Case 4:09-cv-01827 Document 562
`
`filed in TXS3 on 09/28/12 De e1of-41
`(C)
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
`
`§ §
`
`§ §
`
`WESTERNGECO L.L.C.,
`
`Plaintiff,
`
`V.
`
`Judge Keith P. Ellison
`
`§ CIVIL ACTION NO. 4:09-cv-01827
`§
`§
`ION GEOPHYSICAL CORPORATION,
`§
`FUGRO-GEOTEAM,
`INC.,
`FUGRO-
`GEOTEAM AS, FUGRO NORWAY §
`MARINE SERVICES AS, FUGRO, INC.,
`§
`FUGRO (USA),
`INC.
`and
`FUGRO §
`GEOSERVICES, INC.,
`
`JURY TRIAL DEMANDED
`
`§ §
`
`Defendants.
`
`§
`
`ION’S MOTION FOR JUDGMENT AS A MATTER OF LAW,
`MOTION FOR NEW TRIAL ON DAMAGES, AND
`ALTERNATIVELY MOTION FOR REMITTITUR
`
`OF COUNSEL:
`
`David J. Healey
`State Bar No. 09327980
`
`Federal I.D. No. 000035021
`FISH & RICHARDSON, P.C.
`1 Houston Center
`1221 McKinney Street, 28”‘ Floor
`Houston, Texas 77010
`Telephone: (713) 654-5310
`Facsimile: (713) 652-0109
`healey@fr.com
`
`David L. Burgert
`ATTORNEY IN CHARGE
`
`State Bar No. 03378300
`Federal I.D. No. 2084
`
`dburgert@porterhedges.com
`Ray T. Torgerson
`State Bar No. 24003067
`Federal I.D. No. 22846
`
`rtorgerson@porterhedges.corn
`Jonathan M. Pierce
`State Bar No. 24027744
`Federal I.D. No. 23801
`jpierce@porterhedges.com
`PORTER HEDGES LLP
`1000 Main Street, 36th Floor
`Houston, Texas 77002-6341
`Telephone: (713) 226-6668
`Facsimile: (713) 226-6268
`
`ATTORNEYS FOR DEFENDANT
`ION GEOPHYSCIAL CORPORATION
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 1
`
`

`
`Case 4:O9—ov-01827 Document 562
`
`:iled in TXS3 on 09/28/12 9age 2 of 41
`
`TABLE OF CONTENTS
`
`Page
`
`SUMMARY OF ARGUMENT .................................................................................................... .. 1
`
`NATURE AND STAGE OF THE PROCEEDING...................................................................... .. 2
`
`ISSUES TO BE DECIDED .......................................................................................................... .. 3
`
`STANDARD OF REVIEW .......................................................................................................... .. 3
`
`BACKGROUND .......................................................................................................................... .. 4
`
`ARGUMENT ................................................................................................................................ .. 4
`
`I.
`
`LOST PROFITS .................................................................................................................. .. 4
`
`A.
`
`There Is No Legal Basis for the Lost Profits Award. .................................................. ..4
`
`1.
`
`Damages cannot be based on third-party revenue realized from the non-
`infringing use of the patented device outside the United States. ....................... .. 4
`
`a.
`
`b.
`
`The non-infringing use of the patented invention..................................... .. 5
`
`Predicating damages on non-infringing, extraterritorial conduct
`improperly gives extraterritorial effect to United States law.................... .. 6
`
`2.
`
`The Panduit test only applies if the patentee’s and the infringer’s
`products compete. .............................................................................................. .. 7
`
`B.
`
`The Lost Profits Award Is Not Supported by Sufficient Evidence. ............................ ..9
`
`1.
`
`The CRM database is unreliable and cannot support lost profits. ................... .. 10
`
`2 WG did not prove that the 10 surveys were completed using DigiFIN ........... .. 13
`
`3.
`
`4
`
`Sims’s analysis of the Panduit factors is fatally flawed. ................................. .. 14
`
`There is insufficient evidence to support three of the Panduit factors. ........... .. 15
`
`a.
