Westerngeco L.L.C. v. ION Geophysical Corp.

• Decision Date: 11 January 2019
• Docket Number: 2014-1528,2013-1527,2014-1526,2014-1121
• Parties: WESTERNGECO L.L.C., Plaintiff-Cross-Appellant v. ION GEOPHYSICAL CORPORATION, Defendant-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

913 F.3d 1067

WESTERNGECO L.L.C., Plaintiff-Cross-Appellant

v.ION GEOPHYSICAL CORPORATION, Defendant-Appellant

2013-1527

2014-1121

2014-1526

2014-1528

United States Court of Appeals, Federal Circuit.

Decided: January 11, 2019

John C. O'Quinn, Kirkland & Ellis LLP, Washington, DC, argued for plaintiff-cross-appellant. Also represented by Gregg F. LoCascio, William H. Burgess ; Timothy Gilman, Leslie M. Schmidt, New York, NY; Lee Landa Kaplan, Smyser, Kaplan & Veselka, LLP, Houston, TX.

David I. Berl, Williams & Connolly LLP, Washington, DC, argued for defendant-appellant. Also represented by Kannon K. Shanmugam, Masha Hansford, Andrew Charles McBride, James Matthew Rice; Frank Porcelli, Kevin Su, Fish & Richardson, PC, Boston, MA; Jackob Ben-Ezra, Bailey Kathleen Harris, Danielle J. Healey, Brian Gregory Strand, Houston, TX; Francis J. Albert, Olga I. May, San Diego, CA; Justin Barnes, Troutman Sanders LLP, San Diego, CA.

Before Dyk, Wallach, and Hughes, Circuit Judges.

Dyk, Circuit Judge.

This case returns to us from the Supreme Court. WesternGeco LLC v. ION Geophysical Corp. , ––– U.S. ––––, 138 S.Ct. 2129, 201 L.Ed.2d 584 (2018) (" WesternGeco III "). The sole claim remanded to us by the Supreme Court is the lost profits award. The Supreme Court held "that WesternGeco’s damages award for lost profits was a permissible domestic application of [ 35 U.S.C.] § 284," id. at 2139, reversing our decision in WesternGeco LLC v. ION Geophysical Corp. , 791 F.3d 1340, 1349–52 (Fed. Cir. 2015), (" WesternGeco I ").¹ But the Supreme Court did not decide other challenges to the lost profits award. In light of the Supreme Court’s decision and the intervening invalidation of four of the five asserted patent claims that could support the lost profits award, we remand to the district court.

BACKGROUND

This case involves a patent infringement suit brought by WesternGeco L.L.C. ("WesternGeco") against ION Geophysical Corp. ("ION") 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, and claim 15 of U.S. Patent No. 7,080,607 ("Bittleston patents"), as well as claim 14 of U.S. Patent No. 6,691,038 ("Zajac patent").

The patented technology in this case relates to marine seismic surveys for discovering oil and gas deposits beneath the ocean floor. The patent claims are directed to technology for controlling the movement and positioning of long streamers towed by a ship. Sensors are located along the length of these streamers, and they detect returning sound waves that are bounced off of the ocean floor by an airgun. The collected data is then used to create a map of the ocean’s subsurface geology. Controlling the positioning of the various streamers in the array is important to the quality of the maps generated, which, in turn, is important to identifying drilling locations for oil or gas.

Both WesternGeco and ION domestically manufacture devices, the Q-Marine and DigiFin respectively, for steering streamers in marine seismic surveys. WesternGeco does not sell its device, instead using it to perform surveys abroad for oil companies. ION does not perform surveys, instead supplying its device to customers who perform the surveys abroad. This case does not involve any question as to lost profits from domestic surveys.

In 2009, WesternGeco sued ION for patent infringement based on ION’s sales of its DigiFin devices to WesternGeco’s competitors in the marine seismic survey market. After a jury trial, the asserted patent claims were found to be not invalid, and ION was found to have infringed all of the asserted patent claims under 35 U.S.C. §§ 271(f)(1) and (2). The jury awarded WesternGeco a reasonable royalty of $ 12.5 million and lost profits of $ 93.4 million, but declined to award WesternGeco enhanced damages for willful infringement. The lost profits award was based on 10 surveys, which, according to WesternGeco, it would have won "but-for" ION’s sales of its DigiFin device to WesternGeco’s competitors. WesternGeco argues that without the patented technology embodied in the device, ION’s customers would not have been able to win the bids for the 10 surveys at issue.

