WESTERNGECO L.L.C. V. ION GEOPHYSICAL CORP. [OPINION ON REMAND]

Before Dyk, Wallach, and Hughes.  On remand from the Supreme Court.

Summary:  Even though the issue of the jury’s award of lost profits was still pending, a party could not reopen the issue of a reasonable royalty award based on the subsequent invalidation of a subset of asserted patent claims because the reasonable royalty award was the subject of a stipulation of final judgment resolving all issues except for lost profits.  When a lost profits award is based on multiple infringed claims and some of the claims are later found invalid, a new trial on lost profits may not necessarily be required if there is evidence that the technology covered by a remaining claim was required to perform the infringing activities.    

In 2009, Westerngeco sued ION for patent infringement.  After a jury trial, the asserted patent claims were found valid and infringed under § 271(f)(1) and (2).  The jury awarded a reasonable royalty and lost profits.  ION appealed, and the Federal Circuit reversed the lost profits award as being based on an unauthorized extraterritorial application of the patent laws.  Westerngeco petitioned for certiorari which the Supreme Court granted.  The Supreme Court vacated the Federal Circuit’s decision and remanded for consideration of enhanced damages in light of the decision in Halo Elecs. v. Pulse Elecs., 136 S.Ct. 1923.  The Federal Circuit reinstated its earlier opinion including a reversal of lost profits, but vacated the district court’s denial of enhanced damages and remanded for consideration of the Halo decision.  At the district court, the parties entered a stipulated final judgment pursuant to Fed. R. Civ. P. 58 in which the parties agreed to a reasonable royalty amount and the only issue exempt was the lost profits award.  In 2018, Westerngeco’s petition for certiorari relating to the lost profits award was granted, and the Westerngeco opinion of the Supreme Court held that a patentee may recover foreign lost profits when an infringer violated § 271(f)(2) by exporting from the United States a component of a patented invention.  While that case was pending in the Supreme Court, the Federal Circuit affirmed the PTAB’s unpatentability determination for four of Westerngeco’s six asserted patent claims.  The Supreme Court then remanded to the Federal Circuit on the issues of (1) the impact of the intervening invalidation of those patent claims on the fully paid reasonable royalty award, and (2) the impact of the invalidation of those claims on the lost profits award.

Ion argued that a judgment cannot be final for purposes of intervening patent invalidations if any part of the litigation remains pending, and here the lost profits award continues to be litigated.  However, the Federal Circuit held that the parties’ stipulated final judgement resolving all issues but lost profits barred Ion from reopening the issue of the reasonable royalty award, which was satisfied and paid in full. 

As for the lost profits award, the jury instructions and verdict form did not instruct the jury to award damages separately based on infringement of each of the asserted claims, and thus the jury did not do so.  Due to the intervening invalidation, Ion requested that the Federal Circuit hold either lost profits are not recoverable or remand for a new trial.  Regarding whether a new trial on lost profits was merited, the Federal Circuit noted that the general rule is when a jury is told it can rely on any of two or more independent legal theories to support a damages award, and one of which is defective, the general verdict must be set aside. However, the Federal Circuit stated that a new trial on the issue of lost profits was not automatically required.  If the record establishes that there was no dispute that the technology covered by a remaining claim was required to perform the infringing activities, then a new trial on lost profits may not be required, and a harmless error standard could be applied.  The Federal Circuit remanded to the district court to make a determination as to whether there was evidence in the record to support that the technology covered by a remaining claim was required to perform the infringing activities.