Notable Case: WESTERNGECO v. ION GEOPHYSICAL CORPORATION

A patent is a set of exclusive rights granted to the inventor of an invention that meets certain requirements. An invention must be novel, must not be obvious and must be useful to be granted a patent in the United States. If an invention is granted a patent in the United States, the inventor is granted the exclusive right to use or sell the invention. If someone else uses a patented invention, without the consent of the inventor, that is known as patent infringement.

When a patent owner wins a patent infringement lawsuit, the defendant has to pay the patent owner damages. Two methods are used in determining damages in a patent infringement lawsuit. Reasonable royalty and lost profits. Reasonable royalty is the amount of money for which two people would have agreed to license the patent. Lost profits are the amount of money that a company actually lost because of the patent infringement.

In the past most companies that operate in the United States would get patents in the United States and only be concerned with patent infringement in the United States. Globalization is making the world a smaller place. Today multinational companies operate across the globe, and patent infringement can happen across the globe. When a patent infringement case is won in the United States, can a patent owner be awarded damages for patent infringement that happens outside the United States?

That is the question in WESTERNGECO v. ION GEOPHYSICAL – can damages be awarded for patent infringement that occurs outside the United States? The details of the case are very technical. WesternGeco developed and patented technology used in geological surveys to search for oil and gas under the ocean floor. The patented invention is a sensor array which is dragged behind ships to defect oil and gas deposits under the ocean floor. ION Geophysical sold a product that infringed on WesternGeoco’s patents. A jury awarded $12.5 million in damages for reasonable royalty and $93 million damages in lost profits. ION Geophysical appealed the verdict and the Federal Circuit Court of Appeals reversed the lost profits damages. The Federal Circuit reasoned that because the patent infringement occurred outside the United States, lost profits damages were not available. WesternGeoco appealed the Federal Circuit’s decision to the United States Supreme Court.

Normally patent infringement that occurs outside of the United States would not be litigated in United States courts. The specific patent infringement in this case can only occur when components of a patented invention are sold in the United States and then assembled for use in a foreign country. 35 U.S.C. § 271(f) is specific statute that covers this type of patent infringement. 35 U.S.C. § 271(f) was enacted specifically to cover sales of components manufactured in the United States, which were exported to make a product which infringed on a United States patent. The Federal Circuit held that 35 U.S.C. § 271(f) imposes liability for patent infringement but not impose damages for patent infringement which occurs outside the United States. Because the patented invention was used in the ocean, outside of United States territory, the Federal Circuit held that lost profits damages are not available. WesternGeoco would like the United States Supreme Court to reverse this decision and award lost profits damages.

The United States Supreme Court has agreed to hear the case, so it will be interesting to see what the court decides.

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