WESTERNGECO L.L.C., Plаintiff-Cross-Appellant v. ION GEOPHYSICAL CORPORATION, Defendant-Appellant
2013-1527, 2014-1121, 2014-1526, 2014-1528
United States Court of Appeals for the Federal Circuit
January 11, 2019
Appeals from the United States District Court for the Southern District of Texas in No. 4:09-cv-01827, Judge Keith P. Ellison.
JOHN C. O‘QUINN, Kirkland & Ellis LLP, Washington, DC, argued for plaintiff-cross-appellant. Also represented by GREGG F. LOCASCIO, WILLIAM H. BURGESS; TIMOTHY GILMAN, LESLIE M. SCHMIDT, New York, NY; LEE LANDA KAPLAN, Smyser, Kaplan & Veselka, LLP, Houston, TX.
DAVID I. BERL, Williams & Connolly LLP, Washington, DC, argued for defendant-appellant. Also represented by KANNON K. SHANMUGAM, MASHA HANSFORD, ANDREW CHARLES MCBRIDE, JAMES MATTHEW RICE; FRANK PORCELLI, KEVIN SU, Fish & Richardson, PC, Boston, MA; JACKOB BEN-EZRA, BAILEY KATHLEEN HARRIS, DANIELLE J. HEALEY, BRIAN GREGORY STRAND, Houston, TX; FRANCIS J. ALBERT, OLGA I. MAY, San Diego, CA; JUSTIN BARNES, Troutman Sanders LLP, San Diego, CA.
Before DYK, WALLACH, and HUGHES, Circuit Judges.
This case returns to us from the Supreme Court. WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129 (2018) (“WesternGeco III“). The sole clаim remanded to us by the Supreme Court is the lost profits award. The Supreme Court held “that WesternGeco‘s damages award for lost profits was a permissible domestic application of [
BACKGROUND
This case involves a patent infringement suit brought by WesternGeco L.L.C. (“WesternGeco“) against ION Geophysical Corp. (“ION”) for infringement of claims 18, 19, and 23 of U.S. Patent No. 7,293,520, claim 15 of U.S. Patent No. 7,162,967, and claim 15 of U.S. Patent No. 7,080,607 (“Bittleston patents”), as well as claim 14 of U.S. Patent No. 6,691,038 (“Zajac patent”).
Both WesternGeco and ION domestically manufacture devices, the Q-Marine and DigiFin respectivеly, for steering streamers in marine seismic surveys. WesternGeco does not sell its device, instead using it to perform surveys abroad for oil companies. ION does not perform surveys, instead supplying its device to customers who perform the surveys abroad. This case does not involve any question as to lost profits from domestic surveys.
In 2009, WesternGeco sued ION for patent infringement based on ION’s sales of its DigiFin devices to WesternGeco’s competitors in the marine seismic survey market. After a jury trial, the asserted patent claims were found to be not invalid, and ION was found to have infringed all of the asserted patent claims under
In WesternGeco I we reversed the lost profits award as being based on аn unauthorized extraterritorial application of the patent laws. Judge Wallach dissented on this point. 791 F.3d at 1349–52, 1354–64. We unanimously affirmed the district court‘s refusal to award enhanced damages for willful infringement. WesternGeco I, 791 F.3d at 1353–54. WesternGeco petitioned for certiorari, which the Supreme Court granted, vacated our original decision in WesternGeco I, and remanded for further proceedings consistent with its decision in Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1935–36 (2016). We reinstated our earlier opinion, including reversal of the lost profits award, but we vacated the district court‘s denial of enhanced damages and remanded for further consideration in light of Halo. WesternGeco II, 837 F.3d at 1361–64.
