Yelderman, Stephen (2018) "Proximate vs. Geographic Limits on Patent Damages," IP Theory: Vol. 7: Iss. 2, Article 2.
The exclusive rights of a U.S. patent are limited in two important ways. First, a patent has a technical scope—only the products and methods set out in the patent’s claims may constitute infringement. Second, a patent has a geographic scope—making, using, or selling the products or methods described in the patent’s claims will only constitute infringement if that activity takes place in the United States. These boundaries are foundational features of the patent system: there can be no liability for U.S. patent infringement without an act that falls within both the technical and geographic scope of the patent.
Once liability has been established and a court’s attention turns to remedies, the continued relevance of these boundaries is not so clear. If all the infringing activity and all the resulting harm are within the technical and geographic scope of the patent, there is no problem. But, sometimes, activities within the technical and geographic scope of a patent cause harm to the patentee somewhere outside that scope. For example, a defendant’s infringing sales of a patented product may cause the patent holder to lose some sales of an unpatented product too. Or, as another example, a defendant’s infringing activity in the United States might cause a patent holder to lose sales somewhere else. Are these harms—to sales of a different product, or in a different country—cognizable for purposes of measuring the patent holder’s damages? Or do the basic limits on patent scope apply to questions of remedy just as they do to questions of liability?
The Federal Circuit has resolved this puzzle differently depending on which boundary is at issue. When it comes to technical scope, the Federal Circuit has long held that patent holders may recover for all the harms actually and proximately caused by the infringement. As a result, if the defendant’s infringing actions divert sales from the patent holder, the patent holder can potentially recover all of those lost sales, whether or not they fall inside or outside the technical scope of the patent at issue.
When it comes to harms beyond a patent’s geographic scope, however, the Federal Circuit has taken a different approach. In a series of recent cases, the court has developed a hard-and-fast geographic limit, categorically denying recovery of any foreign losses that were caused by the domestic infringement. As a result, if infringing activity inside the United States causes lost sales outside the United States, those losses are simply left to lie where they fall—even if they were actually and proximately caused by the infringing act.
Under the Federal Circuit’s current approach, then, the technical scope of a patent is applied only once in a patent case—to determine whether the defendant can be held liable as an infringer. In contrast, the geographic scope of a patent does a kind of double duty, applying first to the question of liability, and a second time to the question of damages.
This Essay argues that the same approach adopted at the edge of technical scope should apply at the geographic boundary as well. Specifically, patent holders should recover for the injuries actually and proximately caused by domestic acts of infringement, even if those injuries arise outside the technical or geographic scope of the patent. The Federal Circuit has correctly decided cases in which damages fall across the line of technical scope, but erred when it comes to damages that happen to cross a geographic boundary.
"Proximate vs. Geographic Limits on Patent Damages,"
IP Theory: Vol. 7:
2, Article 2.
Available at: https://www.repository.law.indiana.edu/ipt/vol7/iss2/2