Overview
United States Patent rights are territorial, and thus ordinarily apply to acts within the U.S. In limited circumstances, patent owners can overcome the presumption against extraterritorial application of patents to seek damages from foreign sales. Notably, in WesternGeco LLC v. ION Geophysical Corp., 585 U.S. 407 (2018) (“WesternGeco”), the Supreme Court established a two-part analysis to determine whether a patent owner was entitled to recover lost profits damages on foreign sales of a product found to be infringing under 35 U.S.C. § 271(f)(2), which makes it an act of infringement to supply a component “especially made” for use in a patented invention from the U.S. knowing and intending that such component will be combined abroad in a manner that would infringe the patent if such combination occurred within the United States.
The WesternGeco two-part framework for deciding whether the application of a statute is impermissibly extraterritorial begins with the rebuttable presumption that the extraterritorial application of patent rights is not permitted. This presumption can be rebutted by clear congressional action, such as a statute that provides a clear indication of an extraterritorial application. If the presumption has not been rebutted, the analysis then proceeds to the second prong, where the “focus” of the statute, e.g., the conduct it seeks to regulate, is examined to determine whether the case involves “a domestic application” of the statute. “‘If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application’ of the statute, ‘even if other conduct occurred abroad.’” Id., at 413 (quoting RJR Nabisco, Inc. v. European Community, 579 U.S. 325, 337 (2016)).
Recently, in Brumfield v. IBG LLC, 97 F.4th 854 (Fed. Cir. 2024) (“Brumfield”), the U.S. Court of Appeals for the Federal Circuit applied the WesternGeco extraterritoriality framework to a case in which the patent owner sought damages from foreign sales flowing from domestic infringement under 35 U.S.C. § 271(a), which makes it an act of infringement to make, use, offer to sell, or sell a patented invention within the United States. 35 U.S.C. § 271(a).
By way of background, at the district court level, IBG LLC (“Defendant-Appellee”) was found to infringe software patents owned by Mr. Harris Brumfield (“Plaintiff-Appellant”) by making and selling an infringing software product in the United States. See Trading Technologies International, Inc. v. IBG, LLC, 201 WL 2473809 (N.D. Ill. June 17, 2021). A jury awarded $6.6M to Plaintiff-Appellant for domestic infringement under § 271(a). The District Court, however, excluded a damages theory put forth by Plaintiff-Appellant’s damages expert, namely, that Plaintiff-Appellant was also entitled to a reasonable royalty on foreign sales of software products that IBG developed in the U.S. and sold abroad. See Brumfield, Trustee for Ascent Trust v. IB LLC, 586 F.Supp.3d 827, 830–31 (N.D. Ill. 2022) (Post-Trial Opinion).
Plaintiff-Appellant appealed seeking, inter alia, a new trial on damages to expand their damages award to include a reasonable royalty on foreign sales of the software products and arguing that the district court should have applied the WesternGeco extraterritoriality analysis, rather than the principles the district court relied on from the Federal Circuit’s previous decision in Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348 (Fed. Cir. 2013).
On appeal, the Federal Circuit affirmed the District Court’s decision to exclude the damages theory involving foreign sales. However, in so doing the Federal Circuit applied the extraterritoriality framework set forth in WesternGeco which involved a foreign lost profits damages claim stemming from infringement under §271(f)(2), to the claims seeking foreign reasonable royalty damages stemming from infringement under §271(a). See Brumfield v. IBG LLC, 97 F. 4th at 870 (2024).
The Brumfield Court ultimately denied Plaintiff-Appellant’s request for a new damages trial on grounds including that Plaintiff-Appellant’s damages theory failed to establish proximate cause between the damages sought for foreign sales and a domestic act, as is necessary under WesternGeco. Id., at 877–879. Specifically, the Court noted that “[t]he requirement of the [WesternGeco] framework that is dispositive here is that ‘the infringement’—the focus of § 284, as the Court in WesternGeco repeatedly stressed—have the needed causal relationship to the foreign conduct for which recovery is sought.” Id., at 878. The Court further acknowledged that the necessary proximate causation is more than but-for causation, including the absence of remoteness. Id., at 877. As for Plaintiff-Appellant’s damages theory, the Brumfield Court concluded that Plaintiff-Appellant “… presented no focused, coherent explanation of the required causal connection to domestic infringement.” Id., at 880.
WesternGeco LLC v. ION Geophysical Corp., 585 U.S. 407 (2018).
Brumfield v. IBG LLC, 97 F.4th 854 (Fed. Cir. 2024).
Trading Technologies International, Inc. v. IBG, LLC, 201 WL 2473809 (N.D. Ill. June 17, 2021).
Brumfield, Trustee for Ascent Trust v. IB LLC, 586 F.Supp.3d 827, 830–31 (N.D. Ill. 2022).
Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348 (Fed. Cir. 2013).
RJR Nabisco, Inc. v. European Community, 579 U.S. 325, 337 (2016).