On remand, WesternGeco sought $ 43.6 million in enhanced damages, and the district court awarded WesternGeco $ 5 million in enhanced damages. The parties then entered into a stipulated “Final Judgment pursuant tо
In December 2015, the United States Patent and Trademark Office‘s Patent Trial and Appeal Board (“PTAB”) held four of the six asserted patent claims—‘520 patent claims 18 and 19, ‘967 patent claim 15, and ‘607 patent claim 15—unpatentable. See WesternGeco LLC v. ION Geophysical Corp., 889 F.3d 1308, 1331 (Fed. Cir. 2018) (“WesternGeco IPR”). While the case was pending in the Supreme Court, we affirmed the PTAB‘s unpatentability determination of these four claims. Id. Thus, the only asserted claims that remain are ‘520 patent claim 23 and ‘038 рatent claim 14, and it is uncontested that only ‘520 patent claim 23 may now support the lost profits award.
DISCUSSION
On remand from the Supreme Court, two issues remain for us to resolve: (1) the impact of the intervening invalidation of four of the six asserted patent claims on the fully paid reasonable royalty award, and (2) the impact of the invalidation of the four claims on the lost profits award and ION‘s argument (presented in its original appeal) that “Panduit cannot be satisfied because ION and [WesternGeco] do not compete in the marketplace.” ION Open. Br. 56.
I. Reasonable Royalty Award
ION challenges the fully paid and satisfied reasonable royalty award based on subsequent invalidation of a number of WesternGeco‘s asserted patent claims. See WesternGeco IPR, 889 F.3d at 1331. ION argues that the calculation of the reasonаble royalty under Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970), would be affected by the invalidation of four of the six asserted patent claims, and therefore a new trial is required. For support, ION frames the decision in Fresenius USA, Inc. v. Baxter International, Inc., 721 F.3d 1330 (Fed. Cir. 2013) as holding that a judgment cannot be final for purposes of intervening patent invalidations if any part of the litigation remains pending, and that here the lost profits award continues to be litigated and is not final.
We disagree. Fresenius only applies where a judgment is not final. Id. at 1340–41 & n.9; see also Fresenius USA, Inc. v. Baxter Int‘l, Inc., 733 F.3d 1369, 1371 (Fed. Cir. 2013) (Dyk, J., concurring in dеnial of rehearing en banc). To be sure, finality under Fresenius requires that “the litigation must be entirely concluded so that [the] cause of action [against the infringer] was merged into a final judgment ... one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” 721 F.3d at 1341 (alterations in original) (quoting Mendenhall v. Barber–Greene Co., 26 F.3d 1573, 1580 (Fed. Cir. 1994); see ePlus, Inc. v. Lawson Software, Inc., 789 F.3d 1349, 1358 (Fed. Cir. 2015). But Fresenius made clear that it does not allow reopening of a satisfied and unappealable final judgment. 721 F.3d at 1340 (“As the Supreme
The particular facts of this case establish that the reasonable royalty award constitutes a fully satisfied and unappealable final judgment such that the subsequent invalidation of asserted patent claims does not support reopening. Here, ION and WesternGeco entered into a compromise agreement resolving all of the issues in the case except for the lost profits award. They stipulated to a “Final Judgment pursuant to
II. Lost Profits
ION argues that, despite the Supreme Court‘s decision in WesternGeco III, we should either hold that lost profits are not recoverable in this case or remand for a new trial.
First, ION contends that the district court erred when it denied ION‘s renewed motion for judgment as a matter of law (“JMOL”) on the theory that WesternGeco is not entitled to lost profits based on a Panduit theory of but-for causation because ION and WesternGeco are not “direct competitors.” ION sells only devices and WesternGeco sells only surveys. According to ION, because West-ernGeco and ION do not compete in the same market, lost profits in the surveys are not recoverable. For legal support, ION relies on a statement from Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1545 (Fed. Cir. 1995) (en banc) that “the patentee must show a reasonable probability that, ‘but for’ the infringement, it would have mаde the sales that were made by the infringer.” (emphasis added). ION argues that the emphasized language established a “direct competition” requirement between the patentee and alleged infringer. ION also relies on our decision in BIC Leisure Products, Inc. v. Windsurfing International Inc., 1 F.3d 1214, 1217–20 (Fed. Cir. 1993), that “[t]he Panduit test ... operates under an inherent assumption ... that the patent owner and the infringer sell products sufficiently similar to compete against each other in the same market segment.”
