Oilfield Service Patent Contests Get Heated

Abstract

From the highest courts of the US judicial branch to the C-suite, contests involving patents have recently come to the fore in the innovation-hungry US oilfield services industry, even as filings and litigation have recently declined. In the past few months, the US Supreme Court has ruled on two disputes involving oilfield services firms, providing guidance on the extent to which patent protection applies beyond US borders and reaffirming a controversial process by which a patent’s validity is reexamined. The decisions come as companies adopt a more tactical approach in their pursuit and defense of intellectual property (IP). The most recent ruling, which came in June, found that Schlumberger’s geophysical services subsidiary WesternGeco could recover lost profits for infringement abroad of four of its US patents by rival Ion Geophysical. The technology in question involved control systems for marine seismic streamer steering devices, separately falling under WesternGeco’s Q-Marine brand and Ion’s DigiFin brand. Ion was shipping the components overseas to customers, which then assembled the technology for their own use. The first chapter of the saga came in 2012 when a federal jury ruled in favor of WesternGeco in its infringement suit against Ion, finding that the practice caused WesternGeco to lose multiple survey contracts. The case was turned on its head, however, when an appeal by Ion resulted in the US Court of Appeals for the Federal Circuit reversing the lost profit award. A subsequent appeal by WesternGeco elevated the case to the US Supreme Court. While Ion’s appeal was pending, the companies were involved in separate proceedings, initiated by Petroleum Geo-Services, that challenged the validity of the WesternGeco patents before the Patent Trial and Appeal Board (PTAB) under a process called inter partes review (IPR). Challenged in the other US Supreme Court decision this year involving oilfield service firms, IPR is a procedure that takes a patent challenge to the US Patent and Trademark Office (USPTO) rather than before a jury in a district court. The PTAB invalidated the four patent claims that formed the basis for the federal jury verdict, and, upon appeal by WesternGeco, the Federal Circuit in May determined that three of the four patents were invalid. Meanwhile, in the original case, the US Supreme Court in June ruled in a 7–2 decision that infringement did occur under Section 271 of the Patent Act—which covers the exporting of components for a patented invention for assembly abroad—and that WesternGeco was in fact entitled to lost-profit damages for infringement. The court determined that “the conduct in this case that is relevant to the statutory focus clearly occurred in the United States.” In a subsequent statement to JPT, Schlumberger said it was “pleased” with the high court’s decision. “More importantly,” the company said, the ruling “reinforces our position that, as a technology innovator, we receive the full protection of the Patent Act against those who infringe US patents.”