Westerngeco L.L.C. v. Ion Geophysical Corp.

untimely liquidation in purported a against L.L.C., Plaintiff- WESTERNGECO having without first action

an enforcement (“We Cross-Appellant therefore at 1561 Id. protest. entry Cherry Hill’s was hold that because ..., of law IC & S by operation liquidated protest the October required not CORPORATION, ION GEOPHYSICAL against to ... defend in order liquidation Defendant-Appellant. liqui- deemed ground liability on 2014-1121, Nos. however,

dation.”). claim, cannot Such 2014-1526, 2014-1528. in an action used “as sword” be further to avoid simply against government Appeals, United States Court Am., Fujitsu Gen. protest procedures. Federal Circuit. States, 1375- Inc. v. United (Fed.Cir.2002). against claim ICP’s July present proper government did liquidated raising deemed posture

claim, an it was therefore not abuse the Trade Court to dismiss

discretion for include that requested amendment to here.

argument hold that the Trade Court

We therefore motion for recon-

correctly denied ICP’s complaint. to amend the

sideration and/or remaining argu- all have considered

We

ments, find unpersuasive. but them

Conclusion reasons, foregoing the decisions

For the (1) dismissing

of the Trade Court Counts (2) complaint denying

1-9 of ICP’s reconsider, alter,

ICP’s motion to judgment to amend the

amend and/or

complaint are affirmed.

AFFIRMED Locascio,

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

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

Before and HUGHES, Judges. Circuit Opinion for the court filed Circuit Judge Dissenting-in-part opinion DYK. Judge filed Circuit WALLACH. DYK, Judge. Circuit (“WesternGeco”) WesternGeco L.L.C. against Geophysical Corp. filed suit ION alia, (“ION”) inter of, (“the 6,691,038 pat- U.S. Patent Nos. '038 (“the ent”), 7,080,607 7,162,- patent”), '607 (“the (“the 7,293,520 patent”), '967 jury patent”). infringe- '520 The found invalidity ment and no to all pat- asserted claims for each of the four ents, $93,400,000 prof- awarded lost conditions can cause the streamers to tan $12,500,000in royalties. its and reasonable This, gle apart. turn, or drift can cause the sensors on the generate streamers to appeals, arguing that WesternGeco imperfect or distorted maps. patents '607, '967, is not the owner and '520 improvements here relate to two to that patents standing and therefore lacks technology: first, controlling the stream them; that applied assert the district court ers and sensors relation to each other an incorrect standard in granting sum- through the of winged use mary judgment positioning de as to claim 18 of the '520 vices; second, 271(f)(1) using gener under 35 U.S.C. sensors to ruling is, that this trial ate maps infected the with re- four-dimensional maps —that claims; spect liability for all other and in possible which it is changes to see in the impermissibly were seabed over time. awarded for conduct abroad. parties Both are involved in this indus- conditionally cross-ap-

WesternGeco try. WesternGeco manufactures its com- that, peals, if arguing we find in favor of mercial embodiment of the tech- ION with respect appealed of its nologies, Q-Marine, the performs and issues, we should set aside the damages surveys on behalf of oil companies. ION award because district court erred in allegedly manufactures its patent-practic- preventing damages WesternGeco’s expert device, ing DigiFIN, and sells that testifying on the issue of reasonable customers, (cid:127)device to its perform who sur- royalty. challenges WesternGeco also veys on behalf companies. of oil district court’s refusal to award enhanced 12, 2009, On June WesternGeco filed infringement. for willful ION, suit against accusing willfully ION of affirm in respects, We all except that we infringing various patents. claims of four reverse the district court’s award of lost theory WesternGeco’s was profits resulting from conduct occurring alia, on, 271(f)(1) § based inter 35 U.S.C. abroad. 271(f)(2). (f)(1) § Broadly and speaking, prohibits supplying portion a substantial Background the components patented system in a WesternGeco asserts that it owns the actively manner that induces their combi- patents four at issue: the patent, '038 (f)(2) abroad, nation prohibits and supply- patent, '607 patent, the '967 and the '520 ing components especially that are adapted patent. The asserted claims of all four to work in a patented invention and in- patents system relating claims to tech- tending components that the be combined nologies used to gas search for oil and abroad in a infringe manner that would if beneath the ocean floor. To search for oil combined domestically. See 35 U.S.C. gas, ships tow a long series of stream- 271(f). § ers. Each equipped streamer awith 29, 2012, number of airgun sensors. An Oh June granted the court bounces sound waves off of the ocean floor. The summary judgment of infringement in fa- pick sensors up returning sound waves vor of WesternGeco for claim and, other, in combination with each create 271(f)(1). § '520 under 35 U.S.C. map of the subsurface geology. This ruling, In so interpreted court generated map can aid oil companies 271(f)(1) § requiring that the “alleged identifying drilling gas. locations for oil or (1) infringer actively induce the combina- (2) question;

The streamers can tion of the length, be miles in movements, weather, and vessel and other that the combination of those components 19, 2013, the district court de- if such combina- On June infringe would nied ION’s JMOLs and motion to dismiss the United States.” tion occurred within and WesternGeco’s motion enhanced 271(f)(2), the district J.A. 52. Section damages, finding positions ION’s concluded, required heightened court objectively reasonable and not base- were (1) the defendant intended standard: “that less. (2) knew components; the combination condition- pat- appealed. he intended WesternGeco that the combination was jurisdiction (3) ally cross-appealed. We have ented; that the combination knew 1295(a)(1). pursuant to 28 U.S.C. if it oc- infringing be he intended would in the United States.” J.A. curred DISCUSSION that WesternGeco

The court determined compo- intended that the proved that ION I infringed therefore be combined and nents first address ION’s conten We 271(f)(1) respect to claim under with does not own the tion that, claim but concluded and the '520 patent, patent, '607 the '967 271(f)(2), genuine there was a 18 under patent, standing and therefore lacked material fact as to whether the issue of question assert them. The is whether knew that the combination patents “Defendants WesternGeco owned when filed in 2009. It is uncontroverted infringing.” J.A. 56. suit was patent standing that a sole owner of a has July August and Trial was held entity to assert it and that an that does not 16, 2012, August jury the ren- 2012. On (or patent own the is not the exclusive verdict, finding infring- that ION dered its licensee) to standing does not have sue. patent, 19 and 23 of the '520 ed claims Co., Inc., Corp. Kelley See Rite-Hite patent, claim 15 of the claim 15 of the '967 (Fed.Cir.1995) 1538, (en F.3d 1551-52 patent and claim of the '038 patent, '607 banc). 271(f)(1) (f)(2). jury §§ and under The Although standing is reviewed de infringed claim of also found novo, we review factual determinations re 271(f)(2) (infringe- under patent the '520 lating standing to for clear error. See (f)(1) having to claim ment under as Commc’ns, Inc., Enovsys LLC v. Nextel already summary judg- decided on been (Fed.Cir.2010). 1340-41 F.3d ment). Finally, jury found that the parties’ The district court reviewed the (applying was willful the so- arguments to the chain-of- “subjective” prong Seagate called of In re title and concluded that has “WesternGeco LLC, Technology, presented prove sufficient evidence to its banc)). (Fed.Cir.2007) (en jury ownership patents” and that ‘West- $93,400,000 awarded in lost and assigned rights.” ernGeco was J.A. 7. $12,500,000 royalties. in reasonable relating reviewed the record to We have for judgment ION filed motions original of title between the in the chain matter of law or for new trial. ION also ventors and WesternGeco. We conclude findings district court’s are not dismiss, for the filed a motion to first time clearly erroneous. alleging that did not have standing patent, to assert the '607 the '967 patents The three each list two inven- patent, and the '520 because West- Hillesund and Simon Bittle- Oyvind tors: patents. ernGeco did not own the West- working ston. In Bittleston started filed, alia, Ltd., ernGeco inter a motion for en- subsidiary Schlumberger for a and working subsidiary hanced under 35 U.S.C. 284. Hillesund started Schlumberger Ltd. the following year. early 1990s, they were transferred to Schlumberger Ltd. is one of the world’s Schlumberger Technology Corporation largest gas oil and companies, incorporat- (“STC”) pursuant to a 1998 agreement. ed in and throughout Curacao with offices four Schlumberger companies, Although the world. precise Schlum- Schlumberger Limited, STC, Holdings berger corporate existing structure in the Schlumberger Limited, Canada and Ser- early record, 1990s is not clear from the vices Petroliers Schlumberger S.A., en- and it is not clear precisely for which tered into a cost-sharing agreement. As a subsidiaries Bittleston and Hillesund part agreement, of that parties as- invention, worked at the time of their ION signed intellectual property rights to each admits that Hillesund and Bittleston other to consolidate rights those on a geo- worked for so-called “Geco” subsidiaries of graphical basis: Schlumberger Ltd. Appellant’s Br. 10 [O]wnership Rights, Patent Pro (characterizing Hillesund and Bittleston as prietary Technical Information having “originally went to work for Geco Copyrights which subject to this in” 1994 and respectively). Agreement shall be vested in the Partic Both inventors they testified that trans- ipants in Respective their Areas.... rights ferred their they the inventions J.A. 12828-29. “respective STC’s area” developed employers to their pursuant was the United States. J.A. 12820. The employment their contracts. Bittleston agreement defined “Patent Rights” to in- testified: “[W]hen joined [Hillesund I] “any clude and all patents ap- company [one of the Geco companies], plications, certificates of invention and the signed we something saying that in- like, throughout world, and interests ventions we going made were to be owned therein, upon based relating inventions by us, company, they’re so seismic oil field services or equipment owners.” J.A. 1504. Hillesund’s testimo- which are obtained for the Geco ny is similar. When asked: “Mr. Hille- companies.” Thus, Prakla J.A. 12824.1 sund, as an employee of Geco and later there is substantial evidence to conclude WesternGeco, you assign your did rights agreement that the assigned here the in- of the intellectual property compa- to the tellectual in property ny?”, companies the Geco Hillesund responded: ‘Tes. Part of inventors) (originally assigned my from the to contract was that intellectual the — in 1998. property STC in something also —there contract that I was to given be reasonable The next event in the chain-of-title oc- coverage bonus, of—in the form a all in in curred Schlumberger when and significance accordance to the pat- Baker-Hughes venture, joint formed ent.” J.A. 12805. WesternGeco, to assigned which STC its

