Digest of Westerngeco L.L.C. v. Ion Geophysical Corporation, No. 2013-1527, 2014-1121, 2014-1526, 2014-1528 (Fed. Cir. July 2, 2015) (precedential). On appeal from S.D. Tex. Before Dyk, Wallach, and Hughes.
Procedural Posture: After all of the asserted claims were found infringed under 35 U.S.C § 271(f) and not invalid, and $93.4M in lost profits and $12.5M in reasonable royalties were awarded, defendant ION appealed, arguing that plaintiff WesternGeco was not the owner of the patents in suit, that the district court applied an incorrect standard in granting summary judgment as to one claim under 35 U.S.C. § 271 (f)(1), and that lost profits were impermissibly awarded for conduct abroad. Plaintiff conditionally cross appealed, arguing to set aside the damages award because the district court erred in preventing plaintiff’s damages expert from testifying on the issue of reasonable royalty. CAFC affirmed on all issues except that it reversed the award of lost profits resulting from conduct occurring abroad.
- Ownership of Patents: Denying Defendant’s argument that the chain of title to the patents was defective, the Federal Circuit examined a series of transactions and first expressed that the patent rights were apparently transferred from the inventors to “Geco” in the early 1990s, from Geco to “STC” in 1998, and from STC to plaintiff WesternGeco in a 2000 merger agreement. Defendant argued that while the inventors were perhaps obligated to transfer their rights to Geco, no such transfer actually occurred. However, even if the inventors still owned their rights after the 2000 merger, the Federal Circuit explained, they transferred their relevant rights to STC in 2001, and since the 2000 agreement between STC and WesternGeco “included the rights to future patents resulting from the existence of a previous invention,” the transfer of the patent rights from STC to WesternGeco occurred automatically under the 2000 agreement.
- § 271(f): The district court did not err in rejecting a proposed jury instruction enjoining the jury, when deciding infringement under § 271(f)(2), from considering the Court’s prior summary judgment of infringement under § 271(f)(1), since the issue of intent that the components be combined abroad is applicable to both § 271(f)(1) and (f)(2).
- Lost Profits: Plaintiff WesternGeco was not entitled to lost profits resulting from its failure to win foreign service contracts, the failure of which allegedly resulted from Defendant ION’s supplying infringing products to WesternGeco’s competitors. § 271(f) does not eliminate the presumption against extraterritoriality. Under § 271(f), it is the act of exporting the components from the U.S. which creates the liability, and the liability attaches in the U.S. The U.S. exporter of the component parts is, however, not liable for use of the infringing article abroad. Thus, the foreign service contracts could not serve as the basis for a lost profits award.
- Reasonable Royalty: District court did not abuse its discretion in excluding testimony from Plaintiff’s damages expert, who proposed a reasonable royalty that was four times Defendant’s revenue.
- Willful Infringement: While the jury determined, under the subjective Seagate-prong, that Defendant actually knew, or it was so obvious that Defendant should have known, that its actions constituted infringement of a valid patent, the district court did not err in finding, under the objective Seagate-prong, that Defendant’s defenses were “not unreasonable by clear and convincing evidence,” “not objectively baseless,” and “reasonable,” and therefore refusing to award enhanced damages.
- Dissent (Wallach): Judge Wallach dissented on the reversal of lost foreign sales when determining damages, arguing that “[t]he majority’s near-absolute bar to the consideration of a patentee’s foreign lost profits is contrary to the precedent both of this court and of the Supreme Court.”