In June of 2018 the U.S. Supreme Court ruled that patent owners may recover lost profits for infringement outside the United States. WesternGeco, (a subsidiary of Schlumberger) sued ION Geophysical over four patents for locating oil and gas. ION created a rival system and began manufacturing components for the system in the United States and shipping the components overseas for assembly. The assembled system was indistinguishable from WesternGeco’s system. WesternGeco sued ION for patent infringement under 35 U.S.C. §271(f)(1) and (2). A jury awarded WesternGeco $12.5 million in royalties and $93.4 million in lost profits.
On appeal the Federal Circuit reversed the award for lost profits, holding that infringement under §271 does not allow recovery for lost profits outside the United States.
The U.S. Supreme Court granted certiorari and reversed the Federal Circuit’s ruling. The Supreme Court relied on §271(f)(2), which states inter alia:
“Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention… and not… for substantial noninfringing use… knowing 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.”
The U.S. Supreme Court held that ION’s manufacturing of the parts within the United States for assembly overseas constituted infringement of WesternGeco’s patents under §271(f)(2). Since ION had undertaken actions within the United States in violation of §271(f)(2), it was liable for lost profits to WesternGeco under the general damages provisions of §284.
Justices Breyer and Gorsuch dissented, and argued that allowing recovery of overseas damages would allow U.S. patent holders to extend their monopolies to overseas markets in which a U.S. patent would have no legal force. This would in turn invite other countries to use their own patent laws to assert control over the U.S economy.