`
`Factor 2: Available Acceptable, Non-Infringing Alternatives ............... .. 15
`
`(i) No Evidence the Alternatives Infringed ......................................... .. 15
`
`(ii) No Evidence the Alternatives Were Unavailable ........................... .. 15
`
`(iii) No Evidence the Alternatives Were Unacceptable ......................... .. 17
`
`b.
`
`c.
`
`Factor 3: Capacity ................................................................................... .. 18
`
`Factor 4: Amount of Lost Profits ............................................................ .. 20
`
`(i)
`
`Speculative and Conclusory Calculation of Lost Profits ................ ..2l
`
`(ii) WG Would Not Have Been Awarded the 10 Surveys .................... ..2l
`
`5.
`
`The jury was not properly instructed on the burden of proof. ......................... .. 24
`
`2898314
`
`i
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 2
`
`

`
`Case -4:O9—ov—O1827 Document 562
`
`:il-ed in TXSD on 09/28/12 Dage 3 of 41
`
`6.
`
`Lost profits cannot be based on the entire value of the surveys. ..................... .. 25
`
`II.
`
`IMPROPER RECOVERY OF BOTH MEASURES OF DAMAGES .............................. .. 27
`
`III. REASONABLE ROYALTY ............................................................................................. .. 28
`
`A.
`
`B.
`
`C.
`
`The Reasonable Royalty Is Not Based on the Value of the Patented
`Improvement.............................................................................................................. ..28
`
`The Reasonably Royalty Cannot Be Based on Convoyed Sales. .............................. ..3l
`
`The Jury Was Not Instructed on the Marking Requirements. ................................... ..3l
`
`IV. AGGREGATED DAMAGES ........................................................................................... .. 32
`
`V.
`
`EXCESSIVE DAMAGES ................................................................................................. .. 33
`
`CONCLUSION ........................................................................................................................... .. 33
`
`2898314
`
`ii
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 3
`
`

`
`Case -4:09—cv—01827 Document 562
`
`:il-ed in TXSD on 09/28/12 Dage 4 of 41
`
`TABLE OF AUTHORITIES
`
`CASES
`
`Page(s)
`
`Bic Leisure Prods. Inc. V. Windsurfing Int’l, Inc.,
`1 F.3d 1214 (Fed. Cir. 1993) .................................................................................................... ..8
`
`Bott V. Four Star Corp,
`807 F.2d 1567 (Fed. Cir. 1986) .............................................................................................. ..22
`
`Brooke Gr., Ltd V. Brown & Williamson Tobacco Corp,
`509 U.S. 209 (1993) ............................................................................................................... ..12
`
`Brown V. Duclzesne,
`
`60 U.S. 183 (1856) ................................................................................................................... ..7
`
`Cardiac Pacemakers, Inc. V. St. Jude Med., Inc.,
`576 F.3d 1348 (Fed. Cir. 2009) ............................................................................................ ..5, 6
`
`Carefusion 303, Inc. V. Sigma Int’l,
`No. 10cV0442 DMS (WMC), 2012 WL 392808 (S.D. Cal. Jan. 3, 2012) ............................. ..27
`
`Comair Rotron, Inc. V. Nippon Densan Corp,
`49 F.3d 1535 (Fed. Cir. 1995) .................................................................................................. ..9
`
`Dowagiac Mfg. Co. V. Minn. Moline Plow Co,
`235 U.S. 641 (1915) ................................................................................................................. ..6
`
`Eiland V. Westinghouse Elec. Corp,
`58 F.3d 176 (5th Cir. 1995) ................................................................................................... ..33
`
`Ellis V. Weasler Eng ’g, Inc.,
`258 F.3d 326 (5th Cir. 2001) ................................................................................................... ..3
`
`Gargoyles, Inc. V. United States,
`113 F.3d 1572 (Fed. Cir. 1997) .............................................................................................. ..17
`
`Garretson V. Clark,
`
