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WesternGeco LLC v. Ion Geophysical Corp.

United States Court of Appeals, Federal Circuit

May 7, 2018


          Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in Nos. IPR2014-00687, IPR2014-00688, IPR2014-00689, IPR2014-01475, IPR2014-01477, IPR2014-01478, IPR2015-00565, IPR2015-00566, IPR2015-00567.

          John C. O'Quinn, Kirkland & Ellis LLP, Washington, DC, argued for appellant. Also represented by William H. Burgess; Leslie M. Schmidt, Timothy Gilman, New York, NY; Michael Kiklis, Christopher Ricciuti, Oblon, McClelland, Maier & Neustadt, LLP, Alexandria, VA.

          Gregory A. Castanias, Jones Day, Washington, DC, argued for appellees. Also represented by Jason M. Garr, Emily Justine Tait, Detroit, MI; Danielle J. Healey, Brian Gregory Strand, Fish & Richardson, PC, Houston, TX.

          Before Wallach, Chen, and Hughes, Circuit Judges.

          Chen, Circuit Judge.

         WesternGeco LLC (WesternGeco) appeals from the final written decisions of the Patent Trial and Appeal Board (Board) in inter partes review (IPR) proceedings instituted on six petitions filed by Petroleum Geo-Services, Inc. (PGS)[1] against three patents owned by WesternGeco: U.S. Patent Nos. 7, 080, 607 (the '607 Patent), 7, 162, 967 (the '967 Patent), and 7, 293, 520 (the '520 Patent) (collectively, the WesternGeco Patents). PGS filed its IPR petitions in two rounds: the first three petitions challenged certain claims of each of the three WesternGeco Patents; and the second three petitions challenged additional claims of each of the WesternGeco Patents. After the first round of IPRs was instituted, ION Geophysical Corp. and ION International S.A.R.L. (together, ION) moved, under 35 U.S.C. § 315(c), to join those IPRs. The Board granted ION's request but restricted its involvement to receiving notification of filings and attending, rather than actively participating in, depositions and oral hearings.

          The Board issued six final written decisions, finding all of the instituted claims in the six proceedings to be unpatentable as anticipated or obvious. It also rejected WesternGeco's arguments that the IPR proceedings were time-barred under 35 U.S.C. § 315(b). We conclude that substantial evidence supports the Board's unpatentability determinations, as well as its conclusion that the proceedings were not time-barred. We thus affirm the Board's decisions.


         I. Technical Background

         We have familiarity with the WesternGeco Patents through prior appeals. See, e.g., WesternGeco L.L.C. v. ION Geophysical Corp., 837 F.3d 1358, 1364 (Fed. Cir. 2016).[2] The WesternGeco Patents are directed to technologies for controlling the movement and positioning of a series of streamers towed in an array behind a ship. These streamers emit acoustic signals and detect the returning signals that reflect from the ocean floor. '967 Patent col. 1, ll. 28-41. The collected data can be used to create a map of the subsurface geology, helping oil companies analyze underwater natural resource formations and explore for oil and gas beneath the ocean floor.

         Conventional marine seismic survey systems use long streamers that are towed behind ships in open-water conditions. The streamers, equipped with sensors, can stretch for a mile or more. Vessel movements, weather, and other conditions can cause the streamers to tangle or drift apart. To obtain accurate survey data, it is necessary to control the positioning of the streamers, both vertically in the water, as well as horizontally against ocean currents and forces that can cause the normally-parallel streamers to bend and even entangle with each other. Id. at col. 1, l. 42-col. 2, l. 16. The WesternGeco Patents generally relate to a system for controlling the positioning of the streamers in relation to each other by mounting on each streamer a set of "streamer positioning devices" which can realign the individual streamers into their desired positions. Id. col. 2, ll. 56-58.

         II. Procedural History

         WesternGeco, PGS, and ION are all participants in the marine seismic survey industry. WesternGeco launched its commercial steerable streamer system, the Q-Marine, in 2000. J.A. 4794. Subsequently, PGS commissioned ION to design and build a competing commercial streamer system, the DigiFIN, which launched several years later. Id.

