Westerngeco L.L.C. v. Ion Geophysical Corp. , 837 F.3d 1358 ( 2016 )

United States Court of Appeals
for the Federal Circuit
______________________
WESTERNGECO L.L.C.,
Plaintiff-Cross-Appellant
v.
ION GEOPHYSICAL CORPORATION,
Defendant-Appellant
______________________
2013-1527, 2014-1121, 2014-1526
______________________
Appeals from the United States District Court for the
Southern District of Texas in No. 4:09-cv-01827, Judge
Keith P. Ellison.
--------------------------------------------------------------------
WESTERNGECO L.L.C.,
Plaintiff-Appellant
v.
ION GEOPHYSICAL CORPORATION,
Defendant-Appellee
______________________
2014-1528
______________________
2 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
Appeal from the United States District Court for the
Southern District of Texas in No. 4:09-cv-01827, Judge
Keith P. Ellison.
______________________
Decided: September 21, 2016
______________________
GREGG F. LOCASCIO, Kirkland & Ellis LLP, Washing-
ton, DC, for WesternGeco L.L.C. Also represented by
WILLIAM H. BURGESS, JOHN C. O’QUINN; TIMOTHY GILMAN,
LESLIE M. SCHMIDT, New York, NY; LEE LANDA KAPLAN,
Smyser, Kaplan & Veselka, LLP, Houston, TX.
DAVID J. HEALEY, Fish & Richardson, PC, Houston,
TX, for ION Geophysical Corporation. Also represented by
BAILEY KATHLEEN HARRIS, JACKOB BEN-EZRA, BRIAN
GREGORY STRAND; FRANK PORCELLI, KEVIN SU, Boston,
MA; OLGA I. MAY, FRANCIS J. ALBERT, San Diego, CA;
JUSTIN BARNES, Troutman Sanders LLP, San Diego, CA.
_____________________
Before DYK, WALLACH, and HUGHES, Circuit Judges.
Opinion for the court filed by Circuit Judge DYK.
Opinion dissenting in part filed by Circuit Judge
WALLACH.
DYK, Circuit Judge.
This case returns to us on vacatur and remand from
the Supreme Court, “for further consideration in light
of Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S.
__ (2016).” WesternGeco LLC v. ION Geophysical Corp.,
No. 15-1085, 2016 WL 761619 (U.S. June 20, 2016)
(Mem.). On remand, we vacate the district court’s judg-
ment with respect to enhanced damages for willful in-
fringement under 35 U.S.C. § 284 and reinstate our
earlier opinion and judgment in all other respects. We
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 3
remand for further proceedings consistent with this
opinion and with the Supreme Court’s decision in Halo.
BACKGROUND
The vacated decision, WesternGeco L.L.C. v. ION Geo-
physical Corp. (“WesternGeco II”), 791 F.3d 1340 (Fed. Cir.
2015), addressed a patent infringement suit by Western-
Geco L.L.C. (“WesternGeco”) against ION Geophysical
Corp. (“ION”) for infringement of, inter alia, U.S. Patent
Nos. 6,691,038, 7,080,607, 7,162,967, and 7,293,520. See
WesternGeco L.L.C. v. ION Geophysical Corp. (“Western-
Geco I”), 953 F. Supp. 2d 731 (S.D. Tex. 2013). The jury
found infringement and no invalidity as to all asserted
claims and awarded WesternGeco $93.4 million in lost
profits and a reasonable royalty of $12.5 million. The jury
also found that ION’s infringement had been subjectively
reckless under the “subjective” prong of the then-
prevailing two-part test articulated in In re Seagate, LLC,
497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc).
After trial, WesternGeco moved for enhanced damag-
es for willful infringement under 35 U.S.C. § 284. ION
moved for judgment as a matter of law (“JMOL”) of no
willful infringement, contending that WesternGeco had
failed to prove that it was either objectively or subjective-
ly reckless in its infringement. The district court held
that ION was not a willful infringer meriting enhanced
damages, finding that ION’s positions were reasonable
and not objectively baseless and thus that the objective
prong of the Seagate test had not been satisfied. West-
ernGeco I, 953 F. Supp. 2d at 753. Because the district
court found no objective recklessness on the part of ION,
it did not reach ION’s JMOL motion seeking to set aside
the jury’s finding of subjective recklessness. Id.
