The U.S. Supreme Court will consider expanding the territorial boundaries for imposing damages in patent infringement cases. The question now is whether the justices might carve a small exception into the usual presumption against extraterritoriality—or blow it up altogether when it comes to patent damages.

Immediately at stake in WesternGeco v. ION Geophysical is $93 million in lost profits in a dispute over mapping technology for oil deposits under the ocean floor. WesternGeco LLC, a subsidiary of Schlumberger backed by Kirkland & Ellis, won its verdict under Section 271(f) of the Patent Act, a relatively narrow provision that targets infringers who ship components for assembly overseas. Section 271(f) creates a “sufficient territorial nexus” to allow for damages based on marine surveys that were conducted beyond U.S. territorial waters, Kirkland partner Paul Clement argued in WesternGeco's cert petition.

The Justice Department, however, is framing the case much more broadly, urging the court to make every patent owner whole—under any provision of the Patent Act—for domestic patent infringement, no matter whether the damages occur in the United States or abroad. That could have a big impact on, for one example, technology companies that infringe U.S. patents but sell the infringing goods around the world.

“The presumption against extraterritoriality does not bar courts from taking notice of foreign evidence or events in fashioning appropriate relief for a domestic act of patent infringement,” the solicitor general's office wrote in an amicus brief filed last month.

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The Federal Circuit's rule against worldwide patent damages has shaved hundreds of millions in damages against technology companies in some recent cases.

ION Geophysical Corp. argues that the presumption against territoriality should apply to patent infringement and damages. WesternGeco “would transform United States patents into worldwide patents,” ION's counsel of record, Fish & Richardson partner DJ Healey, wrote in her brief in opposition.

Healey is a veteran IP litigator who made news last summer by announcing that she is transgender and is transitioning to live as a woman. The case presents the possibility of one of or the first openly transgender individual appearing before the high court.

The case, closely watched by IP lawyers, was among 12 cases that the justices agreed to review. Among the other cases, the justices will decide whether online retailers must pay state sales taxes even if they have no physical presence in the state and will consider the legitimacy of administrative judges at the U.S. Securities and Exchange Commission.

WesternGeco involves methods for steering the sometimes mile-long cables that scan beneath the sea bed. The company says it invested a decade of research and nearly $100 million to develop the process of “lateral steering,” and held 100 percent of the market during the early 2000s. In 2007 alone WesternGeco says it earned more than $500 million from its “Q marine” surveys.

Houston-based ION manufactures a similar system that is assembled overseas and then sold to WesternGeco's competitors. A Houston federal jury found that WesternGeco lost at least 10 contracts worth $6 million to $45 million each to ION-supplied competitors.

U.S. patent laws generally limit liability to making, using or selling a patented invention in the United States. But ION was found liable under Section 271(f), which holds that a domestic manufacturer can be liable for supplying “any component of a patented invention that is especially made or especially adapted for use in the invention” outside the United States.

The U.S. Court of Appeals for the Federal Circuit upheld the infringement finding and a $12.5 million royalty awarded by the jury. But the appellate court threw out the additional $93.4 million for lost profits, on the ground that those damages occurred on the high seas beyond the United States.

Judge Timothy Dyk looked to Power Integrations v. Fairchild Semiconductor, a seminal Federal Circuit case in which a semiconductor supplier claimed damages based on lost contracts around the world. U.S. patent law does not provide “compensation for a defendant's foreign exploitation of a patented invention, which is not infringement at all,” the court held in Power Integrations.

Judge Evan Wallach dissented from Dyk's decision, and two other Federal Circuit judges dissented from the denial of en banc review.

WesternGeco argues that the finding of liability under Section 271(f) should overcome the presumption against extraterritoriality. Power Integrations arose under the general patent statute, “which reflects no comparable congressional judgment to target certain extraterritorial conduct as long as a specified nexus to the United States is satisfied,” Clement argues in the company's cert petition.

Last month the solicitor general went further, arguing that Power Integrations was wrongly decided and that a patent owner's foreign lost profits should be in play in any case of domestic patent infringement. “A patent holder is always seeking compensation for a wholly domestic legal injury, even if the consequences of that injury include lost profits that would have been earned overseas,” the solicitor general's brief states.

If the Supreme Court were to agree, it could substantially fatten patent damages against companies that do business globally. Five years ago a Pennsylvania jury awarded $1.5 billion against Marvell Technology Group for infringing a patent owned by Carnegie Mellon University. The Federal Circuit reduced the award to about $330 million, largely on the basis that most of the damages may have occurred outside the United States. The solicitor general argues that Carnegie Mellon was wrongly decided as well.

Healey argued to the Supreme Court last month that Western Geco and the solicitor general aren't on the same page. “The government does not view this case in terms of § 271(f); it frames the question presented, and indeed the whole case, radically differently,” she wrote.