If, fact, in Geco intellectual property subsidiaries Schlum- rights “primarily re- berger, acquired Ltd. rights those in the lated to the Seismic in Business the U.S.”2 1. "Geco Prakla” was to ly, wholly defined mean: majority by be or owned Schlum- (SL); berger Limited and successors SHL; specifically STC and its Geco Prakla long such entities so as each remains a engineering, manufacturing operating and wholly majority-owned subsidiary or of SL centers; divisions and research SCL and or a successor of SL. specifically its operat- Geco Prakla seismic J.A. 12820. division; SPS; ing and other seismic processing service data oil field cor- agreement and/or 2. The "Transferred IP” defined to firm, poration, to, alia, partnership entity or other "Schlumberger refer inter Trans- ("entities”) IP,” may, directly which or indirect- ferred which in turn defined to mean to obligate that the owner “[C]ontraets there is substantial evi- And

J.A. 12780. legal in the future do not vest grant rights that the intellectual to conclude dence “primarily assignee.” in this case is to the in the Id. at patents title property at issue circumstances, Business” because In such the em- the Seismic 1364-65. related to Cooperation formally rights Patent assign and must still application ployee British (“PCT”) application, employer from which in order to Treaty to the to the derive, right at issue were contractual to patents employer’s the three convert the IP in a list of used expressly technology ownership included into a vested the Seismic Business.3 As primarily for interest. transfers, appears result of this series that if the simple answer is even rights were the inventors’ in- rights inventors still owned the to the companies, to the Geco transferred first merger agreement, after the 2000 vention STC, in and then then in 1998 in inventors transferred their interests

WesternGeco, in this case. plaintiff patent applications to STC pending assignment 2001. The 2001 forms execut- However, argues that there by provided ed each of the two inventors It in this chain of title. contends is a defect acquiring is desirous of “[STC] inventors, perhaps obligated that the while confirming ownership its of the entire rights the invention to their transfer in and to subsidiaries) right, [the title and interest (Geco under their employers and confirmed that the inven- invention]” testify failed to employment agreements, sold, assigned, transferred and tors “have a transfer fact occurred. It is that such sell, conveyed, by assignment, and this do employment con well-established convey, unto assign, Assignee, transfer and necessarily automatically as tracts do not assigns, right, its successors and the entire employer. to the sign patent rights LLC, Bioscience, throughout Inc. v. Navinta title and interest United Abraxis ” (Fed.Cir.2010). my ... invention.... States and to names, secrets, (i) shop Property that is owned such marks or trade "Intellectual inventions, royalty rights, technology, Schlumberger to which or its Affiliates or know-how, processes and confidential and Schlumberger or its Affiliates otherwise have information, proprietary including any (ii) be- rights, primarily is used or held for use ing developed (including but not limited to primarily connection with or otherwise relat- data, data, designs, manufacturing design Business, Schlumberger ed to the Seismic data, data, formulae), operational test Date, (iii) Closing exists as of the includ- tangible whether or not recorded in form Schlumberger Rights ing Proprietary software, through drawings, reports, manu- 4.18(a) Schedule to the identified tangible expressions, als or other whether Schlumberger Disclosure Letter." J.A. subject statutory registration, or not 12711; 12713. The contract defined "Intel- domestic, rights all whether or and Property” to lectual mean: foregoing. of (filed, patents, patent applications or unfiled added). (emphases J.A. 12706 invention, being prepared), records of inven- disclosures, (registered tion trademarks or patents The at issue here are all con- three (filed, unregistered), applications 6,932,017, trademark U.S. Patent No. tinuations of names, being prepared), unfiled or trade application PCT which was itself based on the (registered unregistered), copyrights or merger. expressly transferred in the 2000 (filed, copyright applications un-filed or be- patent application was initiated un- The '017 ing prepared), (registered provides § service marks or der 35 U.S.C. which for the unregistered), applications filing applications. service mark PCT The three national of (filed, being prepared), patents in unfiled or database at issue could not have been listed they yet rights (registered unregistered), agreement had not all to- the 2000 because gether goodwill with the associated with been filed. assignments “inventions,” 12195-98. These 2001 pared),” J.A. and “including any Application were filed as to U.S. Patent being developed.” J.A. 12706. The 2000 '723”) 09/787,723 (“App. No. No. and assignment here included rights to fu- above, As noted PCTIB99/01590. patents ture resulting from the existence patents three challenges for which ION previous of a invention. ownership were all continuations of the There is thus substantial evidence to

patent resulting App. from No. '723. ION conclude that WesternGeco owns the pat- assigned admits that patents STC ents at sue, issue and has standing to argues in that STC is the regardless of whether the inventors trans- owner. rights ferred their to the inventions to the

No further transfer instrument companies by Geco operation of their em- required STC to WesternGeco was to ployment agreements they or whether patents vest these in after merely agreed to a future transfer in the rights were transferred to STC early formally 1990s then transferred 2001. The transfer from STC to Western- rights their to STC in 2001. The district Geco occurred automatically under court did not err in ruling that WesternGe- previously agreement. executed 2000 It is co was the owner of the patents-in-suit and agreement well-established that when an had standing to sue. provides for the transfer of an in a interest patent and the transferring party later II title, receives formal the formal title is We next turn to ION’s challenges to the automatically by operation transferred of infringement. determination of As stated prior agreement par to the transferee earlier, granted the district court summary Abraxis, (“If ty. See at 625 F.3d [a] judgment on claim 18 of ‘contract expressly conveys rights in future 271(f)(1). the '520 under inventions, no further act is required once jury determined that infringed ION an invention being, comes into and the 271(f)(1), other asserted claims under transfer of title by operation occurs jury and the separately determined that law.’”); Tech., SiRF Inc. v. Int'l Trade infringed all of the asserted claims Comm’n, (Fed.Cir. 18) 271(f)(2) (including claim under 2010) (same).4 well. Here, merger the 2000 agreement was a 271(f)(1)provides: Section present assignment rights of STC’s to the authority Whoever without supplies or property intellectual merger issue. The supplied causes to be in or from the agreement provided: assigns “STC por- United States all or a substantial [WesternGeco] accordance with Article components tion of the in- title, 2 all right, interest and to the vention, where components such are un- Schlumberger IP primarily Transferred part, combined whole or in in such related to the Seismic Business actively manner as to induce the Property U.S.” J.A. 12780. Intellectual combi- was defined to include: nation “patents, patent such outside (filed, applications being pre- unfiled or the United States in a manner that Indeed, §§ 4. writing.” Similarly, § 35 U.S.C. 118 and 261 provides part: contem- plate assignment right patent. of a to receive a person assigned "A to whom the inventor has provides part: "Applications Section 261 obligation assign or is under an to the inven- therein, patent, patents, for or interest may application patent.” tion make an assignable by shall be in law an instrument in patent tically. disagrees the if such combi- J.A. 52. ION that infringe with