ION appealed to our court, asking us, inter alia, to re-
verse the district court’s award of lost profits. Western-
Geco cross-appealed, challenging the district court’s
refusal to award enhanced damages. Our opinion issued
4 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
on July 2, 2015. WesternGeco II, 791 F.3d at 1340. In
section III of that opinion, we reversed the lost profits
award, holding that WesternGeco was not entitled to lost
profits resulting from foreign uses of its patented inven-
tion. Id. at 1351. On this issue Judge Wallach dissented.
Id. at 1354 (Wallach, J., dissenting-in-part). In section V
of the opinion of the court, we unanimously affirmed the
district court’s denial of WesternGeco’s motion for en-
hanced damages, holding that ION’s noninfringement and
invalidity defenses were not objectively unreasonable and,
as such, we agreed with the district court that the objec-
tive prong of the Seagate test had not been met. Id. at
1353–54.
WesternGeco petitioned for certiorari on February 26,
2016. Petition for Writ of Certiorari, WesternGeco, LLC v.
ION Geophysical Corp., 2016 WL 792196 (U.S. Feb. 26,
2016) (No. 15-1085) (“Petition”). The petition, inter alia,
requested that the petition be held in view of Halo Elec-
tronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v.
Zimmer, Inc., which were argued February 23, 2016, and
involved the standard for enhanced damages. Western-
Geco’s petition argued that “[i]f the result of Halo and
Stryker is other than a complete affirmance and approval
of Federal Circuit law, the Court should grant certiorari,
vacate, and remand [(“GVR”)] for further consideration.”
Id. at *31.
The Supreme Court decided Halo on June 13, 2016.
Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. __, 136 S.
Ct. 1923 (2016). The Supreme Court granted certiorari in
this case and issued its GVR order on June 20, 2016,
remanding the case to us “for further consideration in
light of Halo.” WesternGeco, 2016 WL 761619, at *1. We
recalled our mandate on July 25, 2016. We now consider
what action is appropriate in this case in view of the
Supreme Court’s remand.
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 5
DISCUSSION
The Supreme Court’s Halo decision was solely con-
cerned with the question of enhanced damages for patent
infringement under 35 U.S.C. § 284 and does not affect
other aspects of our earlier opinion. 1 As such, we rein-
state our earlier opinion except for section V. Section V of
1 The opinion dissenting-in-part “join[s] the majori-
ty’s opinion to the extent it applies the Supreme Court’s
decision in Halo on the issue of enhanced damages for
willful infringement under 35 U.S.C. § 284 (2012),” but
disagrees on the issue of lost profits, “for the reasons
articulated in [the] original dissent.” Dissent at 2. In
fact, the issue of lost profits is not properly before us.
WesternGeco’s petition for certiorari presented two ques-
tions. Petition, 2016 WL 792196, at *ii. The first was lost
profits—namely, “[w]hether the court of appeals erred in
holding that damages based on a patentee’s so-called
‘foreign lost profits’ are categorically unavailable in cases
of patent infringement under 35 U.S.C. § 271(f).” Id. The
second was “[w]hether the Court should hold this Petition
for Halo and Stryker.” Id. The scope of the Supreme
Court’s GVR order was limited to the second question.
WesternGeco, 2016 WL 761619, at *1. “The general rule is
that, when the Supreme Court remands in a civil case,
the court of appeals should confine its ensuing inquiry to
matters coming within the specified scope of the remand.”
Kotler v. Am. Tobacco Co., 981 F.2d 7, 13 (1st Cir. 1992);
see also, e.g., Escalera v. Coombe, 852 F.2d 45, 47 (2d Cir.
1988) (upon GVR, “[a]ny reconsideration at this juncture
of our earlier opinion must be limited to the scope of the
Supreme Court’s remand”); Hermann v. Brownell, 274
F.2d 842, 843 (9th Cir. 1960) (on remand, “the jurisdiction
of this Court is rigidly limited to those points, and those
points only, specifically consigned to our consideration by
the Supreme Court”).
6 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
our earlier opinion was specifically directed to the ques-
tion of enhanced damages, and it is that section that we
now revisit.
