Last June, the Supreme Court determined that $93.4 million in lost foreign profits awarded to WesternGeco L.L.C. for infringement under 35 U.S.C. § 271(f)(2) was a permissible domestic application of 35 U.S.C. § 284, and the Court therefore reversed the Federal Circuit's reversal of the award of lost profits damages and remanded the case (see "WesternGeco LLC v. ION Geophysical Corp. (2018)"). Earlier this month, the Federal Circuit decided, given the intervening invalidation of four of the five asserted patent claims by the U.S. Patent and Trademark Office's Patent Trial and Appeal Board, to remand the case back to the District Court for further proceedings on the lost profits award.
The dispute between the parties began when WesternGeco filed suit against ION Geophysical Corp. for infringement of claims 18, 19, and 23 of U.S. Patent No. 7,293,520; claim 15 of U.S. Patent No. 7,162,967; claim 15 of U.S. Patent No. 7,080,607; and claim 14 of U.S. Patent No. 6,691,038. The patents relate to marine seismic surveys for discovering oil and gas deposits beneath the ocean floor. Both WesternGeco and ION manufacture devices for steering streamers in marine seismic surveys; WesternGeco does not sell its device, but uses it to perform surveys abroad, and ION does not perform surveys, but sells its device to customers who perform surveys abroad. At trial, ION was found to have infringed the asserted claims under 35 U.S.C. §§ 271(f)(1) and (2), and WesternGeco was awarded a reasonable royalty of $12.5 million and lost profits of $93.4 million. The lost profits damages were based on the loss of ten surveys abroad, which WesternGeco argued it would have won but for ION's sales to WesternGeco's competitors.
On appeal, the Federal Circuit reversed the lost profits award as being based on an unauthorized extraterritorial application of the patent laws. WesternGeco petitioned for certiorari, which the Supreme Court granted, and the Court vacated the Federal Circuit's decision and remanded for further proceedings consistent with the Supreme Court's decision in Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016). On remand, the Federal Circuit again reversed the lost profits award, vacated the District Court's denial of enhanced damages, and remanded to the District Court for further consideration in light of Halo. On remand, the District Court awarded WesternGeco $5 million in enhanced damages. The parties then stipulated to the reasonable royalty amount, which ION paid, and agreed not to appeal the enhanced damages award, but did not stipulate to the lost profits award. WesternGeco again petitioned for certiorari, requesting review of the Federal Circuit's decision on lost profits. The Supreme Court again granted the petition, reversed the Federal Circuit's decision on lost profits, and remanded the case back to the Federal Circuit.
In a parallel proceeding before the PTAB, the Board determined that four of the six asserted patent claims (i.e., all but claim 23 of the '520 patent and claim 14 of the '038 patent) we unpatentable. While the case above was pending in the Supreme Court, the Federal Circuit separately affirmed the PTAB's decision. Of the two remaining claims, it is uncontested that only claim 23 of the '520 patent can support WesternGeco's lost profits award.
On remand from the Supreme Court again, ION challenged the fully paid and satisfied reasonable royalty award as well as the lost profits award based on the PTAB's subsequent invalidation of four of the six asserted patent claims. With respect to the reasonable royalty award, ION argued that the calculation of the reasonable royalty would be affected by the invalidation of claims and sought a new trial, citing Fresenius USA, Inc. v. Baxter International, Inc., 721 F.3d 1330 (Fed. Cir. 2013), as holding that a judgment cannot be final for purposes of intervening patent invalidations if any part of the litigation remains pending, and that the lost profits award was still being litigated. In rejecting ION's challenge to the reasonable royalty award, the Federal Circuit disagreed with ION's interpretation of Fresenius, noting instead that "Fresenius made clear that it does not allow reopening of a satisfied and unappealable final judgment." In particular, the Federal Circuit pointed out that "ION and WesternGeco entered into a compromise agreement resolving all of the issues in the case except for the lost profits award," and that "ION cannot now reopen the agreed and fully paid unappealable final judgment on the reasonable royalty based on the subsequent invalidation of a subset of asserted patent claims."
With respect to the lost profits award, ION first argued that the District Court erred when it denied ION's renewed motion for judgment as a matter of law on the theory that WesternGeco was not entitled to lost profits because ION and WesternGeco are not "direct competitors" (since ION only sells devices and WesternGeco only sells surveys). The Federal Circuit, however, was not persuaded by ION's argument, noting that "WesternGeco's and ION's devices competed by performing the same types of functions for surveys," and that "there was sufficient evidence in the record for the jury to conclude that the products did compete."
ION also argued that the lost profits award could not be sustained because of the intervening invalidation of four of the five asserted claims supporting the award. The Federal Circuit noted that the jury found all of the asserted claims to be infringed and made a single lost profits award, but that the jury instructions and verdict form did not instruct the jury to award damages based separately on infringement of each of the asserted claims. The Federal Circuit also noted that WesternGeco did not cite to any specific testimony that infringement of claim 23 of the '520 patent was necessary to perform the ten surveys that WesternGeco had contended it lost. The Federal Circuit indicated that to sustain the lost profits award, the record must establish that there was no dispute that the technology covered by claim 23 of the '520 patent, independent of the technology covered by the invalidated claims, was required to perform the surveys at issue. Pointing out that the District Court was in a better position to consider the issue in the first instance, the Federal Circuit remanded to the District Court to determine whether a new trial on lost profit damages is required, stating that "[t]he district court may deny a new trial on lost profits if, but only if, it concludes that WesternGeco established at trial with undisputed evidence that '520 patent claim 23 covers technology necessary to perform the surveys upon which the lost profits award is based."
The Federal Circuit concluded by reinstating sections I, II, and IV of its decision in WesternGeco I and sections I and II of its decision in WesternGeco II, determining that those sections were not affected by either the initial vacatur and remand from the Supreme Court or the Supreme Court's subsequent decision in WesternGeco III, and affirming-in-part, vacating-in-part, and remanding.
WesternGeco L.L.C. v. ION Geophysical Corp. (Fed. Cir. 2019)
Panel: Circuit Judges Dyk, Wallach, and Hughes
Opinion by Circuit Judge Dyk
