Source: https://www.law.cornell.edu/supremecourt/text/16-1011
Timestamp: 2018-07-20 18:43:55
Document Index: 599003244

Matched Legal Cases: ['§281', '§271', '§271', '§271', '§271', '§284', '§271', '§284', '§271', '§284', '§271', '§284', '§284', '§271', '§271', '§271', '§271', '§284', '§284', '§271']

WESTERNGECO LLC v. ION GEOPHYSICAL CORP. | US Law | LII / Legal Information Institute
WESTERNGECO LLC v. ION GEOPHYSICAL CORP. ( )
(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.
WESTERNGECO LLC, PETITIONER v.ION GEOPHYSICAL CORPORATION
The Patent Act gives patent owners a “civil action for infringement.” §281. Section 271 outlines several typesof 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 theact of exporting a substantial portion of an invention’s components:
Petitioner WesternGeco LLC owns four patents relating to a system that it developed for surveying the ocean floor. The system uses lateral-steering technology to produce higher quality data than previous survey systems. Western-Geco does not sell its technology or license it to compet-itors. Instead, it uses the technology itself, performing surveys for oil and gas companies. For several years, WesternGeco was the only surveyor that used suchlateral-steering technology.
On appeal, the Court of Appeals for the Federal Circuit reversed the award of lost-profits damages. WesternGeco LLC v. ION Geophysical Corp., 791 F. 3d 1340, 1343 (2015). 1 The Federal Circuit had previously held that §271(a), the general infringement provision, does not allow patent owners to recover for lost foreign sales. See id., at 1350–1351 (citing Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F. 3d 1348 (CA Fed. 2013)). Section 271(f ) should be interpreted the same way, the Federal Circuit reasoned, because it was “designed” to put patent infringers “in a similar position.” WesternGeco, 791 F. 3d, at 1351. Judge Wallach dissented. See id., at 1354–1364. WesternGeco petitioned for review in this Court. We granted the petition, vacated the Federal Circuit’s judgment, and remanded for further consideration in light of our decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U. S. ___ (2016). WesternGeco LLC v. ION Geophysical Corp., 579 U. S. ___ (2016).
But that observation does not fully resolve this case, as the Patent Act identifies several ways that a patent can be infringed. See §271. To determine the focus of §284 in a given case, we must look to the type of infringement that occurred. We thus turn to §271(f )(2), which was the basis for WesternGeco’s infringement claim and the lost-profits damages that it received. 2
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. In other words, the domestic infringement is “the objec[t] of the statute’s solicitude” in this context. Morrison, 561 U. S., at 267. The conduct in this case that is relevant to that focus clearly occurred in the United States, as it was ION’s domestic act of supplying the components that infringed WesternGeco’s pat-ents. Thus, the lost-profits damages that were awardedto WesternGeco were a domestic application of §284.
Two of our colleagues contend that the Patent Act does not permit damages awards for lost foreign profits. Post, at 1 (Gorsuch, J., joined by Breyer, J., dissenting). Their position wrongly conflates legal injury with the damages arising from that injury. See post, at 2–3. And it is not the better reading of “the plain text of the Patent Act.” Post, at 9. Taken together, §271(f )(2) and §284 allow the patent owner to recover for lost foreign profits. Under §284, damages are “adequate” to compensate for infringement when they “plac[e] [the patent owner] in as good a position as he would have been in” if the patent had not been infringed. General Motors Corp., supra, at 655. Specifically, a patent owner is entitled to recover “ ‘the difference between [its] pecuniary condition after the infringement, and what [its] condition would have been if the infringement had not occurred.’ ” Aro Mfg. Co., supra, at 507. This recovery can include lost profits. See Yale Lock Mfg. Co. v. Sargent, 117 U. S. 536, 552–553 (1886). And, as we hold today, it can include lost foreign profits when the patent owner proves infringement under §271(f )(2). 3
This Court’s precedents confirm what the statutory text indicates. In Brown v. Duchesne, 19 How. 183 (1857), the Court considered whether the use of an American invention on the high seas could support a damages claim under the U. S. patent laws. It said no. The Court explained that “the use of [an invention] outside of the jurisdiction of the United States is not an infringement of [the patent owner’s] rights,” and so the patent owner “has no claim to any compensation for” that foreign use. Id., at 195–196. A defendant must “compensate the patentee,” the Court continued, only to the extent that it has “com[e] in competition with the [patent owner] where the [patent owner] was entitled to the exclusive use” of his invention—namely, within the United States. Id., at 196. What held true there must hold true here. ION must compensate WesternGeco for its intrusion on WesternGeco’s exclusive right to make, use, and sell its invention in the United States. But WesternGeco “has no claim to any compensation for” noninfringing uses of its invention “outside of the jurisdiction of the United States.” Id., at 195–196. 1