I
Before Halo, under our court’s two-part Seagate test,
a patentee seeking enhanced damages for willful in-
fringement was required to prove both an objective and a
subjective prong. Under the objective prong, a patentee
was required to “show by clear and convincing evidence
that the infringer acted despite an objectively high likeli-
hood that its actions constituted infringement of a valid
patent.” Seagate, 497 F.3d at 1371. “If this threshold
objective standard [was] satisfied,” the patentee was then
required to prove subjective recklessness, i.e., to “demon-
strate that this objectively-defined risk (determined by
the record developed in the infringement proceeding) was
either known or so obvious that it should have been
known to the accused infringer.” Id. If the patentee
proved both prongs of willful infringement, the ultimate
determination of whether to award enhanced damages
under § 284 and the extent of any enhancement were left
to the district court’s discretion. See id. at 1368 (“[A]
finding of willfulness does not require an award of en-
hanced damages; it merely permits it.”).
The Supreme Court’s decision in Halo overturned the
Seagate test because it “‘is unduly rigid, and it impermis-
sibly encumbers the statutory grant of discretion to the
district courts.’” 136 S. Ct. at 1932 (quoting Octane
Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct.
1749, 1755 (2014)). Halo held that district courts must
have greater discretion in awarding enhanced damages in
cases where the defendant’s infringement was egregious,
cases “typified by willful misconduct.” Id. at 1934. “The
Seagate test reflects, in many respects, a sound recogni-
tion that enhanced damages are generally appropriate
under § 284 only in egregious cases.” Id. at 1932.
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 7
But, the Court held, “[t]he principal problem with
Seagate’s two-part test is that it requires a finding of
objective recklessness in every case before district courts
may award enhanced damages.” Id. In particular, the
Court rejected Seagate’s strict requirement that a patent-
ee prove the objective unreasonableness of an infringer’s
defenses. Id.; see WBIP, LLC v. Kohler Co., No. 15-1038,
2016 WL 3902668, at *15 (Fed. Cir. July 19, 2016) (under
Halo, “[p]roof of an objectively reasonable litigation-
inspired defense to infringement is no longer a defense to
willful infringement”). At the same time, Halo did not
disturb the substantive standard for the second prong of
Seagate, subjective willfulness. Rather, Halo emphasized
that subjective willfulness alone—i.e., proof that the
defendant acted despite a risk of infringement that was
“‘either known or so obvious that it should have been
known to the accused infringer,’” Halo, 136 S. Ct. at 1930
(quoting Seagate, 497 F.3d at 1371)—can support an
award of enhanced damages. “The subjective willfulness
of a patent infringer, intentional or knowing, may war-
rant enhanced damages, without regard to whether his
infringement was objectively reckless.” Id. at 1933; see
also id. at 1930 (describing the second prong of Seagate as
an evaluation of the infringer’s “subjective knowledge”).
Additionally, the Court stressed throughout Halo
that, if willfulness is established, the question of en-
hanced damages must be left to the district court’s discre-
tion. So too, Halo stressed that “[a]wards of enhanced
damages . . . are not to be meted out in a typical infringe-
ment case, but are instead designed as a ‘punitive’ or
‘vindictive’ sanction for egregious infringement behavior.”
Id. at 1932. “[N]one of this is to say that enhanced dam-
ages must follow a finding of egregious misconduct. As
with any exercise of discretion, courts should continue to
take into account the particular circumstances of each
case in deciding whether to award damages, and in what
amount. Section 284 permits district courts to exercise
8 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
their discretion in a manner free from the inelastic con-
straints of the Seagate test.” Id. at 1933–34. On remand
from the Supreme Court, our court recently reconsidered
enhanced damages in the case of Halo itself and, in re-
turning the issue to the district court, emphasized the
district court’s discretion. Halo Elecs., Inc. v. Pulse Elecs.,
Inc., No. 13-1472, 2016 WL 4151239, at *10 (Fed. Cir.
Aug. 5, 2016).
After Halo, the objective reasonableness of the ac-
cused infringer’s positions can still be relevant for the
district court to consider when exercising its discretion.
Halo looked to Octane Fitness for the relevant standard.