`111U.S. 120 (1884) ......................................................................................................... ..26, 29
`
`Georgia—Pacific Corp. V. U.S. Plywood Corp,
`318 F. Supp. 1116 (S.D.N.Y. 1970) ....................................................................................... ..29
`
`Grain Processing Corp. V. American Maize Prod. ,
`185 F.3d 1341 .................................................................................................................. ..16, 17
`
`2898314
`
`iii
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 4
`
`

`
`Case -4:O9—cv—01827 Document 562
`
`:il-ed in TXS3 on 09/28/12 3age 5 of 41
`
`Hanson V. Alpine Valley Ski Area, Inc.,
`718 F.2d 1075 (Fed. Cir. 1983) .............................................................................................. ..27
`
`IP InnoVation L.L. C. V. Red Hat, Inc. ,
`
`705 F. Supp. 2d 687 (E.D. Tex. 2010) ................................................................................... ..31
`
`John Hopkins Univ. V. CellPro, Inc.,
`152 F.3d 1342 (Fed. Cir. 1998) ................................................................................................ ..7
`
`LaserDynamics, Inc. V. Quanta Computer, Inc.,
`--- F.3d---, No. 2011-1440, 2012 WL 3758093
`
`(Fed. Cir. Aug. 30, 2012) ................................................................................... ..3, 4, 10, 26, 29
`
`Lucent Techs., Inc. V. Gateway, Inc.,
`580 F.3d 1301 (Fed. Cir. 2009) .......................................................................... ..3, 9, 27, 29, 33
`
`Mahurkar V. C.R. Bara’, Inc.,
`
`79 F.3d 1572 (Fed. Cir. 1996) .................................................................................................. ..9
`
`Meyer Intellectual Props. Lta’. V. Boclum, Inc.,
`-- F.3d ---, No. 2011-1329, 2012 WL 3329695 (Fed. Cir. Aug. 15, 2012) ............................ ..13
`
`Minks V. Polaris Indus, Inc.,
`546 F.3d 1364 (Fed. Cir. 2008) .............................................................................................. ..32
`
`Mitutoyo Corp. V. Cent. Purchasing, LLC,
`499 F.3d 1284 (Fed. Cir. 2007) ................................................................................................ ..9
`
`Nike, Inc. V. Wal—Mart Stores, Inc.,
`
`138 F.3d 1437 (1998) ............................................................................................................. ..31
`
`Oiness V. Walgreen Co.,
`88 F.3d 1025 (Fed. Cir. 1996) ................................................................................................ ..13
`
`Pancluit Corp. V. Stahlin Bros. Fibre Works, Inc.,
`575 F.2d 1152 (6th Cir. 1978) ........................................................... ..7, 8, 9, 14, 15, 23, 24, 25
`
`Poly—Am., L.P. V. GSE Lining Tech, Inc.,
`383 F.3d 1303 (Fed. Cir. 2004) ................................................................................................ ..3
`
`ResQNet. com, Inc. V. Lansa, Inc.,
`594 F.3d 860 (Fed. Cir. 2010) ...................................................................................... ..3, 29, 30
`
`Rite—Hite, 56 F.3d at 1545 ...................................................................................................... ..24, 25
`
`Rolls—Royce PLC V. United Techs. Corp.,
`No. 1:10cv457, 2011 WL 1740143 (E.D. Va. May 4, 2011) ........................................... ..13, 26
`
`2898314
`
`iv
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 5
`
`

`
`Case -4:O9—cv—O1827 Document 562
`
`:il-ed in TXSD on 09/28/12 Dage 6 of 41
`
`Smith V. Transworlcl Drilling Co.,
`773 F.2d 610 (5th Cir.1985) .................................................................................................... ..3
`
`SrnitlzKline Diagnostics, Inc. V. Helena Labs. Corp,
`926 F.2d 1161 (Fed. Cir. 1991) .............................................................................................. ..14
`
`Tesco Corp. V. Weatlzerforcl Intern., Inc.,
`722 F. Supp. 2d 755 (S.D. Tex. 2010) (Ellison, J.) ................................................................ ..31
`
`Uniloc USA, Inc. V. Microsoft Corp,
`632 F.3d 1292 (Fed. Cir. 2011) ........................................................................................ ..26, 29
`
`United States V. Flores,
`