         In 2009, WesternGeco sued ION in the U.S. District Court for the Southern District of Texas (the District Court) for infringement of the WesternGeco Patents, as well as the '038 Patent. To assist in developing its infringement case against ION, WesternGeco served PGS with a third-party subpoena, seeking information relating to PGS's use and operation of ION's DigiFIN product. In response, PGS appeared (through its own counsel) in the lawsuit as a third party and produced documents, but did not file anything in that litigation. In August 2012, a jury returned a verdict finding ION had infringed all four patents asserted and that ION had failed to prove that any of the asserted patents were invalid. On appeal, this court affirmed all aspects of the District Court's judgment except for willful infringement and damages.[3]

          After receiving a favorable infringement verdict against ION, WesternGeco next sued PGS in the District Court for allegedly-related infringement of the same four patents ION had been found to have infringed. In response, PGS sought to have the patent claims asserted against it administratively cancelled, by filing at the Board the two rounds of inter partes review petitions discussed above. The Board denied institution of review for the petitions concerning the '038 Patent but instituted review on all six of PGR's IPR petitions concerning the WesternGeco Patents, finding a reasonable likelihood that PGS would prevail with respect to the challenged claims.

         After the first round of PGS's petitions had been instituted, ION moved to join those proceedings. Both WesternGeco and PGS opposed. WesternGeco argued that joinder would create delay and complicate the PGS IPR schedule. PGS, for its part, expressed concern that WesternGeco would seek to add a "substantial volume of testimony" from the ION litigation to the IPR proceeding. PGS added that such testimony would be highly prejudicial because it did not have the opportunity to participate in the ION lawsuit. After considering the arguments, the Board granted ION's request to join PGS's first round of IPRs, but restricted ION's role to "spectator" status, meaning that it had no right "to file papers, engage in discovery, or participate in any deposition or oral hearing." J.A. 13439. ION did not join the second round of IPRs.

         The Board issued six final written decisions (two decisions per patent), finding that various claims were either anticipated by or would have been obvious over several prior art references. See generally Petroleum Geo-Servs., Inc. v. WesternGeco L.L.C. (PGS I), No. IPR2014-00687, 2015 WL 10378275 (P.T.A.B. Dec. 15, 2015) (J.A. 1-44) (invalidating claims 1 and 15 of the '967 Patent); Petroleum Geo-Servs., Inc. v. WesternGeco L.L.C. (PGS II), No. IPR2014-00688, 2015 WL 10378495 (P.T.A.B. Dec. 15, 2015) (J.A. 45-99) (invalidating claims 1 and 15 of the '607 Patent); Petroleum Geo-Servs., Inc. v. WesternGeco L.L.C. (PGS III), No. IPR2014-00689, 2015 WL 10380984 (P.T.A.B. Dec. 15, 2015) (J.A. 100-52) (invalidating claims 1-2 and 18-19 of the '520 Patent); Petroleum Geo-Servs., Inc. v. WesternGeco L.L.C. (PGS IV), No. IPR2014-01475 (P.T.A.B. Mar. 16, 2016) (J.A. 153-216) (invalidating claim 4 of the '967 Patent); Petroleum Geo-Servs., Inc. v. WesternGeco L.L.C. (PGS V), No. IPR2014-01477 (P.T.A.B. Mar. 16, 2016) (J.A. 217-95) (invalidating claims 16-23 of the '607 Patent); Petroleum Geo-Servs., Inc. v. WesternGeco L.L.C. (PGS VI), No. IPR2014-01478 (P.T.A.B. Mar. 16, 2016) (J.A. 296-359) (invalidating claims 3, 5, 13-17, 20, 22, and 30-34 of the '520 Patent).

         WesternGeco appealed the Board's decisions in PGS I-VI to this court. The appeals were consolidated, listing both PGS and ION as Appellees. See Order at 1-2, ECF No. 27. In relevant part, WesternGeco argued that the Board deprived WesternGeco of due process and violated the Administrative Procedure Act by denying Western-Geco the opportunity to be heard on whether the inter partes reviews were time-barred pursuant to 35 U.S.C. § 315(b). WesternGeco also reserved rights to file additional briefing in light of our then-pending en banc reconsideration of Wi-Fi One, LLC v. Broadcom Corp., 837 F.3d 1329 (Fed. Cir. 2016). PGS filed a response brief, and ION "join[ed] in and adopt[ed] by reference" PGS's brief rather than filing its own. ION's Joinder in the Br. of PGS at 1, ECF No. 50; see Order at 2, ECF No. 51.

         After briefing was completed in this appeal, PGS settled with WesternGeco and filed a motion to withdraw. See PGS's Unopposed Mot. to Withdraw at 2, ECF No. 82. We granted PGS's motion, ordered the USPTO to inform the court whether it intended to intervene, and ordered WesternGeco and ION to file a joint status report. See Order at 2, ECF No. 86. The USPTO declined to intervene. Upon consideration of the parties' report, we ordered ION to file a new brief, addressing only PGS I-III, and permitted WesternGeco to file a new reply brief. Order at 2, ECF No. 92.

