Opinion analysis: Justices approve broad damage recovery for patent-infringing exports

This morning’s opinion in WesternGeco v. Ion Geophysical Corp., holding that the Patent Act authorizes a damage award for patent-infringing exports, is far from what you would have expected from the argument. In April when the justices heard from counsel for the parties, the bench engaged in a heated and far-ranging debate that touched on extraterritorial application of the Patent Act as well as basic tort-theory concepts of proximate cause in the like. This morning, though, the justices disposed of the matter with a short and highly formalistic opinion from Justice Clarence Thomas, which barely alludes to those topics. With seven votes for Thomas’ opinion, the concerns of the oral argument and the briefing were relegated almost entirely to a dissent from Justice Neil Gorsuch, joined only by Justice Stephen Breyer.

The case involves Section 271 of the Patent Act, which defines the types of conduct that amount to infringement of a patent. In general, the section applies only to conduct that occurs in the United States. There is an exception, though, in Section 271(f), a provision adopted in response to (and overruling) a notorious Supreme Court case that exonerated a defendant who had manufactured the components of an invention in the United States but had shipped them abroad for assembly into an infringing device. Specifically, Section 271(f) includes within its definition of “infringement” the act of supplying the components of a patented device from the United States. In this case, for example, ION Geophysical manufactured in the United States components that it shipped to companies abroad; when assembled by ION’s customers, those components produced a system for surveying the seafloor that duplicated patented technology held by WesternGeco (perhaps better known by its earlier name Western Geophysical).

The question is what the proper remedy should be for ION’s infringement. The basic premise of the Patent Act (reflected in Section 284) is that the patent-holder should receive full compensation for infringement. Because WesternGeco as a matter of policy did not license its technology, it would have signed service agreements with the parties who bought the components from ION. The lower courts concluded that WesternGeco’s profit from those contracts would have been about $90 million, but they declined to award that amount as damages, reasoning that WesternGeco could not obtain damages for use of the patented device overseas.

Thomas sees it quite differently. He starts by reciting the well-known presumption that federal statutes “apply only within the territorial jurisdiction of the United States,” ornamenting it with his citation of a “medieval maxim” that is new to me: “Statua suo clauduntur territorio, nec ultra territorium disponunt.” (Loosely translated, that means something like “A statute is bound by its own territory and has not effect beyond that domain.”) The parties briefed and debated the question whether that presumption should “apply to statutes, such as § 284, that merely provide a general damages remedy for conduct that Congress has declared unlawful.” Thomas, however, declines to address that question, noting that it “could implicate many other statutes besides the Patent Act.”