We are not convinced. In context, the statement from Rite-Hite was addressing the requirement of “but-for” causation to recover lost profits, not imposing a requirement of direct competition between the patentee and alleged infringer that was neither at issue in the case nor further discussed in the opinion. See 56 F.3d at 1545. BIC clearly focused the inquiry on
To be sure, the fact that ION sells only devices while WesternGeco only sells surveys may be relevant to the computation of lost profits. WesternGeco had two catego-ries of lost profits: the profits attributable to providing the patented device and the profits attributablе to providing other aspects of the surveys (e.g., the ship for towing the streamers). “[A]pportionment is required even for non-royalty forms of damages.” Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). If the application of the Panduit factors does not result in the separation of profits attributable to the patented device and the profits attributable to providing other aspects of the surveys (e.g., the ship for towing the streamers), it appears that appоrtionment is necessary.2
This apportionment argument was not made in the supplemental briefing and was raised for the first time at oral argument. We conclude that the argument was waived on this appeal. However, if the district court orders a new trial on damages, ION may present arguments concerning apportionment at the new trial.
ION‘s second argument is that the lost profits award cаnnot be sustained due to the intervening invalidation of four of the five asserted Bittleston patent claims. Here, the jury found all of the asserted claims to be infringed and made a single lost profits award. But four of the five claims relied on to support lost profits liability have since been eliminated, and now the only remaining claim that could support the lost profits award is ‘520 patent claim 23, a dеpendent device claim. The jury instructions and verdict form did not instruct the jury to award damages based separately on infringement of each of the asserted claims, and the jury did not do so.
The jury could have rested its award on infringement of a now-invalidated claim, which cannot be sustained on review. The general rule is that when a “jury was told it could rely on any of two or more independent lеgal theories, one of which was defective,” the general verdict must be set aside. i4i Ltd. P‘ship v. Microsoft Corp., 598 F.3d 831, 849–50 (Fed. Cir. 2010) (citing Walther v. Lone Star Gas Co., 952 F.2d 119, 126 (5th Cir. 1992)), aff’d, 564 U.S. 91 (2011); see Northpoint Tech., Ltd. v. MDS Am., Inc., 413 F.3d 1301, 1311–12 (Fed. Cir. 2005); United N.Y. & N.J. Sandy Hook Pilots Ass‘n v. Halecki, 358 U.S. 613, 619 (1959) (“[A] new trial will be required, for there is no way to know that the invalid [legal theory] was not the sole basis for the verdict.“); Maryland v. Baldwin, 112 U.S. 490, 493 (1884). We have recognized such a rule “[i]n a situation such as this one—where the
But we do not think a new trial is automatically required here if the jury must have found the technology covered by ‘520 patent claim 23 was essential for performing the surveys. In other words, the award can be sustained if there was undisputed evidence that the technology covered by ‘520 patent claim 23 was necessary to perform the surveys. In this area we apply a harmlessness analysis similar to our approach in the case of erroneous jury instructions. See Avid Tech., Inc. v. Harmonic, Inc., 812 F.3d 1040, 1047 (Fed. Cir. 2016) (“[T]he error in the instruction governing this central dispute at trial would be harmless only if a reasonable jury would have been required by the evidence to find non-infringement even without the error.“).
WesternGeco argues that both parties’ damages experts informed the jury that infringement of any one of the Bittleston patent claims would support the full amount of the lost profits award. It cites to ION‘s own expert, Mr. Gunderson. He testified that he “assumed that ... the patents are not found to be invalid and that—that there is infringement that is occurring on at least one valid claim,” “one of the base assumptions” for damages experts. WesternGeco Open. Suppl. Br. 15 (citing Triаl Tr. at 4655:12-4656:3, WesternGeco LLC v. ION Geophysical Corp., 953 F. Supp. 2d 731 (S.D. Tex. 2013), ECF No. 507). WesternGeco reads too much into this testimony. Mr. Gunderson was merely identifying the basic assumption of his patent damages calculations, and his testimony was directed to showing that WesternGeco was not entitled to the claimed lost profits for infringement based on any of the patents. See, e.g., Trial Tr. at 4658, 4664, 4736, ECF No. 507. We do not interpret this testimony as supporting the theory that the entirety of the lost profits could be supported by infringement of any one Bittleston patent claim.
