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

• Decision Date: 21 September 2016
• Docket Number: 2013-1527,2014-1526,2014-1121,2014-1528
• Citation: 837 F.3d 1358,120 U.S.P.Q.2d 1177
• Parties: WesternGeco L.L.C., Plaintiff-Cross-Appellant, v. ION Geophysical Corporation, Defendant-Appellant. WesternGeco L.L.C., Plaintiff-Appellant, v. ION Geophysical Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

837 F.3d 1358
120 U.S.P.Q.2d 1177

WesternGeco L.L.C., Plaintiff-Cross-Appellant,
v.
ION Geophysical Corporation, Defendant-Appellant.

WesternGeco L.L.C., Plaintiff-Appellant,
v.
ION Geophysical Corporation, Defendant-Appellee.

2013-1527
2014-1121
2014-1526
2014-1528

United States Court of Appeals, Federal Circuit.

Decided: September 21, 2016

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

837 F.3d 1360

David J. Healey , Fish & Richardson, PC, Houston, TX, for ION Geophysical Corporation. Also represented by Bailey Kathleen Harris , Jackob Ben-Ezra , Brian Gregory Strand ; Frank Porcelli , Kevin Su , Boston, MA; Olga I. May , Francis J. Albert , San Diego, CA; Justin Barnes , Troutman Sanders LLP, San Diego, CA.

Before Dyk, Wallach, and Hughes, Circuit Judges.

Opinion dissenting in part filed by Circuit Judge Wallach.

Dyk, Circuit Judge.

This case returns to us on vacatur and remand from the Supreme Court, “for further consideration in light of Halo Electronics, Inc. v. Pulse Electronics, Inc. , 579 U.S. ––––, 136 S.Ct. 1923, 195 L.Ed.2d 278 (2016).” WesternGeco LLC v. ION Geophysical Corp. , ––– U.S. ––––, 136 S.Ct. 2486, 195 L.Ed.2d 820 (2016) (Mem.). On remand, we vacate the district court's judgment with respect to enhanced damages for willful infringement under 35 U.S.C. § 284 and reinstate our earlier opinion and judgment in all other respects. We remand for further proceedings consistent with this opinion and with the Supreme Court's decision in Halo.

BACKGROUND

The vacated decision, WesternGeco L.L.C. v. ION Geophysical Corp. (“WesternGeco II ”), 791 F.3d 1340 (Fed. Cir. 2015), addressed a patent infringement suit by WesternGeco L.L.C. (“WesternGeco”) against ION Geophysical Corp. (“ION”) for infringement of, inter alia , U.S. Patent Nos. 6,691,038, 7,080,607, 7,162,967, and 7,293,520. See WesternGeco L.L.C. v. ION Geophysical Corp. (“WesternGeco I ”), 953 F.Supp.2d 731 (S.D. Tex. 2013). The jury found infringement and no invalidity as to all asserted claims and awarded WesternGeco $93.4 million in lost profits and a reasonable royalty of $12.5 million. The jury also found that ION's infringement had been subjectively reckless under the “subjective” prong of the then-prevailing two-part test articulated in In re Seagate, LLC , 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc).

After trial, WesternGeco moved for enhanced damages for willful infringement under 35 U.S.C. § 284. ION moved for judgment as a matter of law (“JMOL”) of no willful infringement, contending that WesternGeco had failed to prove that it was either objectively or subjectively reckless in its infringement. The district court held that ION was not a willful infringer meriting enhanced damages, finding that ION's positions were reasonable and not objectively baseless and thus that the objective prong of the Seagate test had not been satisfied. WesternGeco I , 953 F.Supp.2d at 753. Because the district court found no objective recklessness on the part of ION, it did not reach ION's JMOL motion seeking to set aside the jury's finding of subjective recklessness. Id .

ION appealed to our court, asking us, inter alia , to reverse the district court's award of lost profits. WesternGeco cross-appealed, challenging the district court's refusal to award enhanced damages. Our opinion issued on July 2, 2015. WesternGeco II , 791 F.3d at 1340. In section III of that opinion, we reversed the lost profits award, holding that WesternGeco was not entitled to lost profits resulting from foreign uses of its patented invention. Id. at 1351. On this issue Judge Wallach dissented. Id. at 1354 (Wallach, J., dissenting-in-part). In section V of the opinion of the court, we unanimously affirmed the district court's denial of WesternGeco's motion for enhanced damages, holding that ION's noninfringement and invalidity defenses

837 F.3d 1361

were not objectively unreasonable and, as such, we agreed with the district court that the objective prong of the Seagate test had not been met. Id. at 1353–54.