This Court’s leading case on lost profit damages points the same way. In Yale Lock Mfg. Co. v. Sargent, 117 U. S. 536 (1886), the patent owner “availed himself of his exclusive right by keeping his patent a monopoly” and selling the invention himself. Id., at 552. As damages for a competitor’s infringement of the patent, the patent owner could recover “the difference between his pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred.” Ibid. And that difference, the Court held, “is to be measured” by the additional profits the patent owner “would have realized from such sales if the infringement had not interfered with such monopoly.” Id., at 552–553. So, again, the Court tied the measure of damages to the degree of interference with the patent owner’s exclusive right to make, use, and sell its invention. And, again, that much is missing here because foreign uses of WesternGeco’s invention could not have interfered with its U. S. patent monopoly. 2
You might wonder whether §271(f )(2) calls for a special exception to these general principles. WesternGeco certainly thinks it does. It’s true, too, that §271(f )(2) expressly refers to foreign conduct. The statute says that some-one who exports a specialized component, “intending that [it] 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.” From this language, you might wonder whether §271(f )(2) seeks to protect patent owners from the foreign conduct that occurred in this case.
Even more dramatic examples are not hard to imagine. Suppose a company develops a prototype microchip in a U. S. lab with the intention of manufacturing and selling the chip in a foreign country as part of a new smartphone. Suppose too that the chip infringes a U. S. patent and that the patent owner sells its own phone with its own chip overseas. Under the terms of the Patent Act, the developer commits an act of infringement by creating the proto-type here, but the additional chips it makes and sells outside the United States do not qualify as infringement. Under WesternGeco’s approach, however, the patent owner could recover any profits it lost to that foreign competition—or even three times as much, see §284—effectively giving the patent owner a monopoly over foreign markets through its U. S. patent. That’s a very odd role for U. S. patent law to play in foreign markets, as “foreign law alone, not United States law,” is supposed to govern the manufacture, use, and sale “of patented inventions in foreign countries.” Microsoft, supra, at 456.
Today’s decision unfortunately forecloses further consideration of these points. Although its opinion focuses almost entirely on why the presumption against extraterritoriality applicable to all statutes does not forbid the damages sought here, the Court asserts in a few cursory sentences that the Patent Act by its terms allows recovery for foreign uses in cases like this. See ante, at 9. In doing so, the Court does not address the textual or doctrinal analysis offered here. It does not explain why “damages adequate to compensate for the infringement” should include damages for harm from noninfringing uses. §284 (emphasis added). It does not try to reconcile its holding with the teachings of Duchesne, Birdsall, and Yale Lock. And it ignores Microsoft’s admonition that §271(f )(2) should not be read to create springboards for liability based on foreign conduct. Instead, the Court relies on two cases that do not come close to supporting its broad holding. In General Motors Corp. v. Devex Corp., 461 U. S. 648 (1983), the Court held that prejudgment interest should normally be awarded so as to place the patent owner “in as good a position as [it] would have been in had the in-fringer” not infringed. Id., at 655. Allowing recovery for for-eign uses, however, puts the patent owner in a better position than it was before by allowing it to demand monopoly rents outside the United States as well as within. In Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476 (1964), meanwhile, the Court simply applied Yale Lock’s rule that a patent owner may recover “ ‘the difference between his pecuniary condition after the infringement, and what his condition would have been if the infringement had not occurred.’ ” Id., at 507 (quoting Yale Lock, 117 U. S., at 552). As we’ve seen, that test seeks to measure the interference with the patent owner’s lawful monopoly over U. S. markets alone.