WesternGeco also relies on its own expert, Mr. Sims. He testified that Bittleston‘s lateral steering technology was required to perform surveys and that “my understanding is that the benefits would be attributable to each of the [Bittleston] patents because each of the patents would prohibit ION from being able to sell аnd supply and, therefore, the contractors from being able to use the lateral steering technology.” WesternGeco Open. Suppl. Br. 14-15 (citing Trial Tr. at 2661:13–2662:6, ECF No. 497).
But it is clear that Sims was simply making an assumption rather than making an independent determination the technology represented in the claims was necessary to perform the surveys. See, e.g., Trial Tr. at 2386:2-7, ECF No. 474. Sims was a damages expert. Hе disclaimed knowledge as to the technical aspects, and explicitly relied on others to support his assumption that infringement of any one of the Bittleston patent claims would have been necessary to perform the 10 surveys at issue in the lost profits award. See, e.g., Trial Tr. at 2378:24–25 (“I confirmed with Mr. Walker, that there was a requirement for lateral steering”), 2386, ECF No. 474; Trial Tr. at 2657–58, ECF No. 497. Sims testified that he relied on Mr. Walker for help in identifying surveys where the patented technology was required, but Mr. Walker disclaimed any knowledge as to the scope of
WesternGeco has also not cited to any other specific testimony that infringement of ‘520 patent claim 23 was necessary to perform the 10 surveys at issue. Instead, at oral argument, WesternGeco argued that the jury was informed generally that the lateral steering technology was required for the surveys at issue and that claim 23 covers part of that technology. But lateral steering technology was also reflected in the four other, now-invalid, asserted claims—‘520 patent claims 18 and 19, ‘967 patent claim 15, and ‘607 patent claim 15. For exаmple, now-invalid ‘520 patent claim 18 recites:
An apparatus comprising:
(a) an array of streamers each having a plurality of streamer positioning devices there along;
(b) a control system configured to use a control mode selected from a feather angle mode, a turn control mode, a streamer separation mode, and two or more of these modes. ‘520 Claim 18.
And now-invalid ’520 patent claim 19 recites:
The apparatus оf claim 18 wherein the control mode is the feather angle mode, and the control-ling comprises the control system attempting to keep each streamer in a straight line offset from a towing direction by a feather angle.
The only surviving claim, ‘520 patent claim 23, recites:
The apparatus of claim 18 wherein the towing comprises ending one pass, turning a towing vessel having the streamers attached thereto while throwing out the strеamers before beginning another pass, with the control mode in the turn control mode during the turning and throwing out.
To sustain the lost profits award, the record must establish that there was no dispute that the technology covered by claim 23, independent of the technology covered by the now-invalid claims (e.g., ‘520 patent claim 18 and 19), was required to perform the surveys at issue. This determination must be made on the present record.
Because of inadequate briefing on this issue prior to oral argument,3 and because the district court is in a better position to consider the issue in the first instance, we remand to the district court to determine whether a new trial on lost profit damages is required. See Verizon, 503 F.3d at 1310; DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, 1262 (Fed. Cir. 2014). The district court may deny a new trial on lost profits if, but only if, it concludes that WesternGeco established at trial with undisputed evidence that ‘520 patent claim 23 covers technology necessary to perform the surveys upon which the lost profits award is based.
CONCLUSION
For the foregoing reasons, we reject ION‘s challenge to the reasonable royalty award and remand to the district court for further proceedings as to the lost profits. We also reinstate sections I, II, and IV of our deсision in WesternGeco I and sections I and II of our decision in WesternGeco II, which were not affected by either the initial vacatur and remand from the Supreme Court, 136 S. Ct. 2486 (2016), or the Supreme Court‘s subsequent decision in WesternGeco III.
COSTS
No costs.