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

United States Court of Appeals, Federal Circuit

January 11, 2019

WESTERNGECO L.L.C., Plaintiff-Cross-Appellant
v.
ION GEOPHYSICAL CORPORATION, Defendant-Appellant

          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.

          DYK, CIRCUIT JUDGE.

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

         Background

         This case involves a patent infringement suit brought by WesternGeco L.L.C. ("WesternGeco") against ION Geophysical Corp. ("ION") for infringement of claims 18, 19, and 23 of U.S. Patent No. 7, 293, 520, claim 15 of U.S. Patent No. 7, 162, 967, and claim 15 of U.S. Patent No. 7, 080, 607 ("Bittleston patents"), as well as claim 14 of U.S. Patent No. 6, 691, 038 ("Zajac patent").

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

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

         In WesternGeco I we reversed the lost profits award as being based on an unauthorized extraterritorial application of the patent laws. Judge Wallach dissented on this point. 791 F.3d at 1349-52, 1354-64. We unanimously affirmed the district court's refusal to award enhanced damages for willful infringement. WesternGeco I, 791 F.3d at 1353-54. WesternGeco petitioned for certiorari, which the Supreme Court granted, vacated our original decision in WesternGeco I, and remanded for further proceedings consistent with its decision in Halo Elecs., Inc. v. Pulse Elecs., Inc., 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 West-ernGeco $ 5 million in enhanced damages. The parties then entered into a stipulated "Final Judgment pursuant to Fed.R.Civ.P. 58." The stipulation noted that the parties had agreed to the reasonable royalty amount and that ION had paid the full amount on November 25, 2016. Both parties agreed not to appeal the enhanced damages award and provided a schedule for payment of the enhanced damages award. The only item exempt from the stipulation was the lost profits award, which Western-Geco had petitioned for certiorari, requesting review of our decision on the lost profits award. Neither party appealed the stipulated final judgment.

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


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