Extraterritoriality and Proximate Cause after WesternGeco
38 Pages Posted: 11 Oct 2018 Last revised: 14 Jul 2021
Date Written: October 2, 2018
The Supreme Court’s decision WesternGeco LLC v. ION Geophysical Corp. appeared to be a narrow case about a rather obscure patent law provision. In reality, however, it had the potential to reach into a number of trans-substantive areas, including the nature of compensatory damages, proximate cause, and extraterritoriality. Instead of painting with a broad brush, the Supreme Court opted to take a modest, narrow approach to the issue of whether lost profits for foreign activity were available to a patent holder for infringement under 35 U.S.C. § 271(f)(2). In addressing this issue, the Court utilized its two-step framework for assessing the extraterritorial reach of U.S. law that it adopted in RJR Nabisco Inc. v. European Community. Step one under RJR Nabisco entails an assessment of whether the presumption against extraterritoriality has been rebutted. Step two requires a court to examine whether activity relevant to the focus of the statute occurred within the United States, even if other acts occurred outside. If so, then the statute still applies to the conduct. The Court skipped step one in WesternGeco, but its analysis of step two confirmed that the territorial limits of damages is tied to the corresponding liability provision. Ultimately the Court allowed the damages for the relevant foreign activity.
This decision clarified a few important aspects about the extraterritorial application of US law. By skipping step one of RJR Nabisco, the Court made clear that the presumption against extraterritoriality is distinct from the focus analysis of step two. The Court passed on the opportunity to further elaborate on step one and to answer definitively whether the presumption applies to remedial provisions. The Court also elaborated on step two and embraced a methodology that tied the extraterritorial reach of a general remedy provision to the corresponding liability provision.
The Court’s decision also leaves a number of questions open. Specifically, it remains unclear whether the Federal Circuit’s Power Integrations and Carnegie Mellon decisions survive WesternGeco, along with other decisions regarding the extraterritorial reach of U.S. patent law. I contend that the ultimate conclusions Power Integrations and Carnegie Mellon are correct, even though the methodology used in the original decisions were wrong. The Court also failed to explore the important role that proximate cause may play in future patent cases, particularly those involving global theories of damages, and I take up this issue here. The Federal Circuit could – and should – embrace a narrower conception of proximate cause to limit these types of global theories of patent damages.
Keywords: extraterritoriality, proximate cause, westerngeco, 271(f), territoriality, presumption against extraterritoriality, morrison, rjr nabisco, remedies, damages, compensatory damages
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