In WesternGeco I we reversed the lost profits award as being based on an unauthorized extraterritorial application of the patent laws. Judge Wallach dissented on this point. 791 F.3d at 1349–52, 1354–64. We unanimously affirmed the district court’s refusal to award enhanced damages for willful infringement. WesternGeco I , 791 F.3d at 1353–54. WesternGeco petitioned for certiorari, which the Supreme Court granted, vacated our original decision in WesternGeco I , and remanded for further proceedings consistent with its decision in Halo Elecs., Inc. v. Pulse Elecs., Inc. , ––– U.S. ––––, 136 S.Ct. 1923, 1935–36, 195 L.Ed.2d 278 (2016). We reinstated our earlier opinion, including reversal of the lost profits award, but we vacated the district court’s denial of enhanced damages and remanded for further consideration in light of Halo . WesternGeco II , 837 F.3d at 1361–64.

On remand, WesternGeco sought $ 43.6 million in enhanced damages, and the district court awarded WesternGeco $ 5 million in enhanced damages. The parties then entered into a stipulated "Final Judgment pursuant to Fed. R. Civ. P. 58." The stipulation noted that the parties had agreed to the reasonable royalty amount and that ION had paid the full amount on November 25, 2016. Both parties agreed not to appeal the enhanced damages award and provided a schedule for payment of the enhanced damages award. The only item exempt from the stipulation was the lost profits award, which WesternGeco had petitioned for certiorari, requesting review of our decision on the lost profits award. Neither party appealed the stipulated final judgment.

The petition was granted with respect to the lost profits award, and in WesternGeco III , the Supreme Court reversed our decision on lost profits, holding that "WesternGeco’s damages award for lost profits [under 35 U.S.C. § 271(f)(2) ] was a permissible domestic application of § 284," 138 S.Ct. at 2139, "as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents," id . at 2138. The Supreme Court also noted that "[i]n reaching this holding, we do not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases." Id. at 2139 n.3. The Court then remanded the case to us "for further proceedings consistent with this opinion." Id. at 2139.

In December 2015, the United States Patent and Trademark Office’s Patent Trial and Appeal Board ("PTAB") held four of the six asserted patent claims— ’520 patent claims 18 and 19, ’967 patent claim 15, and ’607 patent claim 15—unpatentable. See WesternGeco LLC v. ION Geophysical Corp. , 889 F.3d 1308, 1331 (Fed. Cir. 2018) (" WesternGeco IPR "). While the case was pending in the Supreme Court, we affirmed the PTAB’s unpatentability determination of these four claims. Id. Thus, the only asserted claims that remain are ’520 patent claim 23 and ’038 patent claim 14, and it is uncontested that only ’520 patent claim 23 may now support the lost profits award.

DISCUSSION

On remand from the Supreme Court, two issues remain for us to resolve: (1) the impact of the intervening invalidation of four of the six asserted patent claims on the fully paid reasonable royalty award, and (2) the impact of the invalidation of the four claims on the lost profits award and ION’s argument (presented in its original appeal) that "Panduit cannot be satisfied because ION and [WesternGeco] do not compete in the marketplace." ION Open. Br. 56.

I. Reasonable Royalty Award

ION challenges the fully paid and satisfied reasonable royalty award based on subsequent invalidation of a number of WesternGeco’s asserted patent claims. See WesternGeco IPR , 889 F.3d at 1331. ION argues that the calculation of the reasonable royalty under Georgia-Pacific Corp. v. U.S. Plywood Corp. , 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970), would be affected by the invalidation of four of the six asserted patent claims, and therefore a new trial is required. For support, ION frames the decision in 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 here the lost profits award continues to be litigated and is not final.

We disagree. Fresenius only applies where a judgment is not final. Id. at 1340–41 & n.9 ; see also Fresenius USA, Inc. v. Baxter Int’l, Inc. , 733 F.3d 1369, 1371 (Fed. Cir. 2013) (Dyk, J., concurring in denial of rehearing en banc). To be sure, finality under Fresenius requires that "the litigation must be entirely concluded so that [the] cause of action [against the infringer] was merged into a final judgment ... one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." 721 F.3d at 1341 (alterations in original) (quoting Mendenhall v. Barber–Greene Co. , 26 F.3d 1573, 1580 (Fed. Cir. 1994) ; see ePlus, Inc. v. Lawson Software, Inc. , 789 F.3d 1349, 1358 (Fed. Cir. 2015).) But Fresenius made clear that it does not allow reopening of a satisfied and unappealable final judgment. 721 F.3d at 1340 ("As the Supreme Court’s decision in Moffitt made clear, ‘[i]t is a mistake to suppose ... that ... moneys recovered on judgments in suits ... might be recovered back [after a patent is cancelled]. The title to these moneys does not depend upon the patent, but upon ... the judgment of the court.’ " (alterations in original) (quoting Moffitt v. Garr , 66 U.S. 1 Black 273, 283, 17 L.Ed. 207 (1861) ); see Pennsylvania v. Wheeling & Belmont Bridge Co. , 59 U.S. 18 How. 421, 431, 15 L.Ed. 435 (1855).)

The particular facts of this case establish that the reasonable royalty award constitutes a fully satisfied and unappealable final judgment...