Halo, quoting Octane Fitness, held that there is “‘no
precise rule or formula’” to determine whether enhanced
damages should be awarded and that district courts
should generally “‘exercise[] [their discretion] in light of
the considerations’ underlying the grant of that discre-
tion.” Halo, 136 S. Ct. at 1932 (quoting Octane Fitness,
134 S. Ct. at 1756). Octane Fitness in turn held that, in
determining whether to award attorney’s fees under
§ 285, a district court should “consider[] the totality of the
circumstances.” Octane Fitness, 134 S. Ct. at 1756. In
that connection Octane Fitness relied on “the comparable
context of the Copyright Act,” id., noting that “[i]n Fogerty
v. Fantasy, Inc., for example, [the Court] explained that in
determining whether to award fees under a similar provi-
sion in the Copyright Act, district courts could consider a
‘nonexclusive’ list of ‘factors,’ including ‘frivolousness,
motivation, objective unreasonableness (both in the factual
and legal components of the case) and the need in particu-
lar circumstances to advance considerations of compensa-
tion and deterrence,’” id. at 1756 n.6 (emphasis added and
internal citation omitted). Thus, objective reasonableness
is one of the relevant factors. In short, as the Supreme
Court itself has said, district courts should exercise their
discretion, “tak[ing] into account the particular circum-
stances of each case,” and consider all relevant factors in
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 9
determining whether to award enhanced damages. Halo,
136 S. Ct. at 1933–34.
II
Here, in granting ION’s motion for JMOL of no willful
infringement, the district court found that WesternGeco
had not proved that ION’s defenses to infringement were
objectively unreasonable and consequently concluded that
the first, objective prong of the Seagate test had not been
met. WesternGeco I, 953 F. Supp. 2d at 751. As Halo has
rejected the Seagate rule that a patentee’s failure to
establish the objective recklessness of the defendant’s
infringement precludes a finding of willfulness, we must
vacate the district court’s determination of no willful
infringement by ION.
On remand the district court must consider two ques-
tions. The first of these is subjective willfulness. The jury
here was instructed on the Seagate standard for subjec-
tive willfulness. 2 The jury found that WesternGeco had
“prove[d] by clear and convincing evidence that ION
actually knew, or it was so obvious that ION should have
known, that its actions constituted infringement of a valid
patent claim.” J.A. 77. We note that ION’s renewed
motion for JMOL contended that the jury’s verdict of
2 The jury was instructed to determine whether
ION acted recklessly and to “consider all facts,” including
“(1) Whether or not the infringer acted in accordance with
the standards of commerce for its industry; (2) Whether or
not there is a reasonable basis to believe that the infring-
er did not infringe or had a reasonable defense to in-
fringement; (3) Whether or not the infringer made a good-
faith effort to avoid infringing the patent such as attempt-
ing to design a product the infringer believed did not
infringe; [and] (4) Whether or not the infringer tried to
cover up its infringement.” J.A. 11096.
10 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
subjective willfulness was unsupported by substantial
evidence. ION argued that “no reasonable jury could
conclude that the subjective-prong of the willfulness
inquiry was established by clear and convincing evi-
dence.” WesternGeco I, No. 4:09-cv-01827, ECF No. 559,
at 16 (ION’s renewed motion for JMOL of no willful
infringement of Sept. 28, 2012). On remand, the district
court must review the sufficiency of this evidence as a
predicate to any award of enhanced damages, mindful of
Halo’s replacement of Seagate’s clear-and-convincing
evidence standard with the “preponderance of the evi-
dence standard.” Halo, 136 S. Ct. at 1934. 3
3 ION did not waive its challenge to the willfulness
verdict based on the lack of subjective willfulness by
failing to raise it on the first appeal. At the time of the
first appeal it had raised the issue in a JMOL motion but
the district court did not decide that issue (the district
court having ruled that there was a lack of objective
willfulness, a ground then sufficient to set aside the
willfulness verdict). Laitram Corp. v. NEC Corp., 115
F.3d 947 (Fed. Cir. 1997) is similar to this case. There the
jury found both infringement and willfulness. Id. at 949.
The district court entered JMOL of non-infringement and
did not reach the issue of willfulness. Id. On the patent-
ee’s appeal we reversed the judgment of non-infringement
and remanded. Id. On a second appeal by the accused
infringer the question was whether the accused infringer
had waived a challenge to willfulness (and enhanced
damages) by failing to argue it as an alternative ground
on the first appeal. Id. at 953–54. We held that there
was no waiver because the jury’s finding of willfulness
was “neither [itself] on appeal nor relevant to the sole
issue that was: infringement . . . [and] properly considered
moot—until the reversal of JMOL of non-infringement” on
appeal. Id. at 954; see also Eichorn v. AT&T Corp., 484
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 11
The second issue that the district court must consider
on remand, if the jury’s finding of willful infringement is
sustained, is whether enhanced damages should be
awarded. Halo emphasized that the question of enhanced
damages under § 284 is one that must be left to the dis-
trict court’s discretion. The district court, on remand,
should consider whether ION’s infringement constituted
an “egregious case[] of misconduct beyond typical in-
fringement” meriting enhanced damages under § 284 and,
if so, the appropriate extent of the enhancement. Id. at
1935.
