Tesco Corp. v. Nat'l Oilwell Varco, L.P.

• Decision Date: 30 October 2015
• Docket Number: No. 2015–1041.,2015–1041.
• Citation: 804 F.3d 1367,116 U.S.P.Q.2d 1789
• Parties: TESCO CORPORATION, Plaintiff v. NATIONAL OILWELL VARCO, L.P., Offshore Energy Services, Inc., Frank's International, LLC, Defendants–Appellees. v. Glenn A. Ballard, Jr., John F. Luman, III, Interested Parties–Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

804 F.3d 1367

116 U.S.P.Q.2d 1789

TESCO CORPORATION, Plaintiff

v.NATIONAL OILWELL VARCO, L.P., Offshore Energy Services, Inc., Frank's International, LLC, Defendants–Appellees.

v.Glenn A. Ballard, Jr., John F. Luman, III, Interested Parties–Appellants.

No. 2015–1041.

United States Court of Appeals, Federal Circuit.

Oct. 30, 2015.

John Wesley Raley, III, Raley & Bowick, LLP, Houston, TX, argued for defendant-appellee National Oilwell Varco, L.P. Also represented by Robert McGee Bowick, Jr., Bradford Turner Laney.

Clayton James Bushman, Bushman & Associates, Houston, TX, for defendant-appellee Offshore Energy Services, Inc. Also represented by Erin Werner.

Lester L. Hewitt, Attorney at Law, Houston TX, for defendant-appellee Frank's International, LLC. Also represented by Sarah J. Ring, David R. Clonts, James L. Duncan, III, Ashley M. Brown, Akin, Gump, Strauss, Hauer & Feld, LLP, Houston, TX; Rex S. Heinke, Los Angeles, CA.

Grant Harvey, Gibbs & Bruns, Houston, TX, argued for interested parties-appellants. Also represented by Jeffrey C. Kubin, Ayesha Najam ; William F. Lee, Richard Wells O'Neill, Katie Saxton, Michaela P. Sewall, Caitlin Looby, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA.

Before NEWMAN, O'MALLEY, and CHEN, Circuit Judges.

Opinion

Opinion for the court filed by Circuit Judge O'MALLEY. Dissenting opinion filed by Circuit Judge NEWMAN.

O'MALLEY, Circuit Judge.

Plaintiff Tesco Corporation (“Tesco”) and interested parties-appellants Glenn A. Ballard, Jr. and John F. Luman, III (collectively “the Attorneys”) filed this appeal from a decision of the United States District Court for the Southern District of Texas dismissing Tesco's patent infringement suit with prejudice pursuant to the court's inherent authority to sanction. Tesco Corp. v. Weatherford Int'l, Inc., No. H–08–2531, 2014 WL 4244215 (S.D.Tex. Aug. 25, 2014) (“Sanctions Order ”). During the pendency of the appeal, Tesco and defendant-appellees National Oilwell Varco, L.P., Offshore Energy Services, Inc., and Frank's Casing Crew & Rental Tools, Inc. (collectively “NOV”) entered into a settlement resolving all outstanding issues. The Attorneys also participated in the settlement, with the parties and all counsel signing mutual releases. The Attorneys contend that, despite the settlement, the harm to their reputation from the district court's opinion justifies our continued jurisdiction over the appeal. Because we find that there is no remaining case or controversy to adjudicate, we dismiss the appeal.

Background

I

Tesco filed a complaint against NOV for infringement of U.S. Patent Nos. 7,140,443 and 7,377,324 on August 19, 2008. These patents involve a tool used in well drilling technology—an apparatus and method for handling sections of pipe used for lining a well bore. Id. at *1. The purportedly innovative aspect of the technology is the location of the point of connection for “link arms,” which connect the Case Drilling System to the drill pipe that will be placed in the well bore. U.S. Patent No. 7,377,324 col. 1 l.31—col.2 l.27. In the prior art systems, the link arms attached to the top drive of a Case Drilling System, but the patents-at-issue described a Case Drilling System with the link arms attached to the lower pipe engaging apparatus. Id. By lowering the point of connection, the link arms could better reach and grab sections of the pipe.

In response to Tesco's complaint, NOV filed an answer, counterclaims, and a request for attorney's fees under 35 U.S.C. § 285. NOV subsequently filed a series of motions to compel requesting, in part, information about any relevant documents that evidence what occurred during the six month period prior to the on-sale bar date of November 2002. Tesco claimed that it had already disclosed all relevant documents, but nevertheless eventually released a series of printed invoices for brochures created shortly before November 2002. In light of these invoices, NOV specifically requested any information about the brochures, including the brochures themselves, but Tesco denied the continuing existence of these brochures. During a status conference, the district court asked Tesco about the brochures, and Ballard, Tesco's attorney, insisted that Tesco had produced all responsive documents. Joint Appendix (“J.A.”) 10703. Up until trial, NOV continued to file motions requesting the brochures, and Tesco continued to deny their existence. At the pretrial conference, the district court again reiterated his concern about possible non-production of documents, stating that “if there are documents that have been produced to others but not the adversaries, that's, obviously, very serious conduct.” J.A. 20111–12.