`981 F.2d 231 (5th Cir. 1993) ................................................................................................... ..3
`
`Water Teclzs. Corp. V. Calco, Ltd,
`850 F.2d 660 (Fed. Cir. 1988) .................................................................................................. ..7
`
`Waymark Corp. V. Porta Sys. Corp,
`245 F.3d 1364 (Fed. Cir. 2001) ................................................................................................ ..4
`
`Wlzitserve, LLC V. Computer Packages, Inc.,
`--- F.3d ---, Nos. 2011-1206, 2011-1261, 2012 WL 3573845 (Fed. Cir. 2012) .................... ..12
`
`STATUTES
`
`35 L.S.C. §271 .............................................................................................................................. ..7
`
`35 L.S.C. §271(a)-(c) .................................................................................................................... ..4
`
`35 L.S.C. §271(f) .................................................................................................... ..2, 4, 5, 6, 9, 33
`
`35 L.S.C. §271(f)(2) ..................................................................................................................... ..4
`
`35 L.S.C. §284 .............................................................................................................................. ..5
`
`35 L.S.C. §287(a) ................................................................................................................. ..31, 32
`
`Fed. R. Civ. P. 50(a)(1) .................................................................................................................. ..3
`
`2898314
`
`V
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 6
`
`

`
`Case 4:09-cv-01827 Document 562
`
`:iled in TXS3 on 09/28/12 35. e7of-41
`(C)
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
`
`§ §
`
`§ §
`
`WESTERNGECO L.L.C.,
`
`Plaintiff,
`
`V.
`
`Judge Keith P. Ellison
`
`§ CIVIL ACTION NO. 4:09-cv-01827
`§
`§
`ION GEOPHYSICAL CORPORATION,
`§
`FUGRO-GEOTEAM,
`INC.,
`FUGRO-
`GEOTEAM AS, FUGRO NORWAY §
`MARINE SERVICES AS, FUGRO, INC.,
`§
`FUGRO (USA),
`INC.
`and
`FUGRO §
`GEOSERVICES, INC.,
`
`JURY TRIAL DEMANDED
`
`§ §
`
`Defendants.
`
`§
`
`ION’S MOTION FOR JUDGMENT AS A MATTER OF LAW,
`MOTION FOR NEW TRIAL ON DAMAGES, AND
`
`ALTERNATIVELY, MOTION FOR REMITTITUR
`
`Defendant ION Geophysical Corporation (“ION”) files this Motion for Judgment as a
`
`Matter of Law, Motion for New Trial on Damages, and Alternatively, Motion for Remittitur, as
`
`follows:
`
`SUMMARY OF ARGUMENT
`
`The jury awarded WestemGeco L.L.C. (“WG”) $105.9 million based on two defective and
`
`overlapping damage models: (1) a radical lost profits model unsupported by the law or evidence;
`
`and (2) a reasonable royalty model that failed to meet the basic requirements of patent law. A
`
`judgment based on the jury’s verdict would require this Court to ignore well-settled principles of
`
`patent damages and make new law.
`
`The jury’s lost profits award must be vacated because it is not based on the domestic acts of
`
`infringement in this case—ION’s supply of components from the United States—but on the
`
`revenues that WG estimated its competitors received for their non-infringing use of ION’s
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 7
`
`

`
`Case -4:O9—cv—O1827 Document 562
`
`:iled in TXSD on 09/28/12 9age 8 of 41
`
`equipment in 10 seismic surveys performed in foreign waters. A judgment on this verdict would
`
`improperly impose damages on ION for the non-infringing use by third parties and result in the
`
`erroneous extraterritorial enforcement of United States patent
`
`law. WG’s damages expert,
`
`Raymond Sims (“Sims”), imperrnissibly based his calculations on WG’s guesstimates of the
`
`revenue its competitors received for the 10 surveys which WG admits were drawn from rumor
`
`and “innuendo.” Sims also improperly used the Panduit test that is applicable only when the
`
`patentee and the infringer compete to sell similar products, and ION and WG do not. Sims then
`
`applied the test inconsistently with insufficient evidence to support three of the four Panduit
`
`factors. WG further failed to carry its burden by assuming critical facts, such as whether the
`
`claimed lost surveys were actually performed using ION’s components.