         Shortly before the date scheduled for oral argument, we issued our en banc decision in Wi-Fi One v. Broadcom Corp., 878 F.3d 1364 (Fed. Cir. 2018) (en banc). Wi-Fi One held that "time-bar determinations under [35 U.S.C.] § 315(b) are reviewable by this court" and overruled our prior contrary precedent. Id. at 1374. Consequently, WesternGeco requested leave to file supplemental briefing regarding the proper legal standard to determine whether a party is a "real party in interest, or privy of the petitioner" under 35 U.S.C. § 315(b) and whether ION was a "real party in interest" or a "privy of" of PGS. Notice at 1, ECF No. 107. We granted the request. Order at 2, ECF No. 108.

         Standards of Review

         We review Board decisions using the standard set forth in the Administrative Procedure Act (APA), 5 U.S.C. § 706 et seq. In re Sullivan, 362 F.3d 1324, 1326 (Fed. Cir. 2004) (citing Dickinson v. Zurko, 527 U.S. 150, 154 (1999)); see Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1080 (Fed. Cir. 2015). Under the APA, we must "hold unlawful and set aside agency action . . . not in accordance with law [or] . . . without observance of procedure required by law." 5 U.S.C. § 706.

         We review the Board's legal conclusions de novo but review for substantial evidence any underlying factual determinations. See Nike, Inc. v. Adidas AG, 812 F.3d 1326, 1332 (Fed. Cir. 2016); In re Giannelli, 739 F.3d 1375, 1378-79 (Fed. Cir. 2014). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938); In re Applied Materials, Inc., 692 F.3d 1289, 1294 (Fed. Cir. 2012).


         WesternGeco contends that the Board's decisions invalidating claims of the WesternGeco Patents are wrong on the merits and should be reversed. But WesternGeco argues we need not reach the merits because Wi-Fi One has made time-bar decisions under § 315(b) judicially reviewable, and, as a threshold matter, we should vacate and dismiss the petitions as time-barred. In Western-Geco's view, (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 Western-Geco 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 "privy" of PGS. Consequently, WesternGeco argues that the Board never should have instituted the requested IPRs because no party timely filed the petitions.[4]

          I. Time Bar Under 35 U.S.C. § 315(b)

         A. Legal Standard for Privity

         Section 315(b) of the Leahy-Smith America Invents Act (AIA), Pub. L. No. 112-29, § 3(b)(1), 125 Stat. 284, 287 (2011) provides that the USPTO may not institute an IPR where the petition "is filed more than 1 year after the date on which the petitioner, the real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent." 35 U.S.C. § 315(b) (emphases added).

         For purposes of this appeal, WesternGeco focuses on privity as the key basis of its time-bar challenge, reasoning that privity is more expansive in the types of parties it encompasses compared to real party in interest. See Appellant's Supp. Br. 8 n.5 (citing the USPTO Office Patent Trial Practice Guide, 77 Fed. Reg. 48, 756, 48, 759 (Aug. 14, 2012) (hereinafter, "Trial Practice Guide")).

         Neither the AIA nor the Patent Act defines the statutory term "privy." But "privy" is a well-established common-law term, and it is a "cardinal rule of statutory construction" that where Congress adopts a common-law term without supplying a definition, courts presume that Congress "knows and adopts the cluster of ideas that were attached" to the term. FAA v. Cooper, 566 U.S. 284, 291- 92 (2012); Microsoft Corp. v. i4i P'ship Ltd., 564 U.S. 91, 103-04 (2011). Where Congress adopts a term that is used in common law across multiple legal subjects, courts "cannot rely on any all-purpose definition but must con- sider the particular context in which the term appears." Cooper, 566 U.S. at 294.[5]

         The AIA's legislative history supports adopting the common law meaning of privity. The proposed administrative review procedures, including IPR, were intended to provide "quick and cost effective alternatives to litigation." H. Rep. No. 112-98, at 48 (2011). Another expressed congressional goal was to "establish a more efficient and streamlined patent system that will improve patent quality[.]" Id. at 40. At the same time, Congress recognized the importance of protecting patent owners from patent challengers who could use the new administrative review procedures as "tools for harassment." Id. ("While this amendment is intended to remove current disincentives to current administrative processes, the changes made by it are not to be used as tools for harassment or a means to prevent market entry through repeated litigation and administrative attacks on the validity of a patent.").

