for US patent law to play a role in foreign markets.
Russ Emerson, partner at Haynes and Boone, said that it will be interesting to see how broadly the court’s decision is applied. He noted that the ruling only allows for the recoup of foreign lost profits in cases where domestic acts infringe USC section 271(f)(2).
The decision said that under section 271(f)(2), it is an act of patent infringement to supply “components of a patented invention” from the US with the knowledge or intention that the components are to be combined outside the US in a manner that “would infringe the patent if such combination occurred within the US”.
Although the court’s holding is narrow, Emerson said “the reasoning behind that holding is broad: a patentee must be made whole, even if the measure of harm includes foreign consequences of the infringement”.
Yar Chaikovsky, global co-chair of the IP practice at Paul Hastings, added that while the Supreme Court’s holding is limited to section 271(f), it is “likely to cause plaintiffs to make a similar argument in cases not involving section 271(f)”.
“They will argue that the legal injury-infringement entitles them to damages adequate to compensate, including extraterritorial damages, using similar logic”, he added.
Gregg LoCascio, partner at Kirkland & Ellis, which represented WesternGeco, said the decision recognises that US patent law affords WesternGeco and other innovators “full protection against infringers who would try and skirt US patent law by exporting components of a patented system for assembly abroad”.
A spokesperson for WesternGeco added that it is "pleased" with the decision, as it "reinforces our long-standing position that, as a technology innovator, we receive the full protection of the US Patent Act against those who choose to infringe US patents".
Brian Hanson, CEO and president of Ion, said : “between the time the Supreme Court heard arguments in our case in April and issued this decision, the Federal Circuit affirmed a finding by the Patent and Trademark Appeal Board that four of the six patent claims that supported the damages to WesternGeco were based on patents that never should have issued in the first place.
He added that Ion “will seek a new trial as to damages and will forcefully argue in any new trial that the two remaining claims cannot support lost profits”, and “we are prepared to continue fighting this matter through 2019 and beyond”.
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