ION Geo: Provides an update on the WesternGeco litigation
ION Geophysical Corporation (NYSE: IO) today announced that the Supreme Court granted certiorari in the previously-reported lawsuit of WesternGeco L.L.C. v. ION Geophysical Corporation, agreeing to review the lower court’s judgment for legal error on whether a patent holder can obtain lost-profits damages for use of ION’s products outside of the United States. We would like to take this opportunity to provide information about the case and its current status.
WesternGeco sued ION and one of ION’s customers for patent infringement in 2009. In 2012, a jury issued a verdict in favor of WesternGeco and awarded WesternGeco damages for reasonable royalties and lost profits. The lost-profits damages were based on the use of ION’s products outside of the United States. On appeal, ION argued that WesternGeco was not entitled to lost-profits damages for two reasons: one, that under applicable law, WesternGeco cannot recoup lost profits for the overseas use of ION’s products by ION’s customers; two, that lost-profits can only be recouped from a direct competitor, and that ION and WesternGeco are not direct competitors in this market.
The United States Court of Appeals for the Federal Circuit agreed with ION on the first issue and, as a result, overturned the award of lost-profits damages. Since the court decided in favor of ION on this first issue, it did not decide the second issue, which ION reserved the right to re-visit in the future.
WesternGeco filed a petition for a writ of certiorari asking the United States Supreme Court to review the Court of Appeals’ ruling, and on January 12, 2018, the Supreme Court granted WesternGeco’s petition. WesternGeco and ION will now submit briefs to the Supreme Court on the merits of the Court of Appeals’ ruling. We expect that the Supreme Court will hold oral argument in April 2018 and will issue a decision by the end of June 2018. ION firmly believes in its legal position on this issue and that the Federal Circuit made the correct decision. If the Supreme Court upholds the Court of Appeals’ decision, the case will be over and ION will owe no further damages.
If the Supreme Court overturns the Federal Circuit’s decision, the case will be remanded back to the Court of Appeals, at which point ION will present its second argument for eliminating the award of lost profits.
Other proceedings may have an impact on WesternGeco’s ability to recover lost profits damages even if WesternGeco prevails in the Supreme Court. ION was a party to a challenge to the validity of WesternGeco’s patents by means of an Inter Partes Review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”). While the patent infringement lawsuit was pending on appeal, the PTAB invalidated four of the six patent claims that formed the basis for the jury verdict in this case. WesternGeco appealed that decision to the Court of Appeals for the Federal Circuit, which is scheduled to hear oral argument on January 23, 2018. If the Court of Appeals affirms the PTAB’s invalidation of the patents, that may provide a separate ground for reducing or vacating any lost-profits award. In addition, there may be additional bases for challenging the amount of any lost-profits damages, which remain to be litigated in further proceedings.
“We understand this is an important area of law for the Supreme Court to consider and we will continue to defend vigorously against WesternGeco’s claims and the award of lost-profits damages,” stated Brian Hanson, ION’s President and Chief Executive Officer. “We firmly believe our legal position is correct and we will advocate our position forcefully in the Supreme Court. While we would like to see closure to this litigation as soon as possible, if the Supreme Courtreverses the decision, we are confident about re-visiting our second argument at the Court of Appeals. In addition, we believe the IPR process underway is also very positive for our legal position. This is clearly a David and Goliath situation where a company like Schlumberger has the luxury of unlimited legal expenditure without having to rationalize the additional expense of continuing these proceedings. In any case, if the Supreme Court does not put this issue to rest this year, we expect this lawsuit will continue for years, potentially beyond 2020.”