Schlumberger oil services wins in US Supreme Court on patent damages

The exterior of a Schlumberger Corporation building is pictured in West Houston, Texas, US on January 16, 2015. (Reuters pic)

WASHINGTON: The US Supreme Court ruled on Friday that companies can recover profits lost because of the unauthorized use of their patented technology abroad in a victory for Schlumberger NV, the world’s largest oilfield services provider.

The 7-2 decision overturned a lower court’s ruling that had enforced limits on applying US patent law overseas and reduced by $93.4 million the damages sum that rival ION Geophysical Corp had to pay for infringing Schlumberger technology that helps find oil and gas beneath the ocean floor. Both companies are based in Houston.

The decision expands the ability of patent owners to recover foreign-based damages, increasing the threat posed by certain infringement lawsuits in the United States.

Internet-based companies and others had expressed concern that extending patent damages beyond national borders would expose US high-technology firms to greater patent-related risks abroad.

Schlumberger said that since federal patent law protects against infringement that occurs when components of a patented invention are supplied from the US for assembly abroad, it should be fully compensated for the infringement, including any lost foreign sales.

The high court agreed. Writing for the majority, Justice Clarence Thomas said ION infringed patents owned by Schlumberger subsidiary WesternGeco in the United States.

The “overseas events were merely incidental to the infringement,” he said. Justices Neil Gorsuch and Stephen Breyer dissented from the decision.

The case involved four WesternGeco patents related to an invention that more efficiently completes marine seismic surveys to help identify oil and gas drilling locations.

ION developed a competing system and sold it to surveying companies abroad. WesternGeco sued in 2009, and a federal jury in Houston found that Ion infringed the patents and caused the company to lose contracts.

The jury awarded $12.5 million in royalties and $93.4 million in lost profits stemming from foreign contracts the company said it missed out on as a result of ION’s infringement.

In 2015, the Washington-based US Court of Appeals for the Federal Circuit, which specializes in patent issues, ruled that Schlumberger could not recoup the lost profits portion because US patent law does not cover the overseas use of infringing products.

President Donald Trump’s administration, which sided with Schlumberger in the case, said the Federal Circuit’s ruling “systematically undercompensates” US patent owners who participate in cross-border commerce.

The case was made more complicated when the Federal Circuit on May 7 invalidated three of the patents at issue in the case, which could impact the overall damages owed.