Justices To Hear Patent Case Over Lost Profits Damages

The U.S. Supreme Court on Friday agreed to review a Federal Circuit decision that wiped out $93 million in lost profits won by Schlumberger Ltd. in a patent case, and to address the rules for patent damages involving actions that take place outside the U.S.

The appeals court granted a petition for a writ of certiorari by Schlumberger unit WesternGeco LLC challenging a Federal Circuit ruling that restricted its damages in an oil exploration patent suit against rival Ion Geophysical Corp. The high court’s order came just more than a month after the U.S. solicitor general urged the court to hear the case.

A Southern District of Texas jury found that Ion infringed WesternGeco’s patents on a device used to search for oil and gas under the ocean and awarded the company the profits it lost because Ion's customers used the infringing devices.

However, the Federal Circuit ruled in 2015 that Ion cannot be liable for contracts Schlumberger lost that would have been performed outside the U.S. and discarded that part of the award.

In its certiorari petition, WesternGeco argued that while U.S. patent law does not apply outside the U.S. for the purposes of determining liability, there is no similar limit on damages, contrary to what the Federal Circuit found.

"Once infringement liability is established, however, there is no reason to apply the presumption against extraterritoriality again to impose artificial limits on the remedies available," the company said.

Its argument had the support of Solicitor General Noel Francisco, who last month told the high court that the Federal Circuit's decision was wrong because the Patent Act guarantees prevailing patent owners damages adequate to compensate for the infringement. The standard used by the Federal Circuit “systematically undercompensates” patent owners, he said.

While it is presumed that U.S. patent law only applies in the United States, that presumption "does not bar courts from taking notice of foreign evidence or events in fashioning appropriate relief for a domestic act of patent infringement," he wrote.

In its response urging the justices not to hear the case, Ion argued that nothing in patent law "permits for damages based on subsequent use overseas, especially in light of the presumption against extraterritorial application of the patent laws."

Justice Samuel Alito did not participate in the court's decision to hear the case.

Attorneys for the parties could not immediately be reached for comment Friday.

The patents-in-suit are U.S. Patent Numbers 6,691,038; 7,080,607; 7,162,967; and 7,293,520.

Schlumberger is represented by Paul D. Clement, Gregg F. LoCascio, John C. O'Quinn, William H. Burgess, Timothy K. Gilman and Leslie M. Schmidt of Kirkland & Ellis LLP.

Ion is represented by D.J. Healey, Brian G. Strand and Bailey K. Harris of Fish & Richardson PC and Justin M. Barnes of Troutman Sanders LLP.

The government is represented by Solicitor General Noel Francisco, Principal Deputy Assistant Attorney General Chad Readler, Deputy Solicitor General Malcolm Stewart, Assistant to the Solicitor General Jonathan Ellis, and Justice Department Attorneys Mark Freeman and Joseph Busa.

The case is WesternGeco LLC v. Ion Geophysical Corp., case number 16-1011, in the U.S. Supreme Court.