On October 4, 2018, Federal District Court Judge Leonard P. Stark issued an order in Power Integrations, Inc. v. Fairchild Semiconductor International, Inc., et al. allowing a plaintiff to recover foreign lost profits for direct patent infringement under 35 U.S.C. § 271(a). The order extends the U.S. Supreme Court’s June 2018 holding in WesternGeco LLC v. ION Geophysical Corp. (“WesternGeco II”) that foreign lost profits are recoverable in indirect patent infringement cases under 35 U.S.C. § 271(f)(2) where a defendant exports a component of a patented invention, and intends that component be combined outside the U.S. in a way that would infringe the patent if the combination occurred inside the U.S.
The Supreme Court recognized that the overarching purpose of the patent damages statute (§ 284) is to provide the owners of U.S. patents “complete compensation” for the infringement of their patent and, thus, foreign lost profits caused by domestic U.S. infringement under § 271(f)(2) are recoverable.
Judge Stark took the bold step of holding that the Supreme Court’s decision implicitly overruled contrary Federal Circuit precedent that would otherwise bind his decision. He reasoned that “[t]he Supreme Court’s analysis of the patent damages statute, § 284, has equal applicability to the direct infringement allegations pending here, as governed by § 271(a), as it did to the supplying a component infringement claims at issue in WesternGeco II, which were governed by § 271(f)(2).” Although he agreed that “Section 271(a) ‘vindicates domestic interests’ no less than Section 271(f),” he certified his decision for immediate appeal to the Federal Circuit. That appeal is underway.
If the Federal Circuit upholds Judge Stark’s decision, it may have a profound effect on patent infringement damages in many cases, making many U.S. patents even more valuable. Patent owners will be able to seek increased damages and U.S. manufacturers with significant foreign sales may be at increased risk. Patent owners and potential infringers alike should consider the potential impact of an affirmance on their businesses and plan accordingly.