         In particular, Congress observed that the then-existing inter partes reexamination regime at times unfairly burdened patent owners in situations where a set of challengers coordinated reexamination attacks to tie up a patent in the administrative review process for an extended period. S. Rep. No. 111-18 at 54-55 (2009) ("It is not uncommon for the competitors of a patent's owner or licensee to coordinate their efforts and bring serial inter partes challenges to a patent, one after another, each raising a different set of prior art in its challenge.").

         To address this concern, Congress placed several restrictions on IPR petitioners. For example, it raised the substantive threshold standard that governs the Patent Office's institution of the agency's review process. Instead of requiring for IPRs, as for reexaminations, that a petitioner raise merely a "substantial new question of patentability, " the AIA requires a showing of "a reasonable likelihood that" the challenger would prevail with respect to at least one of the claims challenged in the petition. Compare 35 U.S.C. § 312(a) (2006) (repealed 2012), with id. § 314(a) (2012).

         The statute imposes other restrictions as well. A party cannot file an IPR petition against a patent after having already brought a declaratory judgment action challenging the validity of a claim of that patent. Id. § 315(a)(1). IPR is also barred for petitions filed more than one year after a party is served with a complaint alleging infringement of the patent. See id. § 315(b). And following a final written decision in an IPR, the petitioner is estopped from continuing to challenge the validity of the patent claims subject to that decision based on any grounds that the petition "raised or reasonably could have raised during" the IPR. See id. § 315(e). For § 315(b) and (e), these restrictions apply with equal force to an IPR petitioner, any "real party in interest" to that IPR, and any "privy of the petitioner."

         As one Senator observed, privity, as used in the AIA, "takes into account the 'practical situation, ' and should extend to parties to transactions and other activities relating to the property in question." 157 Cong. Rec. S1376 (daily ed. March 8, 2011) (statement of Sen. Kyl); see also 154 Cong. Rec. S9987 (daily ed. Sept. 27, 2008) (statement of Sen. Kyl) ("The concept of privity, of course, is borrowed from the common law of judgments."). The legislative history thus lends support to the conclusion that "privity" in § 315(b) should be given its common law meaning.

         Historically, common law definitions of privity were narrow and specific, denoting mutual succession or relationship to the same rights of property. See 18A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 4449 & n.32 (2d ed. 2017). Over time, its common law meaning expanded: "The term 'privity, ' however, has also come to be used more broadly, as a way to express the conclusion that nonparty preclusion is appropriate on any ground." Taylor v. Sturgell, 553 U.S. 880, 894 n.8 (2008) (citing 18A Wright & Miller § 4449, at 351-53 & n.33); Cal. Physicians' Serv. v. Aoki Diabetes Research Inst., 163 Cal.App.4th 1506, 1521 (Cal.App. 2008). As the Trial Practice Guide observes: "The emphasis is not on a concept of identity of parties, but on the practical situation." 77 Fed. Reg. at 48, 759 (quoting Cal. Physicians' Serv., 163 Cal.App.4th at 1521).

         The Trial Practice Guide further recognizes that "privity" has no universally-applicable common law definition. Id. "Privity is essentially a shorthand statement that collateral estoppel is to be applied in a given case." Id. (quoting Cal. Physicians' Serv., 163 Cal.App.4th at 1521). That is, the privity analysis seeks to determine "whether the relationship between the purported 'privy' and the relevant other party is sufficiently close such that both should be bound by the trial outcome and related estoppels." See id. Given that determining whether two parties may be in privity "is a highly fact-dependent question, " the Trial Practice Guide states the Board will engage in a "flexible" analysis on a "case-by-case basis." Id. In sum, these descriptions of the privity analysis in the Trial Practice Guide accurately reflect the common law considerations for a privity inquiry.

         But, importantly, the reach of privity cannot extend beyond the limits of due process. In Taylor v. Sturgell, the Supreme Court observed that a person who was not a party to a suit generally has not had a "full and fair opportunity to litigate" the claims and issues settled in that suit. 553 U.S. at 894. Because nonparty preclusion risks binding those who have not had a full and fair opportunity to litigate, the Supreme Court has cautioned that there is a general rule against nonparty preclusion, subject to certain exceptions. Id. at 892-93; see Aspex Eyewear, Inc. v. Zenni Optical, Inc., 713 F.3d 1377, 1382 (Fed. Cir. 2013) ("A full and fair opportunity to litigate is the touchstone of any ...

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