would (f)(1) within the United nation occurred reading, arguing language that the of States, infringer. be liable as an shall requires that ION knew the com- intended added). if 271(f)(1) infringing bination would done do- be (emphasis § 35 U.S.C. 271(f)(2) mestically. provides: Section authority supplies without or Whoever question We need not reach the whether supplied to be or from the causes applied the district court the stan- correct any component pat- United States 271(f)(1). § dard under The -verdict was that especially ented invention made jury liability clear that the found under adapted for use in the in- especially 271(f)(2) § for all asserted claims. The staple not a article or com- vention and court expressly jury district instructed the suitable for sub- modity of commerce infringement to “determine ... on claim- use, noninfringing where such stantial 271(f)(1) by-claim § basis” for both is uncombined in whole or in component (f)(2) and instructed them to determine part, knowing component that such is so infringement as to claim 18 of the '520 adapted intending made or 271(f)(2). patent § under Because there component such will be combined out- no was contention raised before the dis- States in a manner side the United (f)(2) trict court that the instruction as to infringe the if patent that would such erroneous,5 and, the standard of intent was combination occurred within the United below, as discussed there were no other States, be infringer. shall liable as an (f)(2) instruction, respect errors with to the 271(f)(2) added). (emphasis 35 U.S.C. infringement the correctness of the finding contends that three ION errors the (f)(2) respect adequate with forms an First, require district court reversal. ION for liability. basis contends that the district court misconstrued (f) (1)’s “actively induce” intent re challenge ION’s second is to the quirement granting summary judgment lack limiting jury instructions to the for claim 18 of the '520 (f)(2). proposed ION (f)(1) instructing jury infringe jury be instructed: ment for the other asserted claims. The previously I have determined that ION parties dispute meaning of the follow ... infringe^] Claim 18 of the '520 Pat- (f)(1): ing language “actively induce the by supplying DigiFIN ent and the Lat- components combination of such outside of eral Controller from the United States the United States in a manner that would intending the two be com- infringe if such combination system bined into a that infringes Claim occurred within the United States.” 35 271(f)(1). utilizing separation the streamer U.S.C. The district court held accept my finding mode. You must on requirement this if satisfied infringement as it relates to alleged infringer “actively Claim 18 of induce[d]” 271(f)(1). abroad, irrespective combination '520 Patent under You of wheth er infringer knowledge had should not consider finding there this in de- would be if ciding question combined domes- infringement as (f)(2) appeal, argues jury argument On that the Supreme is mooted Court’s light instruction was incorrect in of Commil USA, recent decision in Commil LLC v. Cisco USA, Inc., Sys., LLC v. Cisco 720 F.3d 1361 Inc., --, Systems, - U.S. (Fed.Cir.2013), days which was decided six (2015). 191 L.Ed.2d 883 after the district court’s JMOL order. This or deciding to other claim when III 271(f)(2). infringement under Although ION does not challenge the award, royalty reasonable ION challenges added). (emphasis J.A. 10913 The district profits the award of lost resulting from in rejecting court did not err this pro- lost contracts for performed services to be posed instruction. The district court held abroad. profits We hold that lost cannot (f)(1) that, (f)(2), for both and WesternGe- be awarded for resulting from required prove co was to that ION intend- these lost contracts. ed be combined (quite apart abroad from other intent re- Q-Marine WesternGeco makes the do- quirements). In granting summary judg- mestically performs and surveys claim ment on the district court re- abroad on behalf of its customers—oil companies looking solved this issue favor of to extract oil WesternGeco. from the sea jury floor. ION makes the DigiFINs was entitled to be advised that do- (f)(1) mestically ships and then this them to applicable to both overseas issue— customers, who, (f)(2) its in competition with against been resolved ION. —had WesternGeco, perform surveys abroad on Because ION’s proposed instruction would behalf of oil companies. that, WesternGeco broad, precluded overly have it was surveys identified ten which believes and the district court did not err in refus- that, but for ION’s supplying DigiFINs ing give the instruction. See Bettcher customers, to ION’s WesternGeco would Indus., USA, Inc., Inc. v. Bunzl 661 F.3d have been awarded the contract. These (Fed.Cir.2011); Corp. 638-39 Biodex surveys ten allegedly would generat- have Biomedical, Inc., v. Loredan 946 F.2d $90,000,000 ed over profit. According to (Fed.Cir.1991) (“In prevail order to on WesternGeco, ION’s customers would not jury case, instruction issue this [the have been able to win the they contracts if appellant] must demonstrate both that the did not have DigiFINs. access to the jury actually given instructions were fatal- Thus, WesternGeco, according to but for ly flawed and that the requested instruc- customers, ION’s sales to its tion was proper and could have corrected would have earned over million in $90 flaw.”).6 profit from the ten lucrative services con- Finally, complains ION that WesternGe- performed tracts abroad. during co trial improper made references argues ION that WesternGeco cannot (f)(1) to the summary judgment order receive resulting from the fail- arguing when jury should find ure to win these contracts. The service (f)(2) infringement. object ION did not contracts were all to performed be on the they made, the references when were seas, high jurisdictional outside the reach ION fails to demonstrate they consti- U.S. law. There is also no con- plain tuted error requiring reversal in the tention that the service contracts were en- objection. absence of an See Minks v. tered into the United States. Indus., Inc., Polaris 1379- (Fed.Cir.2008) (plain error reversible The presumption against extrater affected). only where substantial rights ritoriality is well-established undisput- equal- ION's denied denying granting motions limine were Orders motions for sum- ly example, requested 10653; overbroad. For mary judgment.” J.A. see also J.A. precluded making WesternGeco be instruction). (refusing give "[a]ny mention of or reference to this Court’s 1350 Congress In enacted response, ruled in Mi S.Ct. 1700. Supreme Court the