CONCLUSION
For the foregoing reasons, we vacate the judgment of
the district court of no willful infringement by ION and
remand for further consideration of enhanced damages
under § 284. As to other aspects of the district court’s
judgment, we hereby reinstate those aspects of our earlier
judgment set forth in sections I–IV of our earlier opinion,
which were not affected by the Supreme Court’s order.
F.3d 644, 657–58 (3d Cir. 2007); Indep. Park Apartments
v. United States, 449 F.3d 1235, 1240–41 (Fed. Cir. 2006);
Crocker v. Piedmont Aviation, Inc., 49 F.3d 735, 738–41
(D.C. Cir. 1995).
Thus, this case is distinguishable from our recent de-
cision in Halo Electronics, Inc. v. Pulse Electronics, Inc.,
where the accused infringer failed to raise the issue at the
JMOL stage in district court or “challenge the propriety of
the jury finding of subjective willfulness” on appeal. No.
13-1472, 2016 WL 4151239, at *10 (Fed. Cir. Aug. 5,
2016). We do not suggest that appellees in the future can
avoid waiver by limiting discussion on the first appeal to
just one aspect of the overall issue of enhanced damages
since under the Supreme Court’s decision in Halo, objec-
tive and subjective willfulness are no longer distinct
issues.
12 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
AFFIRMED-IN-PART, REVERSED-IN-PART,
VACATED-IN-PART, AND REMANDED
COSTS
Costs to neither party.
United States Court of Appeals
for the Federal Circuit
______________________
WESTERNGECO L.L.C.,
Plaintiff-Cross-Appellant
v.
ION GEOPHYSICAL CORPORATION,
Defendant-Appellant
______________________
2013-1527, 2014-1121, 2014-1526
______________________
Appeals from the United States District Court for the
Southern District of Texas in No. 4:09-cv-01827, Judge
Keith P. Ellison.
--------------------------------------------------------------------
WESTERNGECO L.L.C.,
Plaintiff-Appellant
v.
ION GEOPHYSICAL CORPORATION,
Defendant-Appellee
______________________
2014-1528
______________________
2 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
Appeal from the United States District Court for the
Southern District of Texas in No. 4:09-cv-01827, Judge
Keith P. Ellison.
______________________
WALLACH, Circuit Judge, dissenting-in-part.
I join the majority’s opinion to the extent it applies
the Supreme Court’s decision in Halo on the issue of
enhanced damages for willful infringement under 35
U.S.C. § 284 (2012). See Halo Elecs. Inc. v. Pulse Elecs.,
Inc., 136 S. Ct. 1923 (2016). However, for the reasons
articulated in my original dissent, see WesternGeco L.L.C.
v. ION Geophysical Corp. (WesternGeco II), 791 F.3d 1340,
1354–64 (Fed. Cir. 2015) (Wallach, J., dissenting-in-part),
I dissent-in-part from today’s panel opinion, which
reinstates our earlier opinion “in all other respects.” Maj.
Op. at 2.
The majority misunderstands the import of its prior
holding, stating that my original dissent-in-part was from
the panel’s “holding that WesternGeco was not entitled to
lost profits resulting from foreign uses of its patented
invention.” Id. at 4. It is of course uncontroversial that
patentees are not entitled to lost profits resulting from
foreign uses of a patented invention. See Brown v.
Duchesne, 60 U.S. (19 How.) 183, 195–96 (1856) (“[T]he
use of [the invention] outside of the jurisdiction of the
United States is not an infringement of his rights, and he
has no claim to any compensation for the profit or
advantage the party may derive from it.”).
Patentees are entitled, however, to lost profits
resulting from infringement under the laws of the United
States, which is what the jury found below, WesternGeco
II, 791 F.3d at 1342 (“The jury found infringement . . . .”),
what the district court found, id. at 1343 (“[T]he [district]
court granted summary judgment of infringement.”), and
what was affirmed by this court on appeal, id. at 1347–49
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 3
(noting, inter alia, “the correctness of the infringement
finding”).