`
`WG also presented a reasonable royalty on all of ION’s sales of its DigiFIN and Lateral
`
`Controller to customers other than former co-defendant Fugro, but failed to apportion the
`
`damages to account for the value of WG’s patented improvement. Sims’s reasonable royalty
`
`testimony also included unsupported claims for convoyed sales and products sold before WG
`
`gave ION actual notice of infringement.
`
`Because the jury’s verdict is based on theories with no foundation in the law and is not
`
`supported by sufficient evidence or is contrary to the great weight and preponderance of the
`
`evidence, ION is entitled to judgment as a matter of law (“JMOL”) or a new trial on damages.
`
`NATURE AND STAGE OF THE PROCEEDING
`
`Trial of this case began on July 23, 2012. On August 13, 2012, the Fugro Defendants
`
`remaining in this case settled and were dismissed. Dkt. 525. The jury rendered its verdict on
`
`August 16, 2012, finding that certain patent claims were infringed under 35 U.S.C. § 271(f)(1)
`
`and (f)(2) and that ION’s infringement was willful. Dkt. 536. The jury awarded WG lost profits
`
`of $93,400,000 and a reasonable royalty of $12,500,000, for a total award of $105.9 million. Id.
`
`2898314
`
`2
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 8
`
`

`
`Case 4:O9—cv—O1827 Document 562
`
`:iled in TXSD on 09/28/12 9age 9 of 41
`
`ISSUES TO BE DECIDED
`
`the jury’s award of lost profits
`to support
`1. Whether the evidence is legally sufficient
`(Question 5), or the finding is against the great weight and preponderance of the evidence,
`when the finding is based on a damage model that inherently violates blackletter patent law,
`improperly allows WG to recover overlapping damages, and is based on nothing more than
`speculation and unsubstantiated testimony?
`
`2. Whether the evidence is legally insufficient to support the jury’s award of a reasonable
`royalty (Question 5), or the finding is against the great weight and preponderance of the
`evidence, when the finding is based on a damage model that improperly allowed WG to
`recover an amount beyond the value of its patented invention, unproven convoyed sales, and
`sales prior to the date notice of infringement was given?
`
`3. Whether a new trial is necessary because damages are not segregated and/or are excessive,
`or in the alternative, the Court should grant a remittitur?
`
`STANDARD OF REVIEW
`
`The plaintiff has the burden to prove damages. See Lacent Teclzs, Inc. V. Gateway, Inc., 580
`
`F.3d 1301, 1324 (Fed. Cir. 2009). If the plaintiff fails to present evidence of damages, JMOL
`
`should be granted. See ResQNet. com, Inc. V. Lansa, Inc., 594 F.3d 860, 868 (Fed. Cir. 2010), see
`
`also Fed. R. Civ. P. 50(a)(1) (JMOL is appropriate if a “reasonable jury would not have a legally
`
`sufficient evidentiary basis to find for the party on that issue”). JMOL is reviewed ole noVo. See
`
`LaserDynamics, Inc. V. Quanta Computer, Inc., --- F.3d---, No. 2011-1440, 2012 WL 3758093,
`
`at *10 (Fed. Cir. Aug. 30, 2012) (attached as EX. 1).
`
`A new trial may be granted if (1) the verdict is against the great weight of the evidence, (2)
`
`the damages awarded are excessive, (3) the jury’s findings are inconsistent, (4) prejudicial error
`
`was committed, or (5) to prevent injustice. See Ellis V. Weasler Eng ’g, Inc., 258 F.3d 326, 342
`
`(5th Cir. 2001), Smith V. Transworlal Drilling Co., 773 F.2d 610, 612-13 (5th Cir.1985), United
`
`States V. Flores, 981 F.2d 231, 237 (5th Cir. 1993). An order for new trial or remittitur will not
`
`be disturbed absent an abuse of discretion or a misapprehension of the law. See Poly—Am., L.P. V.
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 9
`
`

`
`Case 4:O9—cv-01827 Document 562
`
`filed in TXS3 on 09/28/12 De e10of-41
`(C)
`
`GSE Lining Tech, Inc., 383 F.3d 1303, 1307 (Fed. Cir. 2004), see also LaserDynamz'cs, 2012
`
`WL 3758093, at *10.
