U.S. district court extends foreign lost profits liability to direct patent infringers

In his October 2018 decision in Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. (“Power Integrations Inc.”) Chief Judge Leonard P. Stark of the United States District Court for the District of Delaware held that applying a federal statute to allow recovery of profits lost overseas due to direct patent infringement is a permissible extraterritorial application of U.S. federal law.

This ruling extends the United States Supreme Court’s June 2018 decision in WesternGeco LLC v. ION Geophysical Corp. (“WesternGeco”), which established that profits lost overseas due to indirect patent infringement in the United States were recoverable on the basis that the U.S. patent statute aims to provide “complete compensation” to patentees.

WesternGeco concerned a statutory provision that contemplated situations in which an indirect infringer exports a component of a patented invention intending that the component be combined outside the United States in a way that would infringe the patents if such a combination occurred domestically. Under U.S. patent law, indirect patent infringement occurs through either contributory infringement or the inducement of infringement and only when the infringer has knowledge of the patent at issue.

In Power Integrations Inc., Judge Stark deviated from binding appellate court precedent to hold that the Supreme Court’s decision in WesternGeco equally applied to different statutory provisions relating to direct infringement, such that direct infringers are also liable to account for foreign lost profits. Direct patent infringement occurs when a person makes, uses, offers to sell or sells any patented invention without authorization.

As some commentators have noted, the decision in WesternGeco and the recent extension of foreign lost profits liability in Power Integrations, Inc., have the potential to increase the value of United States patents and may increase the risk of liability for U.S.-based manufacturers and exporters.

An appeal of Judge Stark’s decision to the U.S. Court of Appeals for the Federal Circuit is pending.

Author: Wes Dutcher-Walls, 2018/2019 Articling Student-at-law