Dynamic 3D Geosolutions LLC v. Schlumberger Limited

837 F.3d 1280, 2016 U.S. App. LEXIS 16645, 2016 WL 4729505
CourtCourt of Appeals for the Federal Circuit
DecidedSeptember 12, 2016
Docket2015-1628, 2015-1629
StatusPublished
Cited by3 cases

This text of 837 F.3d 1280 (Dynamic 3D Geosolutions LLC v. Schlumberger Limited) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dynamic 3D Geosolutions LLC v. Schlumberger Limited, 837 F.3d 1280, 2016 U.S. App. LEXIS 16645, 2016 WL 4729505 (Fed. Cir. 2016).

Opinions

Concurring opinion filed by Circuit Judge WALLACH.

[1282]*1282LOURIE, Circuit Judge.

Dynamic 3D Geosolutions LLC (“Dynamic 3D”), along with Acacia Research Corporation and Acacia Research Group LLC (collectively, “Acacia”), appeal from the decision of the United States District Court for the Western District of Texas disqualifying counsel and dismissing its patent infringement complaint without prejudice. Dynamic 3D Geosolutions LLC v. Schlumberger Ltd., No. A-14-CV-112LY, 2015 WL 4578681 (W.D. Tex. Mar. 31, 2015) (“Order”). Because the district court did not err in disqualifying Dynamic 3D’s counsel and in dismissing the complaint, we affirm.

Backgeound

In 2006, Schlumberger hired Charlotte Rutherford in a senior counsel position as Manager of Intellectual Property Enforcement, in licensing and litigation; promoted her to Director of Intellectual Property in 2009; and then promoted her again to Deputy General Counsel for Intellectual Property. Her job duties included “developing and implementing the worldwide IP strategy,” “protecting and preserving [Schlum-berger’s] IP assets including patents, trademarks and trade secrets,” and “ad-vis[ing] senior [Schlumberger] executives regarding risk issues relating to IP.” Joint App. (“J.A.”) 958. She was also responsible for the company’s worldwide program for enforcing intellectual property, including litigation, and directed and supervised outside counsel on intellectual property legal matters. Id.

As part of her work at Schlumberger, Rutherford managed a copyright lawsuit involving Petrel, Schlumberger’s software platform for three-dimensional visualization, mapping, and reservoir modeling of oil wells. She was also involved in a “Goldstar” project that evaluated further patentable aspects of Petrel and assessed the risk of lawsuits against it. One competitor’s product analyzed during this project was Austin Geomodeling’s RECON software. Austin Geomodeling filed a patent application in 2007 that eventually issued as U.S. Patent 7,986,319 (“the ’319 patent”) in 2011. RECON is supposedly the commercial embodiment of the ’319 patent, which is directed to systems and methods of combining seismic and well log data into a real-time, interactive three-dimensional display.

In mid-2013, after seven years at Schlumberger, Rutherford left Schlumber-ger and soon thereafter began working as Senior Vice President and Associate General Counsel at Acacia Research Group LLC. Acacia Research Group LLC is a wholly-owned subsidiary of Acacia Research Corporation, the parent company of various patent-holding entities, including Dynamic 3D.

Shortly after joining Acacia, Rutherford twice met with the inventors of the ’319 patent to discuss Acacia’s acquisition of the patent and possible future litigation. J.A. 755-56, 760, 762. She also participated in a telephone call with the law firm of Collins, Edmonds, Pogorzelski, Schlather & Tower PLLC (“CEP”) and one of her subordinates, Gary Fischman, regarding the ’319 patent. J.A. 765. Schlumberger’s Petrel product was discussed as a potential target of patent infringement litigation, at the meetings and in the call. See, e.g., J.A. 759-761, 764, 766, 828-829, 831. Fischman and CEP then prepared a recommendation to Acacia’s CEO to acquire the ’319 patent and to sue Schlumberger and others, and Rutherford “approved” or “concurred” in that recommendation. J.A. 769-71, 774-77. Rutherford and Fischman also jointly made the decision to hire CEP as outside counsel. J.A. 784-85. Acacia subsequently retained CEP for all ’319 patent-related litigation and acquired the patent. Dynam[1283]*1283ic 3D was formed as a. wholly-owned subsidiary of Acacia, and days later was assigned the ’319 patent on December 9, 2013. Order at *1. Dynamic 3D, at least as of May 201.4, had no employees.

In February 2014, Dynamic 3D filed several lawsuits, including one asserting that Schlumberger, in its use and sale of Petrel, infringed the ’319 patent. The complaint alleges actual knowledge of the ’319 patent by Schlumberger as early as the issuance of the patent in July 2011. The district court stayed the case except for limited claim construction discovery. Schlumberger raised Rutherford’s potential conflict of interest to the court in April 2014. After a stay was lifted in August, Schlumberger filed a motion to disqualify Dynamic 3D’s counsel. The district court granted Schlumberger’s motion, disqualifying Rutherford, other in-house counsel for Acacia Research Corporation and its subsidiaries, and the CEP firm from representing Dynamic 3D in the instant case.

Relatedly, Schlumberger sued Rutherford' in Texas state court in March 2014, presenting evidence that she retained copies of confidential and privileged information, including that relating to Petrel, for purposes of providing it to Acacia. The court dismissed all but the breach-of-contract claim for violating her confidentiality agreement, finding that the Texas anti-SLAPP statute protected Rutherford’s First Amendment rights to petition and association, viz., her “communication” of a “concurrence with the recommendation by outside counsel and in-house counsel to acquire the [’]319 patent and to sue Schlumberger.” J.A. 825, 828. The court sanctioned Schlumberger for bringing the suit, ordering payment of $600,000 in attorneys’ fees and sanctions. Schlumberger challenged the decision to dismiss almost all of the claims, but the state appellate court dismissed that appeal for lack of jurisdiction over an- interlocutory appeal. These issues are not before us in this appeal.

The district court in this case first found that Rutherford’s work at Schlumberger was substantially related to her current work at Acacia. The court found that because the accused features of Petrel existed in the older versions that Rutherford was exposed to, and because she was .involved at Schlumberger in efforts to license Petrel to other companies, the evidence created an irrebuttable presumption that she acquired confidential information requiring her disqualification. Order at *5.

The district court then determined that the acquired knowledge should be imputed to all Acacia attorneys for purposes of participating in Dynamic 3D’s suit against Schlumberger. The court noted that conflict rules for “firms” also apply to corporate legal departments, and that Dynamic 3D depended entirely on Acacia’s legal department for its strategy and litigation conduct.: Order at *5-6. The court was persuaded by evidence of Rutherford’s involvement in acquiring the ’319 patent, in deciding to sue Schlumberger, and in retaining CEP. Order at *6. The court found that Dynamic 3D failed to rebut the presumption of disclosure of Schlumberger’s confidential information, and thus disqualified in-house counsel for Acacia Research Corporation and its subsidiaries. Id.

The district court lastly extended' the disqualification to CEP, interpreting Fifth Circuit case law on disqualifying co-counsel as shifting the evidentiary burden to Dynamic 3D to prove non-disclosure after Schlumberger met its burden to create a rebuttable presumption of disclosure. Order at *7. The court found that the evidence showed multiple communications among Rutherford, Fischman, and CEP while preparing to file suit against Schlum-berger. Id.- As Fischman continued to not [1284]*1284only actively work with CEP in this case but also communicate information regarding the litigation to Rutherford, the court also disqualified CEP. Id.

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837 F.3d 1280, 2016 U.S. App. LEXIS 16645, 2016 WL 4729505, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dynamic-3d-geosolutions-llc-v-schlumberger-limited-cafc-2016.