`
`BACKGROUND
`
`The relevant background may be found in ION’s Motion For New Trial on Infringement
`
`Under 35 U.S.C. § 271(f)(2) at § I, filed September 28, 2012, which is incorporated herein.
`
`I.
`
`LOST PROFITS
`
`ARGUMENT
`
`A. There Is No Legal Basis for the Lost Profits Award.
`
`1. Damages cannot be based on third-party revenue realized from the non-
`infringing use of the patented device outside the United States.
`
`There is no authority to permit an award of lost profits against a component parts
`
`manufacturer for infringement under §27l(f) based on the revenue realized by third-parties
`
`using the patented invention outside the United States. Section 27l(f) only imposes liability for
`
`the supply of components in or from the United States, not the extraterritorial use of those
`
`combined components. See 35 U.S.C. § 27l(f), cf Waymark Corp. v. Porta Sys. Corp, 245 F.3d
`
`1364, 1368 (Fed. Cir. 2001). WG’s claim for lost profits is nothing more than an attempt to
`
`circumvent the limits of § 27l(f) and recover damages for extraterritorial, non-infringing conduct
`
`that United States patent law is not designed to reach.
`
`As this Court has previously found in its prior rulings, § 27l(f) has a meaning independent
`
`of § 271(a)-(c). Dkt. 365 at 46. The text of the statute does not require a direct infringement ever
`
`be shown, but rather the liability is based on “supplying”—which is the act that occurs in the
`
`United States. Just as §27l(f) does not require proof of direct infringement, so too it does not
`
`allow for damages based on conduct outside of the United States from making or using the
`
`patented invention.
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 10
`
`

`
`Case 4:O9—cv-01827 Document 562
`
`:il-ed in TXS3 on 09/28/12 Da e11of-41
`W7
`
`a.
`
`The non-infringing use of the patented invention.
`
`The jury’s lost profits award is improperly based on the non-infringing use of the patented
`
`invention by parties other than ION. Despite WG’s protestations,
`
`the scope of recoverable
`
`damages is not unlimited, and the focus of the inquiry must be on the “act of infringement.” See
`
`35 U.S.C. §284 (defining the damages recoverable for infringement as “damages adequate to
`
`compensate for the infringement, but in no event less than a reasonable royalty for the use made
`
`of the invention by the infringer, together with interest and costs as fixed by the court” (emphasis
`
`added)). Here, the act of infringement was ION’s supply of component parts from the United
`
`States.1 Yet, WG does not seek to recover for sales of components lost in competition to ION’s
`
`supply of components in violation of § 27l(f). Instead, the jury’s lost profits award is based upon
`
`use by third parties of those components (in combination with other components, such as
`
`streamers, and a vessel) to perform surveys outside the United States. ION is not a party to those
`
`survey contracts, has no financial stake in the profitability of the survey contracts, and no role in
`
`bidding or competing for the survey contracts. All of this activity (by third parties neither
`
`controlled nor managed nor otherwise related to ION) takes place outside of the United States2
`
`and, thus, does not infringe a United States patent. See Dkt. 164 at *22 (recognizing that surveys
`
`conducted outside the United States are not infringing acts), Dkt. 144 at *43 (same). Such
`
`conduct is, therefore, not a proper basis for damages under § 27l(f).
`
`The Federal Circuit is clear on this issue.
`
`In Cardiac Pacemakers, the Federal Circuit,
`
`sitting en banc, evaluated whether § 27l(f) applies to the supply of a device used to perform a
`
`particular method outside the United States. Cardiac Pacemakers, Inc. v. St. Jude Mea’., Inc., 576
`
`1 Although ION vehemently denies that it has infringed any of WG’s patents, for the sake of argument, in this
`motion, infringement under § 27l(f) will be assumed.
`
`2 WG’s director of marketing and vice president of sales, Robin Walker, admitted that the claimed lost profits
`surveys took place more than 12 miles from the coast of the United States. Trial Transcript (“Tr”) at 1868:20-
`l869:9. (All trial transcript excerpts are attached as EX. 2).
