Monday, December 18, 2017

Petitions for Certiorari Relating to Patent Damages

There are two petitions for certiorari currently pending before the U.S. Supreme Court relating to patent damages issues.  It may be a few weeks or more before we know whether the Court will decide to hear either case.

The first is WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, petition filed February 17, 2017.  The question presented is "Whether the U.S. Court of Appeals for the Federal Circuit erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases where patent infringement is proven under 35 U.S.C. § 271(f)."  Readers may be familiar with the underlying case, which I have blogged about before (see here, here, and here).  For background, section 271(f) of the Patent Act reads as follows:
(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.
(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending 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 defendant in this case was found liable under section 271(f), based on evidence that it supplied components of the invention from the U.S. to foreign customers, who then assembled them and performed marine seismic surveys for customers on the high seas.  The patent owner argues that, but for the infringement, it would have carried out those surveys and earned the resulting profit.  The Federal Circuit concluded, however, that the patent owner may not recover damages for lost profits arising from services it would have been performed outside the U.S., even if the evidence indicates that, but for the unlawful conduct that occurred within the U.S. (the supplying of the components), it would have performed those services.  Judge Wallach dissented.  (For more details, read my earlier posts.)  Anyway, here are links to the briefs filed so far (courtesy of Scotus Blog), including one filed this past week at the Supreme Court's behest by the Solicitor General (who urges the Court to reverse):

So far I've only carefully read the SG's brief, which argues that the principle of full compensation requires that the patent owner recover its lost profits on these facts, subject to normal tort law principles of proximate causation; and that such an award would not contradict the general principle against extraterritorial application of U.S. patent law.  Similar issues have arisen in the Federal Circuit's decisions in Power Integrations and Carnegie-Mellon v. Marvell (see previous posts here, here, here, here, and here), all of which the SG appears to believe were wrongly decided (see brief p.19).  The SG also argues that the rule Federal Circuit applied here departs from the rule that other courts have applied in copyright cases (see pp. 19-20); given the Supreme Court's predilection in some recent cases (Impression Products v. Lexmark, SCA Hygiene Products) to construe patent and copyright rules in a similar fashion, that might be a persuasive point for the Court.  In addition, the SG notes the possibility that in cases like these the defendant might have had available a noninfringing alternative (shifting its production overseas, where it wouldn't implicate U.S. patent law at all), but if so this is a matter the trier of fact should consider (see p.9 n.1).

In regard to the issues presented in this case, I should note that a few weeks back Norman Siebrasse published a very interesting post inspired by a recent Canadian case that could be read as implicating some analogous issues, see here.

2.  I am informed that EVE-USA, Inc. has filed a cert petition (No. 17-804) in a case that the Federal Circuit recently decided under the name Mentor Graphics Corp. v. EVE-USA, Inc. (see previous posts here and here).  I haven't seen a copy of the petition itself yet, but presumably it will be available on Scotus Blog or some other site before long.  In Mentor Graphics, the Federal Circuit held that the owner of a patent on a component that is incorporated into a multicomponent product can recover whatever profit it lost (if any) from sales it lost as a result of the defendant's infringement, rather than an apportioned lost profit.  For reasons stated in my previous posts, I think that decision is eminently correct, so I am hoping the Court will deny cert on this issue--a result that, it appears to me, would be dictated by the SG's full compensation principle in WesternGeco, were the Court to accept that principle.

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