WesternGeco L.L.C. v. ION Geophysical Corp.

Decision Date02 July 2015
Docket Number2014–1526,2014–1121,Nos. 2013–1527,2014–1528.,s. 2013–1527
Citation791 F.3d 1340,115 U.S.P.Q.2d 1597
PartiesWESTERNGECO L.L.C., Plaintiff–Cross–Appellant v. ION GEOPHYSICAL CORPORATION, Defendant–Appellant.
CourtU.S. Court of Appeals — Federal Circuit

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

David J. Healey, Fish & Richardson, P.C., Houston, TX, argued for defendant-appellant. Also represented by Frank Porcelli, Kevin Su, Boston, MA; Bailey Kathleen Harris, Jackob Ben–Ezra, Brian Gregory Strand, Houston, TX; Olga I. May, Justin Barnes, Francis J. Albert, San Diego, CA.

Before DYK, WALLACH, and HUGHES, Circuit Judges.

Opinion

Opinion for the court filed by Circuit Judge DYK. Dissenting-in-part opinion filed by Circuit Judge WALLACH.

DYK, Circuit Judge.

WesternGeco L.L.C. (WesternGeco) filed suit against ION Geophysical Corp. (ION) for infringement of, inter alia, U.S. Patent Nos. 6,691,038 (“the '038 patent”), 7,080,607 (“the '607 patent”), 7,162,967 (“the '967 patent”), and 7,293,520 (“the '520 patent”). The jury found infringement and no invalidity with respect to all asserted claims for each of the four patents, and awarded $93,400,000 in lost profits and $12,500,000 in reasonable royalties.

ION appeals, arguing that WesternGeco is not the owner of the '607, '967, and '520 patents and therefore lacks standing to assert them; that the district court applied an incorrect standard in granting summary judgment as to claim 18 of the '520 patent under 35 U.S.C. § 271(f)(1) and that this ruling infected the trial with respect to liability for all other claims; and that lost profits were impermissibly awarded for conduct abroad.

WesternGeco conditionally cross-appeals, arguing that, if we find in favor of ION with respect to any of its appealed issues, we should set aside the damages award because the district court erred in preventing WesternGeco's damages expert from testifying on the issue of a reasonable royalty. WesternGeco also challenges the district court's refusal to award enhanced damages for willful infringement.

We affirm in all respects, except that we reverse the district court's award of lost profits resulting from conduct occurring abroad.

Background

WesternGeco asserts that it owns the four patents at issue: the '038 patent, the '607 patent, the '967 patent, and the '520 patent. The asserted claims of all four patents are system claims relating to technologies used to search for oil and gas beneath the ocean floor. To search for oil and gas, ships tow a series of long streamers. Each streamer is equipped with a number of sensors. An airgun bounces sound waves off of the ocean floor. The sensors pick up the returning sound waves and, in combination with each other, create a map of the subsurface geology. This generated map can aid oil companies in identifying drilling locations for oil or gas.

The streamers can be miles in length, and vessel movements, weather, and other conditions can cause the streamers to tangle or drift apart. This, in turn, can cause the sensors on the streamers to generate imperfect or distorted maps. The patents here relate to two improvements to that technology: first, controlling the streamers and sensors in relation to each other through the use of winged positioning devices; second, using the sensors to generate four-dimensional maps—that is, maps in which it is possible to see changes in the seabed over time.

Both parties are involved in this industry. WesternGeco manufactures its commercial embodiment of the patented technologies, the Q–Marine, and performs surveys on behalf of oil companies. ION manufactures its allegedly patent-practicing device, the DigiFIN, and sells that device to its customers, who perform surveys on behalf of oil companies.

On June 12, 2009, WesternGeco filed suit against ION, accusing ION of willfully infringing various claims of four patents. WesternGeco's theory of infringement was based on, inter alia, 35 U.S.C. § 271(f)(1) and § 271(f)(2). Broadly speaking, (f)(1) prohibits supplying a substantial portion of the components of a patented system in a manner that actively induces their combination abroad, and (f)(2) prohibits supplying components that are especially adapted to work in a patented invention and intending that the components be combined abroad in a manner that would infringe if combined domestically. See 35 U.S.C. § 271(f).