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 11
`
`

`
`Case 4:O9—cv-01827 Document 562
`
`:11-ed in TXS3 on 09/28/12 Da -3 12 of 41
`W7
`
`F.3d 1348, 1362 (Fed. Cir. 2009). Relying on the statutory language and legislative history, the
`
`court concluded that § 271(f) does not apply to method claims. Consequently, liability did not
`
`extend to the use of components by third parties outside of the United States. See id. at 1365-66.
`
`Although not seeking to enforce its method claims at trial, WG nonetheless presented evidence
`
`of lost profits based on the overseas use of its patented invention under §271(f). All of the
`
`Bittleston Patents (the ‘520, ‘967, ‘607 Patents) have a series of method claims followed by a
`
`series of apparatus claims for implementing those methods—at least in the context of the
`
`Bittleston Patents, the use of the apparatus is the same as practicing the method. See PTX1,
`
`PTX2, PTX33 A patent owner should not be able to use a distinction with no meaningful
`
`difference to circumvent the rules against extraterritorial application of United States patent law.
`
`b. Predicating damages on non-infringing, extraterritorial conduct improperly
`gives extraterritorial eflect to United States law.
`
`The jury’s lost profits award runs afoul of precedent limiting the reach of United States
`
`patent law. The Supreme Court has clearly articulated a strong presumption against extending
`
`United States patent law to extraterritorial conduct. Microsoft Corp. v. AT&T Corp, 550 U.S.
`
`437, 454-55 (2007) (“The presumption that United States law governs domestically but does not
`
`rule the world applies with particular force in patent law”). This bar against international
`
`enforcement of United States patent law has been in place for over 150 years. See id. at 456
`
`(cautioning that the presumption that patent law only applies domestically is not defeated simply
`
`because a statute like §271(f) specifically addresses extraterritorial application but “remains
`
`instructive in determining the extent of the statutory exception” (emphasis orig.)), see also
`
`Dowagiac Mfg. Co. V. Minn. Moline Plow Co., 235 U.S. 641, 650 (1915) (“The right conferred
`
`3 Due to their voluminous nature, the cited trial exhibits (which are in the record) are not attached to this Motion.
`Upon request, ION will deliver courtesy copies of any exhibits desired by the Court.
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 12
`
`

`
`Case 4:O9—cv-01827 Document 562
`
`:11-ed in TXS3 on 09/28/12 Da -e 13 of 41
`W7
`
`by a patent under our law is confined to the United States and its territories,” and infringement
`
`“cannot be predicated on acts wholly done in a foreign country.” (internal citation omitted)),
`
`Brown v. Duchesne, 60 U.S. 183, 195 (1856) (holding that use of a patented invention outside of
`
`the United States is not infringement).
`
`Permitting WG to recover damages for the extrateriitorial, non-infringing conduct of third
`
`parties results in the impermissible extraterritorial enforcement of United States patent law.
`
`WG’s approach in effect “converts a single act of supply from the United States into a
`
`springboard for liability each time” the component is used in a system or otherwise used outside
`
`of the United States—a proposition expressly rejected by the Supreme Court. Microsoft, 550
`
`U.S. at 456. Foreign law, not United States law, governs the extrateriitoiial use of a patented
`
`invention. See John Hopkins Univ. V. CelZPro, Inc., 152 F.3d 1342, 1366 (Fed. Cir. 1998), see
`
`generally 35 U.S.C. § 271.
`
`Because the lost profits award is premised on nothing more than foreign assembly and use
`
`by third-parties, JMOL for ION is warranted.
`
`2. The Panduit test only applies if the patentee’s and the infringer’s products
`compete.
`
`Even if WG’s theory were recognized by the law, WG cannot prove that the claimed lost
`
`profits were caused by the infringement. The legal test that WG used to establish but-for
`
`causation of its lost profits claim does not apply to this case. See Tr. at 2275:14-2276:2. As a
`
`result, the evidence does not support Sims’s opinion, the submission of a lost profits issue to the
`
`jury, or the verdict under the correct application of the law.
`
`The Panduii test applies when a patent owner claims that “it lost sales equal in quantity to
`
`the infringing sales.” See Water Techs. Corp. V. Calco, Ltd, 850 F.2d 660, 671-72 (Fed. Cir.
