Background
WesternGeco LLC held patents covering a high-precision marine seismic survey system that used steerable cables to gather geological data from beneath the ocean floor — a technology used in offshore oil and gas exploration. ION Geophysical, a competitor, manufactured in the United States the individual components of a competing system and exported them abroad, where third parties assembled and used the competing systems on ocean survey ships.
WesternGeco sued ION for infringement under 35 U.S.C. § 271(f), which extends U.S. patent protection to cover the export of components that will be assembled abroad into a product that would infringe if assembled in the United States. A jury found ION liable and awarded WesternGeco $12.5 million in reasonable royalties and $93.4 million in lost profits — the lost profits representing the overseas marine survey contracts WesternGeco lost to ION’s competing (infringing) system. ION appealed the lost profits award as an impermissible extraterritorial application of U.S. patent law.
The Court’s Holding
The Federal Circuit reversed the lost profits award. Writing for the panel, Judge Wallach applied the presumption against extraterritoriality — the principle that U.S. statutes generally do not reach conduct outside the United States — and held that the damages provision of § 284 does not authorize recovery for lost foreign profits resulting from competition overseas. The patent right under § 271(f) is violated by the domestic act of exporting components; the remedy, the court held, must be measured by domestic harm, not by the downstream consequences of that domestic act in foreign markets. The overseas survey contracts that WesternGeco lost were foreign commercial activity, not a domestic injury traceable to the § 271(f) violation.
The court affirmed the $12.5 million royalty award, which was calculated based on the domestic manufacture and export of the infringing components — a domestic measure of harm.
Key Takeaways
- Under the Federal Circuit’s 2016 ruling, a patent holder who suffers foreign lost profits as a result of domestic § 271(f) component exports cannot recover those foreign losses as patent damages — the presumption against extraterritoriality limits damages to domestic harms.
- Reasonable royalties based on the domestic manufacture and export of infringing components remain recoverable under § 271(f).
- The Supreme Court reversed in WesternGeco v. ION Geophysical (2018), holding that lost foreign profits can be recovered under § 284 for § 271(f) infringement because the domestic act of exporting — not the foreign survey activities — is the focus of the statute.
- The case illustrates the complexity of patent damages for global technology businesses: when infringing conduct starts domestically but its commercial consequences play out abroad, the extraterritoriality doctrine creates uncertainty about the scope of recoverable damages.
Why It Matters
WesternGeco v. ION Geophysical touched on one of the most difficult questions in patent damages: how far do damages extend when infringement at home causes competitive harm abroad? The Federal Circuit’s restrictive answer — only domestic harm is compensable — gave multinational corporations a potential shield against damages for global market harm caused by domestic infringement. The Supreme Court’s 2018 reversal took that shield away, at least in the § 271(f) context, holding that lost foreign profits flowing from domestic infringing exports are recoverable.
The case has ongoing significance for industries where technology is designed and partially manufactured in the U.S. but deployed globally — semiconductors, oil and gas equipment, medical devices, and others. It also influenced the debate over whether the same extraterritoriality principle should extend to lost foreign profits under § 271(a) (direct domestic infringement) — a question courts continue to wrestle with.