ed. As 271(f), im- Corp., Deepsouth § AT & T 550 U.S. Corp. v. which overruled crosoft L.Ed.2d 737 167 shipping 127 S.Ct. pose liability on domestic entities (2007), that United presumption (with “[t]he in- requisite abroad components domestically does governs but law States tent), just they if had manufactured the applies particular the world rule not product itself in the United infringing under patent law. The traditional force 442-45, Microsoft, 550 States. See U.S. operates only standing patent that our law (explaining Congress 127 S.Ct. to for domestically and does not extend 271(f) § to hold manufacturers of enacted in the Patent activities is embedded eign infringers). exported components liable as itself, provides that a which Act so, doing There is no indication in an invention rights exclusive confers Congress intended to extend the United 454-55, Id. at the United States.” within patent law to cover uses abroad of States (citation, alterations, and 127 S.Ct. exported the articles created from the omitted). quotation marks internal components. Packing Co. v. Laitram Deepsouth also 271(a) § It is clear that under 518, 531, 92 S.Ct. Corp., 406 U.S. export product of a finished cannot create (1972) (“Oúr patent system L.Ed.2d 273 effect; liability for extraterritorial use of extraterritorial makes no claim to not, and were Congress product. leading ‘these acts of do The case on lost to, beyond limits operate not intended Integrations, foreign conduct is Power ” (quoting of the Brown Int’l, Inc., United States.’ Inc. v. Fairchild Semiconductor Duchesne, 183, 195, 60 U.S. 19 How. (Fed.Cir.2013). There, the 711 F.3d 1348 (1856))); Op Equal Emp’t 15 L.Ed. 595 chip supplier, a lost contracts to patentee, Am. portunity Comm’n v. Arabian Oil supply prospective customer with com Co., 244, 248, 499 U.S. S.Ct. chips in the States and puter United (1991) (“It longstanding L.Ed.2d 274 infringer abroad because the accused be legislation ‘that principle of American law competitor came a for such contracts as a contrary ap intent Congress, of unless If infringing result of the U.S. sales. only pears, apply is meant to within infringer precluded accused had been jurisdiction territorial the United infringement, patentee alleged U.S. ” Filardo, Foley Bros. v. (quoting States.’ not infringer that the accused could have 281, 285, 575, 93 L.Ed. 336 U.S. competed for the contracts which neces (1949))). in the sarily supplying chips involved both 271(f) Here, expand- the enactment of The patentee United States and abroad. scope ed the territorial laws argued that it should recover world-wide components pat- to treat export profits. (with systems requisite ented abroad rejected argument: “[Our We intent) just export of the finished like thereby provide com patent laws] do systems genesis Congres- abroad. foreign exploi for a pensation defendant’s lay Supreme in the sional action Court’s invention, which is not tation Deepsouth. Deepsouth, decision in Integrations, at all.” Power Supreme determined that a domes- Court Rather, 711 F.3d at 1371. “we find neither tic manufacturer who manufactured com- justifica compelling facts nor a reasonable and then ponents infringing product of an is enti finding patentee] tion for that [the exported those abroad without compensation’ ‘full in the form of tled to infringer an combining first them was not 271(a). based on loss of sales under 406 U.S. at discussed, terms, markets which it claims were a foreseeable 1746. As we have its 271(f) infringing result of conduct in the United operates to attach liability to do- entirely States.” Id. at 1372. extra- “[T]he mestic export entities who components use, production, territorial or sale of an they know and intend be combined in a in patented invention the United States infringing would-be manner abroad. But that, independent, an intervening act un- the liability attaches in the United States. circumstances, der almost all cuts off the It is the act exporting of the components chain of causation by initiated an act of from the United States which creates the infringement.” domestic Id. at 1371-72. liability. A construction that would allow recovery foreign profits would make Integrations, Under Power West- 271(f), § relating to components, broader profits ernGeco cannot recover lost result 271(a), § than which prod- covers finished ing from its foreign failure to win service 271(f) fact, § ucts. was designed to contracts, put the failure of which allegedly domestic export entities who components resulted from supplying infringing ION’s to be assembled into a final products product in a competitors. to WesternGeco’s Duchesne, position similar See also to domestic 60 U.S. at 195-96 manufacturers (“And patented technology] the use of who sell the final product domestically [the or jurisdiction outside of the United export product. the final Just as the Unit- infringement States is not an paten- [the ed States seller final exporter or rights, patentee] has no tee’s] [the product abroad, cannot be liable for use so any compensation claim to for the profit or too the exporter United States of the com- it.”); advantage party may derive from ponent parts cannot be hable for use of the Elecs., Elecs., Inc., Halo Inc. v. Pulse 769 infringing article abroad. (Fed.Cir.2014) 1371, (“Following F.3d 1380 course, Of the fact that WesternGeco is logic, foreign Halo’s goods sale of cov not entitled under patent United States patent ered a U.S. that harms the profits law to foreign lost from the uses of business interest of a patent U.S. holder patented its invention does not mean that infringement liability would incur under it is entitled to compensation. no Paten- 271(a). § Such an geo extension of the tees are royal- still entitled to a reasonable 271(a) § graphical scope of in effect would ty, and roy- WesternGeco received such a confer worldwide right exclusive to a alty here.7 holder, patent U.S. contrary which is The dissent raises three principal argu- law.”). the statute and case allowing ments favor of WesternGeco to argues that Power Inte profits resulting recover lost from failing grations applies infringement under to win perform the contracts to the seismic 271(a)-(b), under surveys high on the seas. 271(f). argument WesternGeco’s misun First, the dissent 271(f) Supreme identifies derstands the role of in our 271(f) approved Court cases believes awards of law. Section does not eliminate the sales, lost presumption profits foreign citing against extraterritoriality. Goulds’ Instead, it exception. Manufacturing Cowing, creates a limited Co. v. 105 Mi U.S. crosoft, 442, 455-56, 253, (1881), U.S. Dowagiac S.Ct. 26 L.Ed. 987 Manu- Pacemakers, royalties may 7. The extent to which these be grounds, on other Cardiac Inc. v. (Fed. Med., Inc., affected suffered abroad is an 576 F.3d St. Jude (en presented Cir.2009) banc); issue not here. See Union Carbide Orthope see also Warsaw Co., dic, NuVasive, Inc., Corp. 778 F.3d Chems. & Plastics Tech. v. Shell Oil Inc. v. (Fed.Cir.2005), (Fed.Cir.2015). 1378 n. 7 overruled resulting from the use abroad of U.S. v. Minnesota Moline Plow its facturing, Co. Co., 59 L.Ed. goods 235 U.S. manufactured there- Duchesne, (1915), 60 U.S. 183. light “particular of in force” remotely cases is similar to these None of presumption against extraterritoriality sure, they suggest that To be this one. Corp., our laws. See Microsoft sales of the profits for Certainly U.S. at S.Ct. are recoverable when the themselves items 271(f)(2) Congress pro- did not drafting manufactured in question were items liability convoyed-sales situa- vide for foreign buy- and sold to States the United tions. by manufacturer. ers the U.S. Third, expresses the dissent concern 254; Dowagiac at Mfg., 105 U.S. Goulds’ ruling today might effectively pre- that our 221; 35 S.Ct. Mfg., U.S. recovering vent from lost Duchesne, 196. is no 60 U.S. at There all, surveys conduct- profits at as the were Rather, the claim is for claim here. such high ed on the seas and were outside of from the use abroad of the profits lost any jurisdic- the territorial reach of The own au- question. items in dissent’s may may tion in the This or not be world. Dowagiac Manufacturing, makes thority, Indeed, the case. WesternGeco does not foreign buyers clear that absent sales recovering contend that it is barred from manufacturer, by the there can be no U.S. jurisdiction in in the which the services recovery profits of lost for sales: negotiated signed, contracted was nor drills, by of the about sold the Some that it from does contend is barred defendants, Canada, part were sold no jurisdiction recovering the which occurring of the transaction within the surveys States, ship performing the the seismic is and as to them there United event, recovery profits flagged. possible could be no of either In the failure damages. right by pat- The conferred a liability provides ignoring no basis for our law is confined to the entee under presumption against extraterritoriality. the United States and its Territories and IV right of this cannot be predicated wholly of acts done a for- Because we reverse the district court’s country. eign decision, turn we next to West- 221.

235 U.S. at cross-appeal. ernGeco’s conditional Second, dissent argues the sur challenges WesternGeco first veys “convoyed should be recoverable as district grant court’s of ION’s motion to domestically sales” of the manufactured expert exclude WesternGeco’s from testi infringing DigiFINs. of the fying royalty. as to a reasonable Western- But, argu WesternGeco did not raise this Sims, damages expert, Raymond Geco’s ment before district court or this court. expert report submitted an in which he And, points the dissent to no case extend royalty determined that the reasonable ing convoyed sales doctrine to cover alleged infringement rate for ION’s was products sales of related or services 10% the revenue of ION’s customers. See, Indus., e.g., abroad. Inc. v. State this, support explained he that ION’s Indus., Inc., Mor-Flo 883 F.2d customers had received billion reve $3.3 (Fed.Cir.1989) for (making no mention of surveys Digi- performing nue for uses); Minco, eign sales or Inc. v. Com FINs, they and that would not have been Inc., Eng’g, bustion (Fed.Cir.1996) (same). able to receive revenue without We see no basis 271(f)(2) extending DigiFINs. for lost prof- cover The district court excluded Sims from reasonable. It is true there is no a testifying royalty. as to reasonable legal rule that caps the royalty reasonable ION, court “that in a district reasoned by the amount infringer’s profit.8 hypothetical negotiation with [WesternGe- We conclude that the district court co], would ... agreed huge, [not] have to a adopted no such absolute rule and did not (and profit-eliminating even revenue elimi- abuse its discretion excluding the ex- royalty nating) obligation for itself. As a pert. The district court expressly based law, matter of no such can risk be taken in ruling its on two royalty facts—that hypothetical negotiation in which' in- profit eliminating and that it was reve- fringement known. deemed With Indeed, eliminating. nue the proposed knowledge validity and infringement, royalty high was so it would have financially catastrophic agreement such exceeded ION’s revenue four times. totally would have been unreasonable.” case, WesternGeco cites no and we are J.A. none, aware of in which we have held that royalty exceed,

District reasonable can courts are tasked with a fac- four, tor of gatekeeping function of determining price market pat- such, to allow an ented expert testify. whether to invention. As we see no error Pharm., Inc., Daubert v. Merrell Dow 509 in the district exercising court its discre- 579, 592, 2786, U.S. 113 S.Ct. 125 tion to L.Ed.2d exclude the from expert testifying (1993). proffer “Faced with a of ex as to a royalty.9 reasonable then, pert testimony, scientific the trial V outset,

judge must determine pursu at the 104(a), ant to Rule expert whether the is Finally, WesternGeco challenges the dis- (1) testify proposing scientific knowl trict court’s refusal to award enhanced (2) edge that will the trier assist of fact to damages for willful infringement. understand or determine a fact in issue.” Seagate, In re announced a we two- (footnote omitted). Id. We review the dis test for prong willfulness: trict court’s decision expert to exclude an establish infringement, [T]o willful a pat- an abuse of discretion. Gen. Elec. Co. entee by must show clear convincing Joiner, 146, 512, U.S. infringer evidence that the despite acted (1997). 139 L.Ed.2d 508 an objectively high likelihood that its argues that actions infringement constituted of a val- improperly court adopted patent.... rule that a id The state of mind of the profit-eliminating royalty per was se un- infringer accused is not relevant to this See, e.g., Aqua 8. v. Inter mining Shield Pool Cover technology Team, (Fed.Cir.2014); 774 F.3d 770-71 revenue, worth expert of total 10% used Mars, Inc., Acceptors, Inc. v. Coin 527 F.3d generated by the revenue ION’s customers (Fed.Cir.2008), on other resulting modified performing surveys from the oceanic grounds, (Fed.Cir.2009); F.3d Mon number, as the base for that rather than 10% (Fed. santo Ralph, Co. v. 382 F.3d generated by resulting the revenue ION Cir.2004); Indus., State Inc. v. In Mor-Flo selling infringing products. This in- dus., Inc., (Fed.Cir. 883 F.2d creased, tenfold, by more than the estimated 1989). royalty. Again, reasonable we are aware of plaintiff no case in which the has used the Although expressly 9. not articulated defendant’s customer's revenue as the reve- court, district noting it is also worth calculating royalty, nue base for a reasonable there were other reasons exclude the ex- identify and WesternGeco does not one. pert’s testimony. example, -For after deter- prong Seagate If tends not to be met inquiry. this threshold ob-