`
`1988) (emphasis orig.) The test provides that to obtain profits on sales the patentee would have
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 13
`
`

`
`Case 4:O9—ov-01827 Document 562
`
`:11-ed in TXSD on 09/28/12 Da -3 14 of 41
`W7
`
`made but for the infringement, “ie, the sales made by the infringer, a patent owner must prove:
`
`(1) demand for the patented product, (2) absence of acceptable noninfringing substitutes, (3) his
`
`manufacturing and marketing capability to exploit the demand, and (4) the amount of the profit
`
`he would have made.” Panduit Corp. V. Siahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156
`
`(6th Cir. 1978) (emphasis added). The failure to establish any one of these factors is fatal to a
`
`lost profits claim. Id
`
`The logical premise of the Panduii test is that, if there is demand for a particular product and
`
`no available alternatives for it, the fact-finder may infer that in the absence of infringement
`
`purchasers of the product would transfer their demand for the infringing product to the patentee’s
`
`substitute product and, thus, the patentee would have captured the infringer’s sales if it had the
`
`capacity to make them. See Bic Leisure Prods. Inc. V. Windsurfing Ini’Z, Inc., 1 F.3d 1214, 1218-
`
`19 (Fed. Cir. 1993). If the products “are not sufficiently similar to compete in the same market
`
`for the same customers, the infringer’s customers would not necessarily transfer their demand to
`
`the patent owner’s product in the absence of the infringer’s product.” Id. The inference provided
`
`by the Panduii test is, therefore, not possible where the patentee’s and the infringer’s products do
`
`not compete for the same customers. Id at 1218 (“If the patentee’s and the infringer’s products
`
`are not substitutes in a competitive market, Panduifs first two factors do not meet the ‘but for’
`
`test—a prerequisite for lost profits”).
`
`ION and WG unquestionably sell different products to different customers.
`
`ION sells
`
`equipment to surveyors, not surveys. Tr. at 312:20-25, 4126:3-5 (including to WG), 4315: 13-21,
`
`2427 :19-21, 2821125-282214, see also id. at 2468225-2469:1. ION’s surveyor customers combine
`
`ION’s equipment with other products to perform surveys. See, e. g., id. at 123413-10. In contrast,
`
`WG does not manufacture or sell marine seismic equipment or the patented system, rather, WG
`
`2898314
`
`PGS V WESTERNGECO (|PR2014-00688)
`WESTERNGECO Exhibit 2153, pg. 14
`
`

`
`Case 4:O9—cv-01827 Document 562
`
`:11-ed in TXS3 on 09/28/12 Da -3 15 of 41
`70
`
`sells surveys to oil companies and uses its equipment to perform the surveys. Tr. at 312:3-7,
`
`243:8-11, 163914-12. While ION competes with other equipment suppliers for sales, WG
`
`competes with surveyors for survey jobs, thus, there is no market overlap among the customers
`
`buying ION’s products and WG’s surveys. See Tr. at 313:1-5, 2270120-2271:7, 2468125-246911,
`
`see also id. at 4548: 19-21, 1694:25-1695:7, 4893:21-4894:7. Accordingly, the Panduit test is not
`
`applicable to this case. See Mitutoyo Corp. V. Cent. Purchasing, LLC, 499 F.3d 1284, 1291 (Fed.
`
`Cir. 2007) (affirming summary judgment for infringer because the patentee failed to establish
`
`any market overlap among the consumers buying the patentee’s and the infringer’s respective
`
`products, so as to entitle it to a jury trial on lost profit damages), Mahurkar v. C.R. Bard, Inc., 79
`
`F.3d 1572, 1581 (Fed. Cir. 1996) (explaining that to apply the Panduit test, the district court
`
`“would have needed to ascertain whether [infringer’s] and [patentee’s] products competed for the
`
`same customers .
`
`. 7’), Comair Rotron, Inc. v. Nippon Densan Corp, 49 F.3d 1535, 1540 (Fed.
`
`Cir. 1995) (Rader, C.J., concurring) (cautioning that “before applying the Panduit test, a court
`
`must determine whether the accused device competes with the patentee’s product
`
`in the
`
`marketplace. If not, the court should not employ the Panduit test”).
`
`Because there is legally insufficient evidence that the parties’ products compete, the Panduit