In principle, patent law only covers acts that take place within the country in which the patent is granted. However, it cannot be ruled out that certain extra-territorial acts that are directly connected to a domestic patent infringement may also lead to liability. Is the patent infringer also obliged to compensate the damage resulting from reduced “export sales” of the patent proprietor?

WesternGeco held Patents for oil and gas prospecting on the seabed. It manufactured the devices in accordance with its own Patents (“Q-Marine”) and used these devices to carry out seabed analyses on behalf of oil companies.

ION produced oil prospecting equipment (“DigiFIN”) of the same type and sold it to companies that then carried out seabed surveys on behalf of the oil companies. These companies were Western Geco’s competitors for prospecting services and concluded and fulfilled the contracts abroad.

WesternGeco filed a lawsuit against ION for patent infringement and claimed that the prospecting contracts would not have gone to its competitors if ION had not supplied the patent-infringing “DigiFIN” devices. It was therefore also entitled to the lost profits from the foreign prospecting contracts.

The District Court therefore ordered ION to pay damages of USD 95 million for patent infringement on the basis of lost profits and USD 12 million in reasonable royalties.

Both parties appealed to the Court of Appeals for the Federal Circuit (CAFC). ION claimed that it had been wrongly ordered to pay damages for the foreign acts of use.

The CAFC sets aside the judgment with regard to the damages for the lost prospecting contracts. It did so on the following grounds.

The purpose of Art. 271(R&D) of the U.S. Patent Act is that it should make no difference whether a patent infringing device is exported as a whole or only in parts. However, it is not the intention of this law to extend U.S. patent law to extraterritorial uses.

The CAFC already clarified this limitation in the earlier decision Power Integrations v. Fairchild Semiconductor (Fed. Cir. 2013). At that time, the patent owner had argued that it would have won the supply contracts for chip deliveries abroad if the patent infringer had not been allowed to sell the chips. However, the CAFC already rejected damages from the foreign sales at that time because this would cover extra-territorial acts.

In the present case, the court also sees no reason to grant the patent proprietor “full compensation” in the sense that the foreseeable foreign consequences of a domestic patent infringement are also compensated. An act that takes place entirely abroad (manufacture, use or sale) is an independent act that under almost all circumstances breaks the chain of causality with regard to compensation.

However, this does not preclude the patent holder from receiving a certain amount of compensation from the infringer in the form of an appropriate License. In the present case, WesternGeco has also received this reasonable license.

This ruling confirms that, despite fears to the contrary by non-American companies, U.S. patent law is limited to acts of infringement and their direct or indirect consequences within the country. Anyone who acquires and uses a device abroad that is patented in the USA cannot be prosecuted under US patent law.

Left: www.cafc.uscourts.gov/sites/default/files/opinions-orders/13-1527.Opinion.6-30-2015.1.PDF