WesternGeco v. ION was decided on remand from the Supreme Court on January 11, 2019 on appeal from the Southern District of Texas. At trial, the jury found the asserted claims not invalid and awarded plaintiff WesternGeco a reasonable royalty of $12.5 million and lost profits of $93.4 million. After many rounds of appeals, the parties entered into a stipulated final judgment. “The stipulation noted that the parties had agreed to the reasonable royalty amount and that [defendant] ION had paid the full amount on November 25, 2016.” The parties also agreed to an enhanced damages amount. “The only item exempt from the stipulation was the lost profits award, which WesternGeco had petitioned for certiorari.” The Supreme Court held that WesternGeco may recover international lost profits for infringement under § 271(f)(2). During this time period, the PTAB held four of the six asserted patents unpatentable and the Federal Circuit affirmed. So only two asserted claims of the patent remained at the time of the Supreme Court remand.
The Federal Circuit upheld the stipulated reasonable royalty award and remanded to the district court for further proceedings as to the lost profits.
ION challenged the fully paid reasonable royalty award based on the subsequent invalidation of four of the asserted patent claims at the PTAB, arguing “that the calculation of the reasonable royalty under [Georgia Pacific] would be affected by the invalidation of four of the six asserted patent claims, and therefore a new trial is required.”
The Federal Circuit disagreed. The reasonable royalty award here “constitutes a fully satisfied and unappealable final judgment such that the subsequent invalidation of asserted patent claims does not support reopening.” The parties entered into “a compromise agreement resolving all of the issues in the case except for the lost profits award.” And ION “further manifested assent to the finality of the judgment as to the reasonable royalty award by not appealing the judgment and completing its payments under the agreement.” Because the “the reasonable royalty and enhanced damages awards were agreed to by the parties and subject to an unappealable final judgment, which was satisfied and paid in full by ION,” ION could not contest the stipulated reasonable royalty award based on subsequent invalidation of some asserted claims.
The Federal Circuit remanded for further proceedings on lost profits. To recover lost profits, “the patentee must show a reasonable probability that, ‘but for’ the infringement, it would have made the sales that were made by the infringer.” “The patented technology in this case relates to marine seismic surveys for discovering oil and gas deposits beneath the ocean floor…. Both WesternGeco and ION domestically manufacture devices…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.”
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ION argued that because the parties were not direct competitors (“ION sells only devices and WesternGeco sells only surveys”), WesternGeco could not meet the but-for causation requirement for lost profits. The Federal Circuit rejected the argument. “WesternGeco’s and ION’s devices competed by performing the same types of functions for surveys. And there was sufficient evidence in the record for the jury to conclude that the products did compete—i.e., that consumers in the surveying market (oil companies) considered WesternGeco’s … device and ION’s …device to be substitutes for their surveying needs (i.e., that the products competed in the same market)” (parenthesis in original). The fact that ION sells only devices while WesternGeco only sells surveys may, however, “be relevant to the computation of lost profits,” i.e., apportionment. “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 …, it appears that apportionment is necessary.”
ION also argued that the lost profit award “cannot be sustained due to the intervening invalidation of four” asserted claims. Here, the jury found all of the asserted claims to be infringed and made a single lost profits award. Generally, “when a jury was told it could rely on any of two or more independent legal theories, one of which was defective, the general verdict must be set aside.” However, a new trial would not be required if “the jury must have found the technology covered by [the surviving claim] was essential for performing the surveys. In other words, the award can be sustained if there was undisputed evidence that the technology covered by [the surviving claim] was necessary to perform the surveys.” The Federal Circuit thus remanded to the district court to determine whether a new trial on lost profit damages is required.
WesternGeco L.L.C. v. ION Geophysical Corp., 913 F.3d 1067 (Fed. Cir. 2019)