objective satisfied, patentee infringer is an relies on a jective standard where accused objec- that this charge infringe- must also demonstrate to a reasonable defense (determined by the ment.”). risk tively-defined developed infringement in the record argues WesternGeco also ION’s known or so ob- was either proceeding) patents to brought customers ION’s have been known to vious that should regard- attention and voiced their concerns infringer. the accused ing possible infringement, and that ION Peripheral In Bard 497 F.3d possibility concerned about the was so Associates, Vascular, Inc. v. Gore & W.L. infringement that it hesitated to enter into

Inc., objective inqui explained that the we indemnity agreements with its customers. answered ry legal question, to be arguments subjective These bear on the judge and reviewed de novo. objective inquiry inquiry, —wheth- (Fed.Cir.2012). 1003, 1007 objectively er WesternGeco had reasonable jury The determined that WesternGeco our review is de defenses. Whether novo demonstrated, “by convincing clear and ev- deferential, we see no error in the dis- idence[,] knew, actually or it was that ION trict court’s determination. known, should have so obvious that its actions constituted Conolusion a valid J.A. 77. Western- claim[J” respects, except We affirm all that we sought enhanced dam- subsequently Geco grant reverse the district court’s refusal to ages light jury’s finding. eliminating profits compo- the lost JMOL district court denied WesternGeco’s mo- jury nent of the award. jury noted that al- tion. The court AFFIRMED-IN-PART, REVERSED- subjective the ready determined IN-PART, AND REMANDED satisfied, prong was but that it was the of the court to determine if responsibility Costs objective prong had been satisfied. party. Costs to neither carefully reviewing nonin-

After ION’s defenses, invalidity fringement and the dis- WALLACH, Judge, dissenting- Circuit they trict court concluded that were “not in-part. convincing unreasonable clear and evi- dence,” baseless,” objectively “not agree I with majority’s holdings “reasonable.” J.A. 26-28. respect standing, infringement, and will- However, in an fulness. effort to WesternGeco has not established presumption against the extraterritori- concluding that the district court erred in law, application al of United States that ION’s defenses were reasonable and majority erroneously declines to consider gives relatively indeed little attention to (“WesternGeco”) WesternGeco L.L.C.’s Instead, argues this issue. determining sales dam- when any that ION was not successful with of its ages under 35 U.S.C. defenses and that ION did not raise of 271(f) (2012).Because, § under this court’s appeal. on But those defenses unreason precedents and of the those United States ableness, success, not a lack of determines Court, Supreme re- patent statute damages whether enhanced are awarded. quires part consideration of such sales as Solutions, Inc. v. Spine Medtronic USA, calculation, Inc., 1305, respectfully I Danek 620 F.3d Sofamor (Fed.Cir.2010) (“Th[e] ‘objective’ 1319 dissent.

1355 beyond question patent rights bility It is on those supplying from the United granted by geo the United States are components States invention graphically Supreme limited. As “in such actively manner as to induce the long ago ... explained, power “[t]he Court combination of such outside of [by granted promote the Constitution to United States a manner that would ... progress useful is domestic arts] infringe patent if such combination character, necessarily its confined occurred within the United States.” 35 within the limits the United States.” 271(f)(1) added). § U.S.C. (emphasis Duchesne, (19 How.) 183, Brown v. 60 U.S. Supreme Court has described (1856); Deep L.Ed. 595 see also 271(f) exception as “an general to the Packing Corp., south Co. v. Laitram rule that our law apply does not 518, 531, U.S. 32 L.Ed.2d S.Ct. extraterritorially.” Microsoft, 550 U.S. at (1972) (“Our patent system makes no 442, 1746; 127 S.Ct. see also Limelight effect; claim to extraterritorial ‘these acts — Networks, Techs., Inc., Inc. v. Akamai not, Congress do and were not intended -, 2111, 2118, U.S. to, operate beyond the limits of the United (2014) (Section 271(f)(1) L.Ed.2d “illus States’; correspondingly reject and we trates Congress when im [that] wishes to claims others such control over our pose liability for inducing activity that does Duchesne, (quoting markets.” 60 U.S. at not itself constitute direct infringement, it 189)), statute, superseded part by Pat so.”); precisely knows how to do Promega ent Law Amendments Act of Pub.L. Corp. Corp., Techs. 773 F.3d Life No. 98 Stat. 3383. (Fed.Cir.2014) (“Under 35 U.S.C. approach, Congress Consistent with this 271(f)(1), party may infringe patentees has conferred on right “the participation based on its in activity that exclude others from making, using, offer- occurs both inside and outside the United sale, ing for or selling the invention States.”) added); (emphasis Power Inte throughout the United States.” 35 U.S.C. grations, Inc. v. Fairchild Semiconductor 154(a)(1) added). (emphasis Although Int’l, Inc., (Fed.Cir. presumption that United law “[t]he States 2013) (“[I]ndirect infringement, which can governs domestically but does not rule the elsewhere, encompass occurring conduct context, unique world” is not to the patent requires underlying infringement direct “applies particular in patent force States.”) added) (ci (emphasis the United law.” Corp. v. AT T Corp., & Microsoft omitted). tations 437, 454-55, 1746, 550 U.S. 127 S.Ct. 167 foreign The relevance of activities is not (2007). L.Ed.2d 737 underlying limited to the of liability issue Nevertheless, the geographic limited infringement, for but also relates to the patent reach of United States law does not damages. associated issue of It is on the mean occurring activities outside the Unit- damages issue of majority the errs. ed States are categorically disregarded general, patentee a is entitled to full when determining issues of in- patent compensatory damages infringe where fringement. example, For 35 U.S.C. Corp. ment is found. Gen. Motors v. De § 271(g) imposes liability upon based an 648, 654-55, Corp., vex 461 U.S. 103 S.Ct. underlying foreign patented pro- use of a 2058, (1983) cess, (By if 76 L.Ed.2d 211 product enacting the by process made 284, imported “Congress sought into the United States. to ensure that the Simi- larly, matter, and relevant present patent to the owner would in fact full receive 271(f) by enacting Congress imposed compensation ‘any lia- for damages’ he suf- 1356 omitted). infringement.”) quotation ternal marks Without a result

fered as (citation omitted); Co. v. Canada, Carborundum excluding pumps the sold in the Innovations, Inc., 72 Equip. Metal Molten Supreme found “a Court reasonable allow- (“The (Fed.Cir.1995) pri- 872, F.3d profits ance for will be fifteen dollars on compensatory damages is mary purpose [i.e., $4,470 pump, multiplied each or financial owner the patent to return the $4,470] by equals in all.” Id. at 258. $15 occupied have but for he would position part The thus relied in on foreign Court 1587, H.R.Rep. No. infringement.”); profits, explaining sales calculate lost (1946) (“The object of Cong., 2d Sess. 79th appellant easily, “could and with rea- recovery the basis of to make the bill is every promptness, filled] sonable or- [have general suits dam- patent infringement der that was made.” Id. 256. is, complain- ages, that In Dowagiac Manufacturing Co. v. added). (emphasis can prove_”) ant Co., Minnesota Moline Plow the Court is rooted in the general approach This accounting profits reviewed “an and an statute, provides: “Upon which damages resulting assessment of from the shall finding for the claimant court granted ... for damages adequate claimant award the improvements certain new and useful infringement, but in no compensate drills, royalty.” grain commonly than a reasonable as shoe event less known added). (emphasis Section U.S.C. drills.” 235 U.S. 35 S.Ct. particular is a variation of the more (1915) (internal quotation 59 L.Ed. 398 “ that, wrong has general principle ‘when omitted). marks The defendants included ” done, gives remedy,’ been and the law purchased wholesale dealers who “ injured placed, is to be party ‘[t]he (who infringed pat- manufacturers also be, in may near as the situation he would ent). Id. at 221. S.Ct. Some of wrong have if the had not been occupied the drills sold in were Canada ” Paper Albemarle Co. v. committed.’ defendants. Id. at 35 S.Ct. 405, 418-19, Moody, U.S. plaintiff held the to re- Court unable (1975) (quoting 45 L.Ed.2d 280 Wick- profits damages” cover “either as to (6 Wall.) 94, 99, Hoppock, er v. 73 U.S. sales, specifically these distinguishing (1867)). L.Ed. 752 the basis that in- Goulds’ on “while [the principles of full general compen- These fringing were made the United drills] sation, course, directly do not address States, they were made the defen- question foreign of whether activities By implication, Id. had dants.” the defen- may calculating when be considered such dants manufactured within the United Court, Supreme compensation. The how- infringing States the articles that were the ever, question has answered this sales, subject of those sales affirmative, looking to non-infringing for- could have used in the calculation of been eign sales to calculate lost where profits damages. and therefore patented product the is manufactured in Supreme prece- Consistent with Court the example, United .States. For dent, previously this court has considered Manufacturing Cowing, Goulds’ Co. v. the foreign lost sales to inform dam- pumps “spe- defendant manufactured 298 In ages Dynamics, calculations. Railroad cially designed drawing gas for off the Co., Inc. v. A. Stucki the district court oil-wells,” from for which “there was no $2,182,986in damages upon awarded based market ... except oil-producing the re- 52,183.5 by infringing multiplied gions Pennsylvania of and Canada.” 105 carsets. (1881) (in- 253, 254-55, carset, royalty com- per plus U.S. 26 L.Ed. 987 of 6% $35