The key issue left unaddressed in the now-reinstated
opinion’s analysis is: When a patent holder successfully
demonstrates both patent infringement under United
States law and foreign lost profits, what degree of
connection must exist between the two before the foreign
activity may be used to measure the plaintiff’s damages? 1
1 According to the majority, “the issue of lost profits
is not properly before [this court],” Maj. Op. at 5 n.1,
because “[t]he scope of the Supreme Court’s [grant
certiorari, vacate, and remand (‘GVR’)] order was limited
to the second question [presented],” i.e., “‘[w]hether the
Court should hold this Petition for Halo and Stryker
[Corp. v. Zimmer, Inc., 136 S. Ct. 356 (2015) (mem.)],’” Id.
(quoting Petition for Writ of Certiorari, WesternGeco LLC
v. ION Geophysical Corp., No. 2015-1085, 2016 WL
792196, at *1 (U.S. Feb. 26, 2016)). However, the
majority reads the Supreme Court’s GVR Order too
narrowly. First, although the Supreme Court did not
grant certiorari on the question of foreign lost profits in
Halo, “a denial of certiorari has no precedential value.”
Cty. of Sonoma v. Isbell, 439 U.S. 996, 996 (1978).
Second, the Order does not limit this court’s review to a
specific issue or question presented, as many GVR orders
do. See, e.g., Herrmann v. Rogers, 358 U.S. 332, 332
(1959) (limiting the appellate court’s review on remand to
a finite issue of Idaho property law). The GVR Order, in
its entirety, provides:
On petition for writ of certiorari to the United
States Court of Appeals for the Federal Circuit.
Petition for writ of certiorari granted. Judgment
vacated, and case remanded to the United States
4 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
Put another way, left unanswered is the question of where
we must draw the line as to when patented products or
services made, used, or sold abroad (or some combination
of these) may be considered in calculating damages
flowing from infringement under Title 35 of the United
States Code. The issue is not one of infringement, where
Court of Appeals for the Federal Circuit for
further consideration in light of Halo . . . .
Justice ALITO took no part in the consideration or
decision of this petition.
WesternGeco LLC v. ION Geophysical Corp., No. 2015-
1085, 2016 WL 761619, at *1 (U.S. June 20, 2016). The
Supreme Court’s only directive was that this court
reconsider the prior opinion “in light of Halo,” id., which
overturns the two-part test for enhanced damages and the
tripartite framework for appellate review in In re Seagate
Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en
banc). See generally Halo, 136 S. Ct. 1923 (2016). The
Supreme Court neither directly addressed the merits of
this court’s holding on the issue of damages associated
with both infringement under United States law and use
on the high seas, nor does it preclude their consideration.
See Halo Elecs., Inc. v. Pulse Elecs., Inc., Nos. 2013-1472,
-1656, 2016 WL 4151239, at *2 (Fed. Cir. Aug. 5, 2016)
(“[T]he Supreme Court’s review was limited to the issue of
enhanced damages and left undisturbed the judgments on
other issues . . . .”); see also Maj. Op. at 5 (“The Supreme
Court’s Halo decision was solely concerned with the
question of enhanced damages for patent infringement
under 35 U.S.C. § 284 and does not affect other aspects of
our earlier opinion.” (footnote omitted)).
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 5
foreign use generally does not count, 2 but one of damages,
where it may.
Rather than grapple with this difficult question of
proximity, the majority avoids it altogether, considering
the foreign lost profits in this case to relate solely to
foreign use and to be wholly disconnected from the
infringement found by the jury. By reinstating our earlier
decision, the majority repeats, out of context, the
statement from Power Integrations that “‘the entirely
extraterritorial production, use, or sale of an invention
patented in the United States is an independent,
intervening act that, under almost all circumstances, cuts
off the chain of causation initiated by an act of domestic
infringement.’” WesternGeco II, 791 F.3d at 1351 (quoting
Power Integrations, Inc. v. Fairchild Semiconductor Int’l,
Inc., 711 F.3d 1348, 1371–72 (Fed. Cir. 2013)). 3
2 Indeed, even in the infringement context, “foreign
activity . . . can have an impact on the rights of a United
States patent owner.” Lexmark Int’l, Inc. v. Impression
Prods., Inc., 816 F.3d 721, 784 (Fed. Cir. 2016) (en banc)
(10-2 decision) (Dyk, J., dissenting).
