Halo Seeks to Recover Extraterritorial Damages from Pulse

Some readers may be aware that I've been working on a paper titled Extraterritorial Damages in Patent Law.  I haven't posted it yet on ssrn, but the basic argument is that, both as a matter of legal doctrine (post-WesternGeco v. ION) and as a matter of policy, where an act of domestic patent infringement is (1) the cause-in-fact and (2) the proximate cause of extraterritorial losses to the plaintiff (or benefits to the defendant), the patent owner should be able to recover damages for those extraterritorial losses, as long as courts avoid awarding duplicative recoveries for the same loss.  I suspect that many U.S. academics may disagree with me on this, but my proposal is consistent with the (albeit limited) case law on this topic from other countries, and I am reasonably confident that my arguments are logically sound.

Anyway, I mention this now because an article recently published on Law360 alerted me to a motion recently filed by Halo Electronics, Inc. to recover damages for lost foreign profits.  (And yes, this is the same Halo v. Pulse litigation that was before the Supreme Court in 2016 on the issue of enhanced damages).  If I am understanding the argument correctly, Halo's contention is that Pulse engaged in pre-infringement negotiations and other conduct in the U.S., which then resulted in the foreign manufacture and sale of equipment that incorporated Halo's U.S. patented technology, some of which equipment was subsequently imported into the U.S. for sale here.  Halo has already been compensated for the losses stemming from the infringing imports into, and sales within, the U.S., and now seeks to recover additional damages for the foreign sales.

Again, assuming I am understanding the facts correctly, the court should deny the motion.  What Halo appears to be arguing is that pre-infringement conduct in the U.S. caused both the foreign manufacture/sales and the subsequent domestic imports/sales--not that the domestic imports/sales caused the foreign manufacture/sales.  Given the timing of events as set forth in the motion, Halo cannot argue that the importation into the U.S. was the cause-in-fact, proximate cause, or any sort of cause of the foreign sales.  (An event at time t cannot cause an event at time t-1, last time I checked--at least not outside the realm of quantum physics, and even there it's sketchy.)  To allow Halo to recover the additional damages it is now seeking would be a violation of the general principle that patents are territorial, and is by no means a reasonable interpretation of WesternGeco.

One possible caveat, though:  maybe Halo is arguing that there was some infringing activity in the U.S.--not just pre-infringement conduct--that preceded, and enabled, the foreign manufacture and sales.  There are a few hints of this in the motion (e.g., at p.11, which refers to Pulse "sending product samples to Cisco for pre-approval").  If that is the case, then the question would be whether this domestic infringing activity was both the cause-in-fact and proximate cause of the subsequent foreign manufacture and sales; if so, damages for the foreign activity may be appropriate.  If, however, the argument is that the pre-infringement conduct in the U.S. caused the foreign manufacture and sales, which in turn resulted in the importation of some infringing products into the U.S., I don't see how the domestic infringement in any sense caused the foreign activity, and no damages for that foreign activity should be awarded.  It's not enough that they are in some sense related, or had a common cause.

For Pulse's response, and Halo's reply, see here and here.  For another recent Law360 article relevant to this topic, see Jenny Colgate & Sheena Wang, Foreign Patent Damages Recovery 2 Years After WesternGeco, which discusses some of the (still fairly sparse) post-WesternGeco case law.