Wednesday January 16, 2019
The Federal Circuit on Friday ordered a Texas district court to decide whether to hold a new trial to determine if WesternGeco LLC can recover $93.4 million in lost profits from Ion Geophysical Corp. in a long-running patent case, following a U.S. Supreme Court decision last year.
The high court ruled in June that WesternGeco is entitled to lost profits from outside the U.S. due to Ion’s infringement of oil exploration patents, but the Federal Circuit said on remand that further district court proceedings are now needed to determine the amount of damages.
That is because weeks before the high court’s ruling, the Federal Circuit affirmed Patent Trial and Appeal Board decisions invalidating several claims of WesternGeco’s patents that Ion was found to infringe.
The appeals court said it will be up to a Southern District of Texas judge to decide whether a new trial is needed to determine if the remaining patent claim still entitles WesternGeco to recover the $93.4 million in lost profits a jury awarded the company in a 2012 verdict, which has been in limbo during the appeals.
"Because of inadequate briefing on this issue prior to oral argument, 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," the Federal Circuit said.
It noted that the district court "may deny a new trial on lost profits if, but only if" it concludes that WesternGeco established at the initial trial that the remaining patent claim entitles it to the lost profits award.
The case has been ongoing for nearly a decade, beginning when WesternGeco accused Ion in 2009 of infringing six claims spanning four patents on technology for conducting seismic surveys to discover oil and gas deposits beneath the ocean floor.
A jury found in 2012 that Ion infringed and awarded WesternGeco a reasonable royalty of $12.5 million, as well as $93.4 million in profits the company said it lost outside the U.S. due to Ion’s infringement. The jury was not instructed to explain how much of the award was based on each patent claim.
The Federal Circuit threw out the lost profits award in 2015, finding that the presumption that U.S. patent law does not extend outside the country means WesternGeco cannot recover profits it would have earned overseas absent Ion's infringement.
However, the Supreme Court disagreed last year. It ruled that since Ion was found to infringe under a patent statute that makes it an act of infringement to ship components from the U.S. to be combined abroad, the lost profits award was a permissible domestic application of damages law.
Meanwhile, Ion challenged the patents in an inter partes review at the Patent Trial and Appeal Board, which concluded that four of the six claims at issue are invalid, and the Federal Circuit affirmed. The appeals court said Friday that it is uncontested that only one of the two remaining patent claims can support the lost profits award.
Since it is not clear whether the jury based its lost profits award on one of the claims that were found invalid in the PTAB case, further proceedings are needed, the court said. It added that if a new trial is necessary, Ion can argue that the lost profits should be apportioned so they cover only the amount attributable to the patented device.
The reasonable royalty award from the jury was not subject to the Supreme Court proceeding. Including enhanced damages, costs and interest, it ultimately totaled $25.8 million, which Ion has now fully paid.
On Friday, the Federal Circuit rejected Ion's argument that it should no longer be required to pay that amount due to the invalidation of several of the claims.
"Ion cannot now reopen the agreed and fully paid unappealable final judgment on the reasonable royalty based on the subsequent invalidation of a subset of asserted patent claims," the court said.
An attorney for Ion declined to comment on the decision. An attorney for WesternGeco could not immediately be reached for comment Friday.
U.S. Circuit Judges Timothy B. Dyk, Evan J. Wallach and Todd M. Hughes sat on the Federal Circuit panel.
The patents-in-suit are U.S. Patent Nos. 6,691,038; 7,080,607; 7,162,967 and 7,293,520.
WesternGeco is represented by John C. O'Quinn, Gregg F. LoCascio, William H. Burgess, Timothy K. Gilman and Leslie M. Schmidt of Kirkland & Ellis LLP, and Lee L. Kaplan of Smyser Kaplan & Veselka LLP.
Ion is represented by David I. Berl, Kannon K. Shanmugam, Masha G. Hansford, Andrew C. McBride and J. Matthew Rice of Williams & Connolly LLP.
The case is WesternGeco LLC v. ION Geophysical Corp., case number 13-1527, in the U.S. Court of Appeals for the Federal Circuit.