3 As recognized elsewhere in Power Integrations,
the central issue in foreign lost profits cases is not
whether the use or sale is “entirely extraterritorial,” but
the nature and degree of connection between the
underlying infringement and the (perhaps entirely
extraterritorial) foreign activity that most proximately led
to the lost profits. See 711 F.3d at 1371 (noting that
plaintiffs cited no case law supporting the use of “sales
consummated in foreign markets, regardless of any
connection to infringing activity in the United States,”
when calculating damages (emphasis added)); Power
Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc.,
589 F. Supp. 2d 505, 511 (D. Del. 2008) (expressing
6 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
The statement in Power Integrations, however,
addressed the patentee’s argument that “having
established one or more acts of direct infringement in the
United States,” the plaintiff should be able to “recover
damages for [the defendant’s] worldwide sales of the
patented invention because those foreign sales were the
direct, foreseeable result of [the defendant’s] domestic
infringement.” 711 F.3d at 1371. If the statement is read
too broadly, such that it prohibits any consideration of
foreign activities when measuring damages, it conflicts
with Supreme Court precedent holding that ordinary
sales abroad can in some cases be used to measure
damages resulting from domestic infringement. See
Goulds’ Mfg. Co. v. Cowing, 105 U.S. 253, 254–55 (1881);
Dowagiac Mfg. Co. v. Minn. Moline Plow Co., 235 U.S.
641, 650 (1915) (discussing Goulds’); see also WesternGeco
L.L.C. v. ION Geophysical Corp., 621 F. App’x 663, 664
(Fed. Cir. 2015) (9-3 decision denying the petition for
rehearing en banc) (Wallach, J., dissenting); WesternGeco
II, 791 F.3d at 1354–64 (Wallach, J., dissenting-in-part).
Such a conflict should serve as a red flag, indicating that
the approach taken by the panel may belong to the class
of “‘unduly rigid’” rules the Supreme Court has repeatedly
cautioned against, including in its decision that led to the
present remand. Halo, 136 S. Ct. at 1932 (quoting Octane
Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct.
1749, 1755 (2014)).
Not only is the approach taken by the majority unduly
rigid, it is in substantial tension with Supreme Court
guidance on the specific issue of (1) infringement under
concern that the “estimate [of the plaintiff’s expert
witness] of $30 million in damages was not related to
parts that were manufactured, used, or sold in the United
States by [the defendant]”).
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 7
United States law followed by (2) use on the high seas.
Duchesne—the very case cited by the majority for the
proposition that lost profits based on foreign use are not
compensable—illuminates at least one circumstance
under which such foreign use is “compens[able]”: Where
the patented invention is “manufactured” or “sold” in the
United States, the defendant is “justly answerable for”
the resulting “advantage which [he] derived from the use
of th[e] improvement . . . on the high seas.” 60 U.S. (19
How.) at 196 (emphases added); see also WesternGeco II,
791 F.3d at 1362 (Wallach, J., dissenting-in-part)
(discussing Duchesne). The compensation in such a case
is not for the foreign use itself, but for the damages
caused when the defendant “diminished the value of [the
plaintiff’s] property” by “compet[ing] with the plaintiff,” in
the United States, “where the plaintiff was entitled
to . . . exclusive use.” Duchesne, 60 U.S. (19 How.) at 196
(emphasis added).
In reinstating its earlier decision, the majority
expresses no concern for the consequences that may result
from that decision. Creative lawyers, for example, may
seek to insulate their clients from infringement liability
by structuring market transactions so as to distance the
infringer from the foreign activities, seeking to mirror the
present case in which ION sells the device in question “to
its customers, who perform surveys” on the high seas “on
behalf of oil companies.” WesternGeco II, 791 F.3d at
1343. When done for liability-avoidance reasons, such a
change in form can increase costs without altering the
underlying economic substance of the transaction.
Such efforts—and perhaps other unforeseen industry
responses—would not only be wasteful, but would also
result in unfairness to the patent owner, whose loss from
the infringement remains the same regardless of the
number of entities involved or the complexity of the
underlying transactions. So long as there is a sufficient
8 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
connection between the infringement and the foreign
activity, plaintiffs who successfully establish infringement
under United States law should be able to rely on foreign
activities to measure those damages adequate to “return
the patent owner to the financial position he would have
occupied but for the infringement.” Carborundum Co. v.
Molten Metal Equip. Innovations, Inc., 72 F.3d 872, 881
(Fed. Cir. 1995).
