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Sunday, June 24, 2018

SCOTUS Term: Extraterritorial remedies: How Far Will WesternGeco Go?

On Friday, the Supreme Court issued its opinion in WesternGeco v. Ion Geophysical Corp. The case involved a patent infringement claim. WesternGeco alleged that Ion Geophysical Corp. had manufactured component parts which it shipped overseas intending that they be integrated into a product for which WesternGeco held a US patent. The question before the Court was whether WesternGeco could recover damages for lost profits arising from sales of the product outside the United States, given the presumption against the extraterritorial application of U.S. statutes

                  In a 7-2 decision authored by Justice Thomas, the Court held that WesternGeco could indeed recover for the loss of profits from overseas sales. The Court held that it need not decide whether the presumption against extraterritoriality had been overcome (a difficult question that the Court acknowledged could have far-reaching effects) because “conduct relevant to the statutory focus in this case is domestic”—that is, the production of the component parts took place in the United States. Because the wrongful conduct took place within the US, the statute was not being applied extraterritorially.

                  Justice Gorsuch, joined by Justice Breyer, issued a dissenting opinion arguing that WesternGeco should not be allowed to recover for lost sales outside the US. The dissent pointed out that damages were being recovered for the foreign sales of the product—and those foreign sales did not themselves violate the U.S. Patent Act: “No doubt WesternGeco thinks it unfair that its invention was used to compete against it overseas. But that’s simply not the kind of harm for which our patent laws provide compensation because a U. S. patent does not protect its owner from competition beyond our borders.”

                  The Court’s decision is an interesting departure from its recent trend toward limiting litigation with foreign dimensions--a trend that Professor Pamela Bookman has called “Litigation Isolationism.” This decision potentially opens the door—at least a crack—to an increase in transnational cases. In allowing recovery based on foreign sales, Justice Thomas’s majority opinion criticizes the restrictive view held by Justices Gorsuch and Breyer, stating that the dissent’s “position wrongly conflates legal injury with the damages arising from that injury.” But of course, much litigation is driven by the possibility of damages—and this is doubly or triply true in transnational litigation, where the possibility of higher damages is a big part of what draws litigants to U.S. courts in the first place, “like a moth to the light.”

                  Going forward, the question will be how far the WesternGeco decision extends beyond its facts. Intellectual property lawyer Ronald Abramson has suggested that the logic of the decision is not “necessarily limited to patent damages,” and that it appears “to open up some more room for a full remedy for infringement (or other violation or tort), which addresses foreign consequences.” It remains to be seen whether the Court will in fact extend the decision in such a manner. Plaintiffs seeking a remedy for foreign harms caused by domestic action, however, will likely rely on WesternGeco’s rationale.  

Posted by Cassandra Burke Robertson on June 24, 2018 at 11:46 PM in 2018 End of Term | Permalink

Comments

Thanks for that interesting ruling , but to be honest , I don't see any issue here , neither extraterritorial nor in specific terms have to do with infringement and the Patent act . Both parties to litigation are US residents ( or both registered therein ) . Assuming that the infringer had necessarily at least conspired to infringe patent or actually to ship abroad parts of the patents , and assemble it there and sell it there , then , it is clearly reconciled with the provisions of the Patent act , here I quote one of several :

Sect. 271. Infringement of patent

(f)(1) 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.

End of quotation :

So , the language is clear :

"……or causes to be supplied in or from the United states " and :

" shall be liable as an infringer " that is to say :

That a patent has been infringed so . And even if sold abroad ,yet , the linkage or nexus with the action within the US , is beyond any debate . I don't see any issue here with all due respect . Both parties are US residents , and the prohibited action or violation , has been occurred within the US territory .
Thanks

Posted by: El roam | Jun 25, 2018 11:17:03 AM

Yes, and 7 justices agreed with that view--so it certainly won the day. But I think there are still concerns about how the case will be applied in future disputes. The court's logic does not rely at all on the fact that both parties in this case were US residents, and the EFF amicus brief points out that most US patents are actually now held by non-residents. So the doctrine could be used to protect non-residents. Another possibility that the amicus briefs raise is that the decision could push manufacturing outside the United States. If manufacturing the component in the US risks worldwide damages, why not just manufacture the same component outside the US? Then there would be no violation of the Patent Act and no risk of damages.

Posted by: CBR | Jun 25, 2018 12:10:40 PM

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