Extraterritoriality and Proximate Cause After WesternGeco

Timothy R. Holbrook
21 Yale J.L. & Tech. 189

The Supreme Court’s decision in WesternGeco LLC v. ION Geophysical Corp. 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, however, 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 U.S. 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 did elaborate 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 decisions in Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. and Carnegie Mellon University v. Marvell Technology Group, Ltd. survive WesternGeco, along with other decisions regarding the extraterritorial reach of U.S. patent law. I contend that the ultimate conclusions in Power Integrations and Carnegie Mellon are correct, even though the methodology used in the original decisions was wrong. I also discuss how 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. The Federal Circuit could—and should—embrace a narrower conception of proximate cause to limit these types of global theories of patent damages.