1357 pound products interest. 727 F.2d 1510 n. 1 via the infringing sold websites (Fed.Cir.1984). award, In upholding the base,” as the royalty considering in partic noted: this court profit ular “the earned on these [non-in 1,671 royalties The award includes for fringing] products”), rev’d on other foreign carsets sold to customers.... grounds, (Fed.Cir.2015). F.3d 1311 1,671 itWhen made the carsets in this Similarly, patented where a device is used country, it infringed.... those Whether unpatented products manufacture were sold in carsets or else- U.S. sold, are later the non-infringing sales can irrelevant, where is and no therefore be used to profits calculate lost or reason including error occurred in those carsets Minco, royalties. able Inc. v. Com among infringing products on which Inc., bustion Eng’g, royalty was due. (Fed.Cir.1996) (“In awarding both lost added). (emphasis Id. profits and a royalty, reasonable the trial sales, non-infringing foreign The use of court used the sale of [non-infringing] following infringing manufacture, domestic [produced fused silica using a patented part of the base on royalties which or kiln] as the baseline measuring for dam profits lost are only calculated is one ex ages.”). ample non-infringing of reliance on activity case, foreign this sales of unpat- at an appropriate damages figure. arrive ented surveys by seismic were made not involved, patents Where method non- defendant-appellant Geophysical Cor- infringing products domestic sales of re (“ION”), poration but by its customers. sulting infringement domestic of the Maj. Op. at 1349. WesternGeco’s patent have been held relevant to the dam lost profits might therefore be distin- Industries, ages calculation. In State Inc. guished Goulds’, from those at issue in Industries, Inc., v. Mor-Flo example, Dowagiac, Dynamics and Railroad on two plaintiff held a patent on “a method of first, separate foreign bases: sales insulating the tank of a water heater were not of product but of an

using polyurethane foam.” 883 F.2d unpatented service in patent-prac- which a (Fed.Cir.1989). “The court district used; ticing second, device was plaintiff] awarded [the its incremental foreign present sales in the matter were profit non-infringing] on [the foam-insulat not made the defendant.1 gas ed water per heaters reflecting the difference, With to the first this centage plaintiff] sales revenue lost [the previously court has allowed recovery [the defendant’s] because on recognition based profit,” have been its would and this “the value of a patent may economic be 1579-80; court affirmed. Id. at see also greater than the value of the v. sales Penney Soverain LLC J.C. Software (E.D.Tex. Corp., F.Supp.2d patented part King alone.” Instruments 2012) (upholding Corp. Perego, calculation F.3d 4n. (Fed.Cir.1995). on “the value of [non-infringing] relied example, For under the is, majority Dowagiac. Maj. Op. comparable overreads defendant —who not Dowagiac impose at 1351-52. declined to to ION but to ION’s customers—did in- not liability for downstream sales because fringe products foreign buy- as to the sold to the defendant was the seller downstream action, present ers. In the WesternGeco is rather than the U.S. and its manufacturer bringing against suit the downstream sell- "infringement only selling consisted ers, infringement, and issue is not but they passed after drills out of the makers’ damages. 650, hands.” 235 U.S. at 35 S.Ct. 221. That

1358 ence.”); Carborundum, sales,” “convoyed patentee a see also 72 F.3d at doctrine profits based on lost sales may recover lost (affirming 881-82 the district court’s hold they if are “suffi products unpatented ing patentee “clearly that the entitled patented product.” to the ciently related profits [unpatented] spare to lost on all NuVasive, Inc. v. Orthopedic, Warsaw sales,” parts finding, injunc and absent an (Fed.Cir.2015). 1365, Inc., 1375 778 F.3d tion, it would have entitled to lost been claims are to an Similarly, drawn “when profits repair on “future lost sales of multi-component component individual Here, parts”). appears where it Western may “damages recover product” patentee a easily, “could and with reason [have] Geco entire market value of the based on the promptness, every able order that fill[ed] long patented as “the product” accused so Goulds’, surveys, was made” for marine creates the basis customer de feature 256, patent-practic 105 U.S. at where the substantially creates the value of mand or ing devices “were made the United VirnetX, parts.” Inc. v. component “by States” and were made the defen (Fed. Inc., 1308, 767 F.3d Sys., Cisco dants,” 650, Dowagiac, 235 U.S. Cir.2014) (internal ci quotation marks and 221, patented and where “the feature cre omitted); Westinghouse tation see also ates the basis for customer demand” of the Wagner Mfg. Elec. & Mfg. Elec. & Co. VirnetX, surveys, 1326, marine 767 F.3d at 615, Co., 691, 225 U.S. S.Ct. recovery precluded. should not be (1912) (Upon a sufficient show L.Ed. ing, patentee may profits a recover “the With to second difference— ... on the if damages and whole machine” ION did itself make the down machine, of the whole “the entire value stream sales—there is no reason allow article, properly legal and a marketable liability to escape profits for lost sim feature.”) ly patented to the attributable ply upon based the business model it chose (internal quotation marks and citation employ. Under omitted). infringer’s profits based not on the but on Although convoyed discussions of sales harm suffered the patentee. See Rob gen- and the entire market value rule are Bosch, Mfg. ert Pylon Corp., LLC v. erally products, addressed to there is no (Fed.Cir.2013). F.3d 1315-16 In this statutory or doctrinal reason to exclude case, damages to WesternGeeo are the services, functionally related as this court competes directly same whether ION acknowledged. Contracting has See State Moreover, indirectly. had ION chosen to Am., Inc., Corp. & v. Condotte Eng’g compete against directly by WesternGeeo (Fed.Cir.2003) (quoting F.3d manufacturing components the United approval jury a instruction that “if States, abroad, assembling them and then job ... an entire construction is function- underbidding per WesternGeeo to win and ally part patented a inventions used contracts, survey form seismic there would job, profits” may ... on the then be (or be no of patent-practicing sales devices entire awarded “for construction thereof) on which to base a Moreover, job”). patented the sale of the royalty. reasonable This case would then products or services need unpatented in that resemble Mineo defen “[b]oth [the simultaneously. DePuy not occur patentee] dant] [the used the invention Danek, Spine, Inc. v. Medtronic Sofamor Minco, compete in [the market.” same] Inc., (Fed.Cir.2009) is, upheld 95 F.3d at 1118. That (Whether Mineo unpatented prod- calculation of lost on a based down together separate ucts are sold or in trans- stream, non-infringing something actions “is distinction without differ- sale of patented product. other than the The abroad and that infringement liability un- 271(f) court should do so here.2 § proper. der is Maj. Op. at 1347-48. This court’s en banc decision Cardiac