On June 29, 2012, the court granted summary judgment of infringement in favor of WesternGeco for claim 18 of the '520 patent under 35 U.S.C. § 271(f)(1). In so ruling, the court interpreted § 271(f)(1) as requiring that the “alleged infringer (1) actively induce the combination of the components in question; and (2) that the combination of those components would infringe the patent if such combination occurred within the United States.” J.A. 52. Section 271(f)(2), the district court concluded, required a heightened standard: “that the defendant (1) intended the combination of components; (2) knew that the combination he intended was patented; and (3) knew that the combination he intended would be infringing if it occurred in the United States.” J.A. 55. The court determined that WesternGeco proved that ION intended that the components be combined and therefore infringed under § 271(f)(1) with respect to claim 18, but concluded that, with respect to claim 18 under § 271(f)(2), there was a genuine issue of material fact as to whether the Defendants knew that the combination was infringing.” J.A. 56.

Trial was held in July and August of 2012. On August 16, 2012, the jury rendered its verdict, finding that ION infringed claims 19 and 23 of the ' 520 patent, claim 15 of the '967 patent, claim 15 of the '607 patent, and claim 14 of the '038 patent under §§ 271(f)(1) and (f)(2). The jury also found that ION infringed claim 18 of the '520 patent under § 271(f)(2) (infringement under (f)(1) as to claim 18 having already been decided on summary judgment). Finally, the jury found that the infringement was willful (applying the so-called “subjective” prong of In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed.Cir.2007) (en banc)). The jury awarded $93,400,000 in lost profits and $12,500,000 in reasonable royalties.

ION filed motions for judgment as a matter of law or for a new trial. ION also filed a motion to dismiss, for the first time alleging that WesternGeco did not have standing to assert the '607 patent, the '967 patent, and the '520 patent because WesternGeco did not own the patents. WesternGeco filed, inter alia, a motion for enhanced damages under 35 U.S.C. § 284.

On June 19, 2013, the district court denied ION's JMOLs and motion to dismiss and WesternGeco's motion for enhanced damages, finding that ION's positions were reasonable and not objectively baseless.

ION appealed. WesternGeco conditionally cross-appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

Discussion
I

We first address ION's contention that WesternGeco does not own the '607 patent, the '967 patent, and the '520 patent, and therefore lacked standing to assert them. The question is whether WesternGeco owned the patents when the suit was filed in 2009. It is uncontroverted that a sole owner of a patent has standing to assert it and that an entity that does not own the patent (or is not the exclusive licensee) does not have standing to sue. See Rite–Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1551–52 (Fed.Cir.1995) (en banc).

Although standing is reviewed de novo, we review factual determinations relating to standing for clear error. See Enovsys LLC v. Nextel Commc'ns, Inc., 614 F.3d 1333, 1340–41 (Fed.Cir.2010). The district court reviewed the parties' arguments with respect to the chain-of-title and concluded that “WesternGeco has presented sufficient evidence to prove its ownership of the patents” and that “WesternGeco was assigned the rights.” J.A. 7. We have reviewed the record relating to the chain of title between the original inventors and WesternGeco. We conclude that the district court's findings are not clearly erroneous.

The three patents each list two inventors: Oyvind Hillesund and Simon Bittleston. In 1993, Bittleston started working for a subsidiary of Schlumberger Ltd., and Hillesund started working for a subsidiary of Schlumberger Ltd. the following year. Schlumberger Ltd. is one of the world's largest oil and gas companies, incorporated in Curacao and with offices throughout the world. Although the precise Schlumberger corporate structure existing in the early 1990s is not clear from the record, and it is not clear precisely for which subsidiaries Bittleston and Hillesund worked at the time of their invention, ION admits that Hillesund and Bittleston worked for so-called “Geco” subsidiaries of Schlumberger Ltd. See Appellant's Br. 10 (characterizing Hillesund and Bittleston as having “originally went to work for Geco in” 1994 and 1993, respectively).

Both inventors testified that they transferred their rights to the inventions they developed to their employers pursuant to their employment contracts. Bittleston testified: [W]hen [Hillesund and I] joined the company [one of the Geco companies], we signed something saying that any inventions we made were going to be owned by the company, not by us, so they're the owners.” J.A. 1504. Hillesund's testimony is similar. When asked: “Mr. Hillesund, as an employee of Geco and later WesternGeco, did you assign your rights of the intellectual property to the company?”, Hillesund responded: “Yes. Part of the—my contract was that intellectual property—there was also something in the contract that I was to be given reasonable coverage of—in the form of a bonus, all in accordance to the significance of the patent.” J.A. 12805.

If, in fact, Geco subsidiaries of Schlumberger, Ltd....

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