By Erik Swanson
The Federal Circuit in Brumfield v. IBG LLC (March 2024)held that under the U.S. Supreme Court’s 2018 WesternGeco decision, a patent owner may recover reasonable royalty damages based on foreign conduct from one who infringes under §271(a) of the U.S. patent statute.
WesternGeco concerned §271(f)(2) of the U.S. patent statute, under which provision the act of exporting from the U.S., for assembly abroad, components that are specially adapted for a patented invention constitutes infringement of the patent. In WesternGeco, the plaintiff owned patents for a system used in surveying the ocean floor. The plaintiff alleged that the defendant infringed these patents by exporting components for use in a foreign country and lost contracts in the foreign country. The question presented in WesternGeco was whether a patent owner may recover lost foreign profits due to overseas use of the patented invention by one who exports components of the patented invention so as to infringe the patent under §271(f)(2). With respect to infringement, the Court identified the focus of §271(f)(2) as the “domestic conduct” of supplying components of a patented invention for combination overseas. The damages themselves are “merely the means by which the statute achieves its end of remedying infringement.” Because the conduct that is relevant to the focus of the statute occurred in the United States, an award of lost foreign profits resulting from that conduct is a permissible domestic application of the U.S. patent law, the Court concluded.
Whereas WesternGeco addressed §271(f)(2) and lost profit damages, the Brumfield case concerned §271(a), under which provision domestic (U.S.) making, using, offering to sell, selling and importing of patented inventions constitute infringement of the patent. In Brumfield the plaintiff owned patents claiming, among other things, a computer readable medium having program code providing an improved graphical interface for commodity trading. The plaintiff alleged that defendants’ software platform download from defendant’s server by users, including foreign users, infringed those patents under §271(a). The question presented in Brumfield waswhether WesternGeco’s extraterritoriality analysis, in particular in relation to the software downloading by foreign users, is applicable to 1) §271(a) infringement, and 2) reasonable royalty damages. The Federal Circuit found in the affirmative on both questions.
Applying the principles set forth in WesternGeco, the Federal Circuit found that nothing about the WesternGeco analysis “is altered when ‘the infringement’ at issue is infringement under §271(a) rather than §271(f)(2).” In the same way that the exporting activity covered by §271(f)(2) is a domestic act for the purposes of the extraterritoriality analysis, so too are the making, using, offering to sell, selling and importing acts covered by §271(a). And although the damages at issue in WesternGeco were lost profits, the Court’s statutory analysis of the §284 damages provision of the U.S. patent law did not distinguish amongst the forms of damages, the Federal Circuit noted. The WesternGeco reasoning thus applies to a reasonable royalty, not just lost profits. Applying the WesternGeco framework, the Federal Circuit found that reasonable royalty damages may be awarded for foreign conduct that is not independently infringing where the foreign conduct is sufficiently causally connected to an increase in the value of the domestic infringement. As with the award of lost profit damages in WesternGeco, the Federal Circuit held that an award of such foreign conduct-based reasonable royalty damages for infringement of §271(a) is a permissible domestic application of the statute.
The Brumfield decision confirms that WesternGeco is not limited to the special case of infringement under §271(f)(2). Rather, the damages analysis framework set forth in WesternGeco has broader applicability to other types of infringing “domestic acts” and to reasonable royalty damages. As such, Brumfield opens the door for patentees to pursue both reasonable royalty and lost profits damages for foreign conduct causally related to such infringing domestic acts.