Pacemakers, support cited of its significantly, Most this court’s decision argument that extraterritorial sales cannot in Power Integrations does not support considered, contrary. be is not See Cardi- majority’s damages. view of It is true Pacemakers, Med., Inc., ac Inc. v. St. Jude that case damages stated for infringement (Fed.Cir.2009) (en 271(a) § under cannot be foreign based on banc). case, In that this court “[held] simply sales “because foreign those sales 271(f) Section does not cover method direct, were the foreseeable result of ... export claims.” Id. at 1359. The of non- infringement.” domestic See Power Inte- infringing implantable cardioverter defi- grations, 711 F.3d at 1371. Read in iso- brillators that were then used abroad to lation, this statement is inconsistent with practice patented give method could not Goulds’, Dowagiac, and Dynam- Railroad 271(f) § liability rise to under “a because ics. component process of a method or step is a However, despite its use of the word in that process,” method or id. at but “direct,” the court in Power Integrations method,” supply step “one cannot clearly concerned with sufficiency terms, simple id. at In Cardiac of the connection between ac- Pacemakers held because method tivity and the domestic infringement. claims intangible, they cannot be ex- Integrations explained Power plaintiffs ported (“supplie[d]”) within the meaning of had cited no case law supporting the use of 271(f). § point of law with markets, “sales in foreign consummated 271(f) § infringement under in Cardiac regardless any Pacemakers, infringing connection to however, inapposite to the of activity States,” in the United when calcu- damages issue of the court now decides. lating damages. (emphasis Id. at 1371 Unlike the defendant in Cardiac Pacemak- added). ers, It noted the shipped non-infringing who “estimate implanta- [of the defibrillators, plaintiffs expert ble cardioverter witness] there is no million in $30 question shipped components damages that ION was not rooted in [the defen- invention for combination activity ] dant’s in the United States.” Id. majority 2. The Supreme sider that the Court in Goulds’ did 271(f)(2) extending rely see[s] no basis for explicit not on an authorization of Con- profits resulting cover lost the use gress damages upon to award based activities from abroad, goods of U.S. manufactured or com- Third, occurring by using overseas. the term ponents light 'particular thereof in "liability,” majority’s ignores statement presumption against force’ of the extraterri- the critical distinction between whether a de- toriality in our laws. fendant is liable and the amount which a for 271(f)(2), Certainly drafting Congress did event, Congress defendant is liable. provide liability convoyed-sales for 271(f) stated whoever violates "shall be lia- situations. 271(f)(1) infringer.” ble as an 35 U.S.C. & added) (citation Maj. Op. (emphases at 1352 (2). precedents, Under this court’s the extent omitted). stating, majority In so elides liability infringement, appropriate First, important by categorizing three issues. cases, by considering is determined the sale of damages “resulting from ... use non-infringing products gen- or services. See abroad,” analysis it assumes without Instruments, ("Sec- erally King 65 F.3d at 947 there is an insufficient connection between imposes types tion 284 no limitation on the proven infringement ION’s in the United (see resulting harm States and discussion of Power Second, Integrations, infra). redress.”). fails con- statute will added) (internal event, any Integrations Power is dis- quota (emphasis at 1372 omitted). Similar tinguishable patentee and citation because the that tion marks ' expressed court decision ly, the district it- presumably protected case could have plain the the “estimate manufacture, sale, [of that concern foreign self from the million in dam of expert witness] $30 tiffs by obtaining patents and use abroad. See parts related to that were not ages was 531, at 92 Deepsouth Packing, 406 U.S. used, manufactured, or sold the United (“[T]he wording 1700 of 35 U.S.C. S.Ct. Power Inte defendant].” [the States congressional §§ 154 and 271 reveals a Fairchild Semiconductor Inc. v. grations, patentee] [protec- intent to have seek [the (D.Del. Int’l, Inc., F.Supp.2d 511 589 through patents secured in tion] abroad 2008). goods being countries where his used.”); record in Power Inte- Although the Microsoft, see also 550 U.S. at clearly describe the na- (“If not grations does AT T 127 S.Ct. 1746 & desires to sale, (e.g., infringing the conduct ture of countries, prevent copying foreign its manufacture, sample testing part or as of remedy today obtaining lies in and enforc- to the for- design process) relation ing foreign patents.”). reasoning Such los- activities, see, e.g., 711 F.3d at eign sales es much of its force where the extraterri- that what is clear is both activity place torial or could take takes this court found the con- district court and place entirely high Maj. on the seas. See approach insufficient. Such an nection (“The Op. at 1349 service contracts were requirement merely applies the sensible seas, performed high all be on the out- an connection appropriate there be jurisdictional of patent side reach U.S. infringing activity between the (“international law.”); see also J.A. Corp. resulting lost sales. See Rite-Hite seas”). waters”); (“high id. at 1182 Co., 1538, 1546 n. Kelley v. & 5 (The generally United States v. Louisiana (Fed.Cir.1995) (en banc) (explaining that Case), Boundary Louisiana 394 U.S. consequences” for “remote (1969) 773, 22 L.Ed.2d “are patent infringement compensa- (“Outside high the territorial sea are the ble,” disagreement with the noting seas, which are international waters not dissent on “where those lines are to be subject to the dominion of na- single drawn”); F. Roche Ltd. cf. Hoffmann-La tion.”); v. WesternGeco L.L.C. Ion Geo- S.A., 155, 166, Empagran 542 U.S. physical Corp., F.Supp.2d (2004) (indicat- 2359, 159 L.Ed.2d 226 S.Ct. (S.D.Tex.2011) (“[A]ctivities in the [Exclu- apply it ing [Ameri- is not “reasonable Economic sive do not occur within Zone] foreign can laws to conduct inso- antitrust] territory pur- United States for independent far as that conduct causes law.”). poses patent of U.S. harm foreign harm and alone reasons, For similar concerns extra- claim”) gives plaintiffs (empha- rise to the application patent territorial of U.S. law modified). sis In contrast to the tenuous recovery (e.g., by could result in double connection between parallel brought suits under the Integrations, harm in Power see F.3d country laws of more than one based on 1371-72, majority question at does not act) infringing possibly the same inter- WesternGeco’s assertion that “but foreign sovereignty fere with are of mini- customers, sales to its ION’s mal relevance here. Where would have earned over million dollars $90 supplied invention are from one in profit from the ten lucrative services country exclusively high and used on the performed Maj. Op. abroad.” at contracts seas, may country’s patent be that no concern, therefore, occurring greater laws reach the conduct inter is not much, provision possibility recovering absent a such as too national waters but 271(f). (19 See, Duchesne, possibility owners e.g., 60 U.S. will be How.) (“[T]he unable to obtain full compensation, may high seas out of [are] import well be the States.”); majority’s hold- jurisdiction of the United ing today. majority’s Under the view of States, Inc. v. Eng’g, Ocean Sci. & United damages, plaintiffs such (Ct.Cl.1979) (It as WesternGeco 572, 574 is uncer who are the proven infringement victims of Congress tain whether intended the and who have damages sustained caused to apply processes laws “to carried out on activity the defendant’s in the United sea.”). flag ships planes U.S. and at may States fully not be able to recover generally Equal Emp’t Opportunity they even if patent rights obtain abroad.3 Co., Comm’n v. Arabian Am. 499 Oil U.S. legislative history No Congress shows in- 244, 265, 1227, 111 S.Ct. 113 L.Ed.2d 274 tended to leave such patentees with an (1991) (“[T]he (Marshall, J., dissenting) incomplete remedy. ordinarily flag governs law of the state ship.”) (emphasis internal affairs of a add 271(f) The majority points § out that is ed) (internal quotation marks and citation 271(a),4 § not broader than “liability omitted), superseded by statute on other States,” attaches in the United and that 1991, grounds, Rights Act of Civil Pub.L. exporting the act of the component “[i]t 109, 1071, 1077, § No. 105 Stat. from the United States which creates the recognized Arbaugh liability.” 1351; v. Y H Corp., Maj. Op. & at see also 35 500, 8, 1235, (f)(2) (indicat- 271(b), (f)(1), § 513 n. U.S. S.Ct. 163 U.S.C. (g)& (2006); Howe, L.Ed.2d 1097 ing Gardiner who “shall be infringer”). liable as an (C.C.D.Mass.1865) (No. here, however, F. Cas. question The is not wheth- 5219) (“[Patent] jurisdiction export extends to the er “the of a finished product can[ ] high liability decks of American vessels on the create for extraterritorial use of seas....”) added); (emphasis product,” Maj. Restatement Op. at but in- (Third) 502(2) stead, Foreign § of proper Relations Law what is the measure of dam- (1987) (“The flag may juris state ages given finding liability. exercise of Infringe- adjudicate, prescribe, diction to to and to ment consistently has been addressed at enforce, respect ship with to the stages proceeding, the various and place conduct that takes on ship.”) majority acknowledges the role of for- added). (emphasis eign infringement activities determi- ("[T]he every country applies wording 3. Even if the law of the at of 35 flag prohibit to vessel-based activities in inter- congressional U.S.C. reveals a [§ 271] intent national waters that are claimed in patentee] [protection] [the to have seek country, may issued it be difficult for through patents abroad secured in countries patentees predict, United States to at the time used.”) goods being (emphasis where his are patenting, flag either the that future vessels added). likely fly to or the countries in which likely “negotiated future contracts are to be course, 271(f) 271(a) § § 4. Of is broader than signed.” Maj. Op. at 1352. This difficul- supply in that of "all reaches or a ty prediction distinguishes patents related portion substantial high to activities on the seas from those ob- 271(f)(1) invention.” 35 U.S.C. tained in the more common situation where added); (emphasis Microsoft, see also attempt predict businesses can the need for (explaining U.S. at 458 n. 127 S.Ct. 1746 patenting given country upon in a based fac- 271(f), respect, past population reach[es] how "in one tors such as size or historical mar- ”). Deepsouth Packing, Deepsouth ket demand. See 406 U.S. the facts of support infringement,” Id. at 1347-48. direct and did not under the statute. nation infringed damages respect under reach the issue of with jury found The 271(f)(1) (2), that it Finally, Supreme did so will- those non-sales. (19 Duchesne, How.) court denied ION’s Re- Court in at fully. The district U.S. 193-94, 198, Judgment Maj. Op. no for as Matter see found newed Motion infringement Trial Motion New based on the extraterritorial Law and Alternative Non-Infringement, gaff and this use of an on a Regarding improved sail- “the find- ing temporarily present affirms vessel was court now (f)(2) adequate an Boston harbor. ing [as] liability.” Id. at ques- 1348. The basis for actually Duchesne undermines the ma- infringe- ION is liable for tion whether jority’s assertion that for domes- in the affirmative. answered ment has been tic manufacture cannot take into account 271(f) “§ de- majority high states value from use on the seas. The who if signed put specifically domestic manufacturers Duchesne Court stated that patented to be assembled into a export components invention “had been manufac- product position final in a similar to do- tured on deck while she was [the vessel’s] Boston, lying port cap- manufacturers who sell the final or if the mestic 1351; there, domestically.” Id. at see tain had sold it he would undoubted- product 98-663, Cong., ly trespassed upon rights 2d S.Rep. No. 98th have of the also (“The (1984) Sess., simply plaintiff, justly at bill amends and would have been an- profit advantage law so that when swerable he for (19 Duchesne, assembly thereby cir- supplied for abroad to obtained.” 60 U.S. How.) added). (emphasis the situation will be at 196 patent, Signifi- cumvent a cantly, same as when the invention is noted treated the Court chief and “[t]he States.”). only in the United It almost advantage ‘made’ or ‘sold’ which the defendant “Qjjust improvement asserts as the United States seller derived from the use of this product of a final cannot be on exporter high seas.” Id. The Court thus abroad, for use so too the United concluded that domestic manufac- liable where exporter component parts “profit advantage” States ture leads to on the seas, Maj. Op. high cannot be liable for use abroad.” the defendant is answerable for profit. at Id.