Trial began on October 25, 2010. On October 28, NOV cross-examined one of the named inventors of the patents-at-issue, Kevin Nikiforuk. NOV questioned Nikiforuk about an image in Exhibit 851, which NOV claimed was the missing brochure from August 2002 that Tesco contended no longer existed. NOV explained that it found the brochure in a box of documents from a prior litigation between Tesco and one of the defendants, and placed the document in their pretrial exhibit list. During questioning, Nikiforuk agreed that, even though he could not see the image clearly, the link arms in the image were attached to the pipe engaging apparatus. The district court instructed Nikiforuk not to speculate, and to answer only if he authoritatively could identify the connection point. Nikiforuk again stated that the image appeared to show the claimed invention.

Tesco objected to this testimony and asked that it be stricken as speculative and irrelevant. Ballard then requested time to determine why the brochure was not produced during discovery and if it actually represented the claimed invention. The next day, Ballard informed the court that Tesco had produced a low-resolution, black-and-white, single-page version of the brochure during discovery, and argued that none of the defendants had asked for a clearer version of the produced document. Ballard then told the court that the image in the brochure did not show the claimed invention. In response, NOV requested a curative instruction and a sanction switching the burden of proof due to Tesco's failure to disclose an original, legible version of the brochure. Certain defendants also refused an offer of a mistrial because they did not want to give Tesco the opportunity to prepare Nikiforuk for a new trial, insisting that they preferred entry of judgment to a new trial. Ballard agreed to continue to investigate the brochure over the weekend. J.A. 20724.

On November 1, Ballard explained that he had done further research on the brochure, and that Luman had contacted the alleged designers of the brochure. Ballard then made the following declaration to the court:

As I told the Court, I would get to the bottom of this August brochure issue, 4008, over the weekend. We did so. We found the animator who actually did the rendering in question. That animator is Don Carr [sic]. He says unequivocally that this is not the invention in the brochure. We explained that in the papers we filed this morning. He left Tesco four years ago. We didn't have his name until this weekend. He lives in Canada. But if the trial—if they want to continue to maintain that 4008 is the invention, we're going to want to call him at some point in the trial.

J.A. 20885 (emphasis added). Ballard again argued that Tesco sufficiently produced the image in black-and-white form, but the district court disagreed, stating that the black-and-white version was not equivalent to the color version, especially with regards to the point of connection for the link arms. Ballard then continued:

I hope to put—I think the issue has been put to bed. It's not the image. I can call Don Carr [sic] to tell you that. We also talked to a guy last night, Jim Orcherton, who was also an individual who worked on the rendering. We didn't have time to put this in our papers. This was late last night. He also confirms that it's not the tool. And so we could call both of them.

J.A. 20888 (emphasis added). Ballard reiterated that, based on the statements of Karr and Orcherton, “there is no doubt that [the image in the brochure is] not Mr. Nikiforuk's invention.” J.A. 20897. Ballard made this same assertion to the jury in his closing argument.

In light of the non-production of the original brochure, the district court sanctioned Tesco by reversing the burden of proof on validity, and setting the burden to be a preponderance of evidence. The jury concluded that NOV infringed the relevant claims of the patents-at-issue, found certain of those claims to be not invalid, and found that the brochure was not enabling.

II

After trial, the district court issued an April 12, 2011 order permitting post-trial discovery on the brochure. NOV filed what the parties characterize as post-trial summary judgment motions of invalidity under 35 U.S.C. § 102(b) and § 103 based on, inter alia, what it asserts was disclosed in the brochure.¹ NOV also filed further motions to compel regarding the brochure, alleging bad faith on the part of Tesco. The court held a series of hearings regarding the brochure. The district court denied NOV's post-trial summary judgment motion regarding the on-sale bar on October 19, 2012, Tesco v. Weatherford Int'l, Inc., 904 F.Supp.2d 622 (S.D.Tex.2012), but granted NOV's post-trial summary judgment motion for obviousness on December 6, 2012,² Tesco Corp. v. Weatherford Int'l, Inc., 904 F.Supp.2d 638 (S.D.Tex.2012). The court did not base the obviousness determination on the brochure, but instead relied on an obvious-to-try analysis. Id. at 643 n. 2.

NOV continued its post-trial motions practice with a focus on its request for attorney's fees under § 285. Tesco filed a motion seeking judgment in its favor regarding the exceptional case determination, arguing that a “trial” was unnecessary because all relevant allegations regarding litigation misconduct had...