WesternGeco petitioned for certiorari on February 26, 2016. Petition for Writ of Certiorari, WesternGeco, LLC v. ION Geophysical Corp. , 2016 WL 792196 (U.S. Feb. 26, 2016) (No. 15–1085) (“Petition”). The petition, inter alia , requested that the petition be held in view of Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc., which were argued February 23, 2016, and involved the standard for enhanced damages. WesternGeco's petition argued that “[i]f the result of Halo and Stryker is other than a complete affirmance and approval of Federal Circuit law, the Court should grant certiorari, vacate, and remand [ (“GVR”) ] for further consideration.” Id. at *31.

The Supreme Court decided Halo on June 13, 2016. Halo Elecs., Inc. v. Pulse Elecs., Inc. , 579 U.S. ––––, 136 S.Ct. 1923, 195 L.Ed.2d 278 (2016). The Supreme Court granted certiorari in this case and issued its GVR order on June 20, 2016, remanding the case to us “for further consideration in light of Halo.” WesternGeco , at 2486. We recalled our mandate on July 25, 2016. We now consider what action is appropriate in this case in view of the Supreme Court's remand.

DISCUSSION

The Supreme Court's Halo decision was solely concerned with the question of enhanced damages for patent infringement under 35 U.S.C. § 284 and does not affect other aspects of our earlier opinion.¹ As such, we reinstate our earlier opinion except for section V. Section V of our earlier opinion was specifically directed to the question of enhanced damages, and it is that section that we now revisit.

I

Before Halo, under our court's two-part Seagate test, a patentee seeking enhanced damages for willful infringement was required to prove both an objective and a subjective prong. Under the objective prong, a patentee was required to “show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Seagate , 497 F.3d at 1371. “If this threshold objective standard [was] satisfied,” the patentee was then required to prove subjective recklessness, i.e., to “demonstrate that

837 F.3d 1362

this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” Id. If the patentee proved both prongs of willful infringement, the ultimate determination of whether to award enhanced damages under § 284 and the extent of any enhancement were left to the district court's discretion. See id. at 1368 (“[A] finding of willfulness does not require an award of enhanced damages; it merely permits it.”).

The Supreme Court's decision in Halo overturned the Seagate test because it “ ‘is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to the district courts.’ ” 136 S.Ct. at 1932 (quoting Octane Fitness, LLC v. ICON Health & Fitness, Inc. , ––– U.S. ––––, 134 S.Ct. 1749, 1755, 188 L.Ed.2d 816 (2014) ). Halo held that district courts must have greater discretion in awarding enhanced damages in cases where the defendant's infringement was egregious, cases “typified by willful misconduct.” Id. at 1934. “The Seagate test reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under § 284 only in egregious cases.” Id. at 1932.

But, the Court held, “[t]he principal problem with Seagate's two-part test is that it requires a finding of objective recklessness in every case before district courts may award enhanced damages.” Id. In particular, the Court rejected Seagate's strict requirement that a patentee prove the objective unreasonableness of an infringer's defenses. Id. ; see WBIP, LLC v. Kohler Co. , No. 15–1038, 829 F.3d 1317, 1341, 2016 WL 3902668, at *15 (Fed. Cir. July 19, 2016) (under Halo, “[p]roof of an objectively reasonable litigation-inspired defense to infringement is no longer a defense to willful infringement”). At the same time, Halo did not disturb the substantive standard for the second prong of Seagate, subjective willfulness. Rather, Halo emphasized that subjective willfulness alone—i.e., proof that the defendant acted despite a risk of infringement that was “ ‘either known or so obvious that it should have been known to the accused infringer,’ ” Halo , 136 S.Ct. at 1930 (quoting Seagate , 497 F.3d at 1371 )—can support an award of enhanced damages. “The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.” Id. at 1933 ; see also id. at 1930 (describing the second prong of Seagate as an evaluation of the infringer's “subjective knowledge”).

Additionally, the Court stressed throughout Halo that, if willfulness is established, the question of enhanced damages must be left to the district court's discretion. So too, Halo stressed that “[a]wards of enhanced damages ... are not to be meted out in a typical infringement case, but...