IP Law Daily WesternGeco’s loses bid to overturn Board’s invalidity findings
Monday, May 7, 2018

WesternGeco’s loses bid to overturn Board’s invalidity findings

By Pamela C. Maloney, J.D.

Findings by the Patent Trial and Appeal Board that a number of seismic streamer patents belonging to WesternGeco LLC were unpatentable and that inter partes review petitions filed in response to a pending patent infringement lawsuit filed by WesternGeco against Petroleum GeoServices, Inc. were not time barred have been upheld by the U.S. Court of Appeals for the Federal Circuit. The patents at issue were the same ones WesternGeco successfully asserted against ION Geophysical Corp. That case is currently pending before the U.S. Supreme Court on the issue of whether lost profits damages are recoverable for infringement occurring abroad (WesternGeco LLC v. ION Geophysical Corp., May 7, 2018, Chen, R.).

After successfully suing ION Geophysical Corp. and ION International S.A.R.L.( together, ION) for infringement of four of its "seismic streamer" patents—U.S. Patent Nos. 7,080,607 (the ’607 Patent); 7,162,967 (the ’967 Patent); 7,293,520 (the ’520 Patent); and 6,691,038 (the ’038 Patent)—all of which involve control and positioning technologies for the geological exploration and identification of potential oil and gas deposits that lay beneath the ocean floor, WesternGeco filed similar claims against Petroleum GeoServices, Inc. (PGS) based on the latter’s infringement of three of those patents: the ’607 Patent; the ’967 Patent, and the ’520 Patent. In response, PGS filed six inter partes review petitions (IPRs) before the Patent Trial and Appeal Board seeking to have the patent claims administratively cancelled. PGS’s petitions, which were filed in two rounds, challenged certain claims of each of the WesternGeco Patents, After the first round of IPRs was filed, ION moved for and was granted permission to join the IPRs, but the Board limited ION’s involvement to receiving notification of filings and attending, rather than actively participating in depositions and oral hearings.

The Board ruled in favor of PGS on all six petitions, finding that the WesternGeco Patents were unpatentable as either anticipated by or obvious over several prior art references. WesternGeco appealed, arguing that (1) it had been deprived of due process by the Board’s refusal to allow WesternGeco the opportunity to be heard on the issue of whether the IPRs were time-barred; and (2) there was insufficient evidence to support the Board’s decisions on the merits of its patent claims. After briefing was completed, PGS settled with WesternGeco and withdrew from the action. The Board ordered ION and WesternGeco to file new briefs. Shortly before the oral argument date, the Federal Circuit issued its ruling in Wi-Fi One v. Broadcom Corp. (878 F.3d 1364 (Fed. Cir. 2018)), holding that time-bar determinations under §315(b) of the Leahy-Smith America Invents Act (AIA) were reviewable by the court, reversing contrary precedent.

IPRs as time-barred. WesternGeco offered the following grounds in support of its claim that the IPRs had not been filed in a timely manner: (1) ION was served with a patent infringement complaint well over a year before the IPR petitions were filed and unquestionably would have been time-barred from filing any petitions challenging the WesternGeco Patents had it not been joined with PGS’s petitions; and (2) PGS’s petitions should be time-barred because ION was a "real party in interest," or was in privity with PGS.

Noting that WesternGeco’s time-bar challenge focused on the privity factor rather than on the real party interest factor, the Federal Circuit agreed that the privity analysis was broader than simply inquiring whether PGS had controlled or had had an opportunity to control ION’s decisions in the patent infringement litigation, or whether ION had controlled or had an opportunity to control PGS’s decisions during the IPRs. However, the Federal Circuit rejected WesternGeco’s claim that the Board had applied an unduly-restrictive test by focusing only on control, adding that to the extent the Board had analyzed privity based on ION’s control over PGS’s IPR proceedings it did so in response to WesternGeco’s theory which focused primarily on control.

Turning to the merits of WesternGeco’s claim that ION was in privity with PGS, the Federal Circuit concluded that there was no evidence to suggest that ION had directed, funded, controlled, or influenced the PGS IPR petitions. Nor was there any evidence to support WesternGeco’s claim that ION had used PGS as a proxy. The litigation history showed that PGS filed the IPRs as a defensive measure in response to WesternGeco’s lawsuit against it and that when ION attempted to join the IPRs, PGS actively opposed that attempt. In addition, when ION was joined to the IPR proceedings, it was given spectator status only. Thus, the Board properly determined that ION did not control or direct the IPR proceedings.

The Federal Circuit also rejected WesternGeco’s other arguments in support of a finding a privity, concluding that the pre-existing business alliance between the two companies, as well as indemnity provisions contained in the purchase agreements for the product accused of infringing WesternGeco’s patents, did not give rise to a sufficiently close relationship that would have given PGS a full and fair opportunity to litigate the validity of the claims of WesternGeco patents during the latter’s lawsuit against ION. Thus, the IPR petitions filed by PGS were not time-barred, the Federal Circuit held, upholding the Board’s determination.

Challenge to Board’s decision on the merits. WesternGeco also challenged the merits underlying the Board’s unpatentability findings with regard to the three patents. First, WesternGeco claimed that the Board’s construction of the term "predicting positions" as used in the ’607 Patent was erroneous, arguing that the Board had construed the term to mean "estimating the actual locations" of streamer position devices, while WesternGeco’s proposed construction required the prediction to be performed using a "behavior-predictive model-based control logic." According to the Federal Circuit, the Board’s construction was taken directly from the ’607 specifications, whereas WesternGeco’s construction described a preferred embodiment of the specification, which could not be used to limit the term unless the specification clearly indicated otherwise.

The Federal Circuit also rejected WesternGeco’s challenges to the Board’s unpatentability rulings for the ’520 Patent, ruling that the Board’s failure to include the term "automatic" in its construction of the term "control mode," as proposed by WesternGeco, was proper because that term did not appear in the specifications and would read unsupported limitations into the specifications. The Federal Circuit also rejected WesternGeco’s argument that the Board’s conclusion that patent’s Workman reference (U.S. Patent No. 5,790,472), which disclosed a method for controlling the position and shape of marine seismic streamer cables towed by a vessel, rendered the patent’s "feather angle mode" obvious. According to the Board, expert testimony proffered on the issue demonstrated that a person of ordinary skill in the art would have been motivated to modify Workman’s control system to implement a feather angle mode threshold parameter to the streamers’ positioning when confronted with the challenge of towing streamers through cross currents.

The evidence also supported the Board’s finding that the "global control system" limitation contained in the ’967 Patent was obvious as well. Rejecting WesternGeco’s argument that the Board’s construction of "global control system" changed midstream and finding that the Board’s construction of that term did not affect the unpatentability outcome, the Federal Circuit found that the Board’s use of another patent’s background information to provide context for how a skilled artisan would understand the ’967 Patent’s disclosed embodiments of a global control system was not erroneous. The background information referenced from another patent disclosed a streamer position device for controlling the position of a marine seismic streamer as it was towed behind a boat in a streamer array. As such, it was considered prior art and anticipates the challenged claims of the ’967 Patent, thereby supporting the Board’s finding of obviousness.

The case is Nos. 2016-2099, 2016-2100, 2016-2101, 2016-2332, 2016-2333, and 2016-2334.

Attorneys: John C. O'Quinn (Kirkland & Ellis LLP) for WesternGeco LLC. Gregory A. Castanias (Jones Day) for ION Geophysical Corp. and ION International S.A.R.L.

Companies: WesternGeco LLC; ION Geophysical Corp.; ION International S.A.R.L.; Petroleum GeoServices Inc.

MainStory: TopStory Patent FedCirNews

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