However, ma Unsurprisingly, the cases which the this court has indicated 271(f) § jority apparently damages may draws this conclusion do under be based on foreign foreign not hold that use can never be lost sales. In Union Carbide calculating damages Technology Corp. considered when re Chemicals & Plastics Co., In sulting infringement. from domestic Shell Oil this court held the district 437, 127 1746, Microsoft, “prohibited 550 U.S. S.Ct. see court “was error” when it Maj. no Op. submitting at the Court found Union Carbide from evidence 271(f); § foreign purpose under did not of Shell’s sales for the Similarly, damages. recovering damages address the issue of additional under 35 271(f)(2).” Electronics, 1366, § in Halo Inc. v. Pulse Elec U.S.C. 425 F.3d (Fed.Cir. tronics, Inc., (Fed.Cir.2005), grounds 769 F.3d overruled on other 2014), Pacemakers, Maj. Op. see this court Cardiac 576 F.3d 1348. Although sitting found the “activities in the this court en banc over- defendant’s Carbide, United States were insufficient to consti ruled Union it did so on the basis catalyst tute a export sale within the United States to that the use abroad added). infringe (emphasis majori- in a method did not un- 1353 n. 10 271(f) catalyst was not a ty attempt der because does not to distinguish Cardiac statute, required by “component” Pacemakers or Promega,5 271(f) apply and because does not “[§ ] It is true some Federal Circuit decisions Pacemakers, patents.” method Cardiac have stated are unavailable 576 F.3d at 1363 n. 1365. It left undis- patentee prod where the does not sell its holding that turbed Cardiac Pacemakers’ See, uct the United States. e.g., Linde foreign evidence of sales is relevant to the mann GmbH v. Am. Maschinenfabrik damages infringe- determination where Co., Hoist & Derrick 271(f). ment is found under See id. at (Fed.Cir.1990) (“Because n. 2 Lindemann (“We [Union therefore overrule Car- did not compete the sale of its invention bide to the extent that it with ] conflicts States, not, in the United it did as it could added). holding today....”) (emphasis our not, damages seek on the basis of lost Promega, decided after Cardiac profits.”); Corp., Trell v. Marlee Elecs. Pacemakers, this court confirmed (Fed.Cir.1990) (“Because F.2d worldwide sales are relevant to the dam Trell did not sell its invention in the Unit 271(f), i.e., ages determination under States, ed he could not seek on holding Union Carbide’s cases, the basis of lost profits.”). In these to the relevance of sales remains however, appears the defendants’ conduct good law. 773 F.3d at 1350-51. This to have taken place the United States “jury profits court awarded lost noted exports and no They were at issue. there ... based on worldwide sales ... under 35 only fore stand proposition 271(f)(1).” Id.; U.S.C. see also W.R. there can profits be no lost where the Intercat, Inc., F.Supp.2d Grace & Co. v. patentee would not have made sales (D.Del.1999) (“[Pjlaintiff 316, 321 is enti Instruments, event. King 65 F.3d at 271(f) damages tled to [under based on ] (“In 951 n. 5 Trell and ... Lindemann sales.”). Intercat’s Although international patentee record does not show that damages this court vacated the award be any product sold in the United States. challenged cause “the claims of four of the patentee possible had no basis for a patents five asserted on which the jury cases, lost claim. profits These like oth invalid,” damages based its verdict are ers, general prof reflect the rule that lost preclude did not the district court on re only if its are recoverable demonstrated again mand from considering worldwide record.”). adequate evidence in the In this part sales as renewed calcu case, the district court found “WesternGe- Promega lation. Corp., 773 F.3d at 1358. presented co sufficient evidence for the contrary, Promega acknowledged To the jury reasonably to find that it had the presumption “against the extraterrito demand,” i.e., capability exploit laws, rial application” but infringement, but for the that “Congress’ language found chosen [in would have made additional 34. sales. J.A. 271(f) assigns liability to defen ] [the reasons, States, majority’s dant’s] conduct within the United For these near- on pat- based its extraterritorial Id. at absolute bar to the consideration of a effect.” majority distinguishes why majority explanation 5. The Carbide Union on offers no as to lost foreign "[t]he basis it addressed extent to sales should be relevant when calcu- royalties may lating damages royalty, which ... be affected lost based on a reasonable abroad,” profits present calculating damages suffered while the but not when based on Maj.-Op. profits. matter not. does 1351 n. 7. The lost contrary entee’s of this court and of the both precedent I respectfully therefore

Supreme Court. part.

dissent

Ralph HERBERT, W. Claimant-

Appellant McDONALD, Secretary A.

Robert Affairs, Respondent-

Veterans

Appellee.

No. 2014-7111. Appeals, Court of

United States

Federal Circuit.

July Quinn Matthew A. Traupman, Emanuel Sullivan, LLP,

Urquhart York, & New N.Y., for claimant-appellant. Witwer,

K. Elizabeth Commercial Liti- Branch, Division, gation Civil United Justice, Department Washington, States DC, for respondent-appellee. repre- Also Branda, by Joyce sented R. Robert E. Kirschman, Jr., Jr; Hockey, Martin F. Eilhardt, Lee, Lara Tracey Y. Ken Parker Warren, Meghan Alphonso, Office Gen- Counsel, eral Department United States Affairs, Veterans Washington, DC. DYK, TARANTO, Before HUGHES, Judges. Circuit TARANTO, Judge. Circuit Ralph disability Herbert filed a claim for disability benefits based on an assertion of post-traumat- caused service-connected (PTSD). ic stress disorder The Board of claim, Appeals denied the find- Veterans’ ing no service connection. The Court of Appeals for Veterans Claims affirmed the Board, after determining denial that the stage proceeding, an earlier had not

Case Details

Case Name: Westerngeco L.L.C. v. Ion Geophysical Corp.

Court Name: Court of Appeals for the Federal Circuit

Date Published: Jul 2, 2015

Citation: 791 F.3d 1340

Docket Number: 2013-1527, 2014-1121, 2014-1526, 2014-1528

Court Abbreviation: Fed. Cir.