Formulating a proper proximity standard—i.e., a
standard that can be used to determine the sufficiency of
the connection between infringement under United States
law and foreign lost profits—is no easy task. There are
some guideposts, however. For example, our case law has
established that a party will not necessarily be able to
recover damages equal to lost foreign sales simply
because those lost sales would not have occurred “but for”
the domestic infringement. Power Integrations, 711 F.3d
at 1370 (finding the connection insufficient despite the
argument of Power Integrations that it was entitled to
damages based upon lost foreign sales it “would have
made but for Fairchild’s domestic infringement”
(emphasis added)). It has established that “[w]here a
physical product is being employed to measure damages
for the infringing use of patented methods,” the patentee
may recover “when and only when” one of the actions
specified in 35 U.S.C. § 271(a) (e.g., selling) “for that unit”
takes place in the United States, “even if others of the
listed activities for that unit (e.g., making, using) take
place abroad.” Carnegie Mellon Univ. v. Marvell Tech.
Grp., Ltd., 807 F.3d 1283, 1306 (Fed. Cir. 2015).
A unifying theme from these cases and others cited in
my original dissent is that the appropriate measure of
damages must bear some relation to the extent of the
infringement in the United States. Thus, on the one
hand, where the volume of non-infringing sales is
independent of the extent of United States infringement,
WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP. 9
those sales should not be used as a measure of damages
flowing from the domestic infringement. For example,
where a product is designed in the United States by an
“infringing use of [the] patented method[],” id., and units
of the product are then “manufactured, sold, and used
abroad,” the number of units produced abroad bears little
or no relationship to the extent of the infringement in the
United States, id. at 1305 (internal quotation marks and
citation omitted). This is because once a product is
designed, an unlimited number of non-infringing units
may be produced from that design.
At the other extreme, there may be a one-to-one
relationship, or nearly so, between the infringement in
the United States and the non-infringing foreign activity.
In this case, each non-infringing unit or activity bearing
such a one-to-one relationship with the infringing unit or
activity is relevant to the damages calculation. See, e.g.,
R.R. Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506, 1519
(Fed. Cir. 1984) (Where a certain number of infringing
“carsets” are manufactured in the United States and that
same number is sold in a foreign country, each non-
infringing foreign sale is relevant.); cf. State Indus., Inc. v.
Mor-Flo Indus., Inc., 883 F.2d 1573, 1575 (Fed. Cir. 1989)
(Where a patented method is used to produce each non-
infringing water heater, the number of water heaters sold
is relevant to the damages calculation.).
The present case appears to lie somewhere in between
these extremes. As described by the majority, the patent-
practicing devices sold by ION are combined (and then
used) in non-infringing streamer systems on the high
seas, in a manner that would infringe if the combination
occurred within the United States. See WesternGeco II,
791 F.3d at 1348. Because each streamer system contains
some number of devices, id. at 1343, the volume of
infringing activity in the United States bears some
relationship to the number of streamer systems used on
10 WESTERNGECO L.L.C. v. ION GEOPHYSICAL CORP.
the high seas, and the number of streamer systems in
turn bears some relationship to the volume of lost sales.
At the same time, however, because a given streamer
system could presumably be used more than once, the
volume of infringing activity in the United States may not
bear a one-to-one relationship with the volume of lost
sales. As with damages questions generally, complex
factual issues such as these may exist regarding the
relationship between the infringing acts and the units or
activities used to measure the patentee’s resulting losses.
The importance of such complex factual issues to the
damages calculation explains why discretion is afforded to
district courts and juries in arriving at an appropriate
damages figure. See AstraZeneca AB v. Apotex Corp., 782
F.3d 1324, 1333 (Fed. Cir. 2015) (“The amount of damages
awarded to a patentee . . . is . . . reviewed for clear error,
while the methodology underlying the court’s damages
computation is reviewed for abuse of discretion.”
(emphases added)); Lucent Techs., Inc. v. Gateway, Inc.,
580 F.3d 1301, 1310 (Fed. Cir. 2009) (“We review the
jury’s determination of the amount of damages, an issue
of fact, for substantial evidence.” (emphasis added)). An
unduly rigid rule barring the district court from
considering foreign lost profits even when those lost
profits bear a sufficient relationship to domestic
infringement improperly cabins this discretion,
encourages market inefficiency, and threatens to deprive
plaintiffs of deserved compensation in appropriate cases.
Accordingly, I again respectfully dissent-in-part.