Quest Integrity USA LLC v. Clean Harbors Industrial Services Inc.

Filing 99

MEMORANDUM ORDER denying (7 in 1:14-cv-01482-SLR) MOTION for Preliminary Injunction filed by Quest Integrity USA LLC, (7 in 1:14-cv-01483-SLR) MOTION for Preliminary Injunction filed by Quest Integrity USA LLC. Signed by Judge Sue L. Robinson on 6/12/2015. Associated Cases: 1:14-cv-01482-SLR, 1:14-cv-01483-SLR(fms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

QUEST INTEGRITY USA, LLC,
Plaintiff,

v.
CLEAN HARBORS INDUSTRIAL
SERVICES, INC.,
Defendant.

QUEST INTEGRITY USA, LLC,
Plaintiff,

v.
COKEBUSTERS USA INC.,
Defendant.

)
)
)
)
) Civ. No. 14-1482-SLR
)
)
)
)
)

)
)
)
)
) Civ. No. 14-1483-SLR
)
)
)
)

MEMORANDUM ORDER

At Wilmington this \J*'day of June, 2015, having reviewed the pending motions
for a preliminary injunction filed by plaintiff Quest Integrity USA, LLC ("Quest") in the
above captioned litigation, as well as the papers filed in connection therewith, and
having heard oral argument on the same;
IT IS ORDERED that the motions (D.I. 7) 1 are denied, for the reasons that follow:
1. Procedural background. Quest initiated the above law suits on December
1

note.

If the docket item numbers differ as between the two cases, the court will so

15, 2014, by filing complaints against Clean Harbors Industrial Services, Inc. ("Clean
Harbors") and Cokebusters USA Inc. ("Cokebusters") (collectively, "defendants")2
asserting infringement of U.S. Patent No. 7,542,874 ("the '874 patent"), entitled "2D and
3D Display System and Method for Furnace Tube Inspection." (D.I. 1, Ex. A) Quest
seeks a preliminary injunction against the defendants, asserting that they have begun to
use infringing furnace tube inspection systems. Defendants oppose the relief, arguing
that they do not infringe and that the '87 4 patent is invalid.
2. Plaintiff Quest is a limited liability company organized and existing under the
laws of the State of Texas and having its principal place of business in Kent,
Washington. Defendant Clean Harbors is a corporation organized and existing under
the laws of the State of Delaware and having its principal place of business in Norwell,
Massachusetts. Defendant Cokebusters is a corporation organized and existing under
the laws of the State of Delaware and having its principal place of business in Houston,
Texas. The court has original subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331
and 1338(a). Venue is proper in the District of Delaware pursuant to 28 U.S.C. §§
1391(b)-(c) and 1400(b).
3. Factual background. In order to convert highly flammable raw petroleum
into useful products such as jet fuel and diesel oil, refineries heat process fluids using
"furnaces" comprised of a heat source surrounded by serpentine furnace tubing.
Because furnace tubes operate under extreme pressure in close proximity with highly
flammable petroleum products, an undetected loss of furnace tube integrity can lead to

2

Quest also filed a complaint against A. Hak Industrial Services US LLC, Civ. No.
14-1481, but that suit has since been voluntarily dismissed. (D.I. 24)

2

"hazardous health and catastrophic safety conditions, including fire and explosion."
(D.I. 8 at 2)
4. To manage such operational risks, refineries periodically shut down for
"planned turnarounds" to perform inspections and maintenance. During planned
turnarounds, refineries typically: (a) clean furnace tubes; (b) inspect furnace tubes to
detect loss of integrity; and (c) fix damaged furnace tubes identified during the
inspection. Defendants have traditionally performed the first of the above steps,
cleaning furnace tubes to remove residual coke. Quest's work traditionally has followed
"de-coking" companies, performing the second step with its FTIS TM furnace tube
inspection system. 3 Refineries would then use Quest's inspection data to complete the
final step. (Id.) Not surprisingly, a refinery that is shut down is not making money;
therefore, a system that improves the efficiency of the periodic inspections and
maintenance would be valuable.
5. Prior art technology. The prior state of furnace tube inspection system art
includes external furnace tube inspection, which involves random spot check
measurements of furnace tube wall thickness and a visual search for exterior tube
damage. "This approach is slow and inaccurate, leaving many flaws undetected,
especially for inaccessible tubes." (D.I. 8 at 3) The next advance in the industry came
in the 1990s and involved the use of "internal ultrasonic inspection 'pigs"'4 which "were

3

"FTIS" stands for Furnace Tube Inspection Services.

4

According to the declaration of Richard Roberts, the Vice President and General
Manager of Quest, the word "pig" as used in the oil refinery industry may be related to
"a squealing noise made by the earliest devices while traveling through the pipe;
alternately, it has also been [an] acronym derived from the initial letters of the term

3

capable of gathering improved data over manual inspection, but they remained an
inaccurate and time consuming option." (D.I. 11, 1f 18) More specifically, the inspection
tool collected inspection data at pre-determined time intervals as it progressed through
the furnace. The collected inspection data was extracted and the various readings
were converted to "calibrated engineering units" which were then examined by an
engineer "in order to identify thinning, bulging and other flaws within the furnace." ('87 4
patent, col. 1:53-64) As further described by the inventors of the '87 4 patent,
[o]ne problem with the furnace tube inspection systems of the prior art
is that it is difficult to correlate the inspection data collected from the furnace
with the physical geometry of the furnace. This is due to the fact[, inter alia,]
that the inspection tool does not progress through the furnace at a constant
rate .... All of these conditions generate a correlation (i.e., mapping or
scaling) problem between the collected inspection data and the precise
location of the inspection tool with respect to the physical geometry of the
furnace ....
Another problem with the furnace tube inspection systems of the prior
art is that the inspection data is not displayed in a manner that readily
"announces" problem areas within the furnace. Conventionally, the
inspection data has been presented in a one-dimensional tabular format,
which is deficient in that an engineer must peruse each line of data to
determine if a potential problem has arisen. It can be appreciated that this
method of examining the inspection data is time-consuming, inefficient,
and does not readily permit a comparison between one section of tubing
and another.

I

'

!
(Id. at col. 1:65-col. 2:29) As a result of these inefficiencies, "most large refineries
found inspection pigs unreliable and continued using external furnace tube inspections."

i

I

I

I

(D.I. 8 at 4)

1

I

6. '874 patent. As explained in the specification, in order to solve the
correlation problem, the system of the '87 4 patent includes a computer "that may be

i

I

I
l
~

'Pipeline Inspection Gauge' or 'Pipeline Intervention Gadget."' (D.I. 11 at 4 n.1)

4

f

programmed to generate a plurality of data markers in relation to the inspection data,
wherein each of the data markers identifies a location of a physical feature of the
furnace (such as a bend, an external raised surface, cross-over piping, a thermal well, a
weld, a flange, a schedule change and/or a diameter change)." ('874 patent, col. 2:5965) "The computer is also programmed to partition the inspection data at the data
markers so as to correlate the inspection data to the appropriate tube segments of the
furnace." (Id. at col. 3:21-23)
7. In order to solve the "reporting" problem, "[p]referably, the computer is further
programmed to generate a display of the partitioned inspection data, wherein the
display is a two-dimensional or three-dimensional representation of one or more of the
tube segments of the furnace." (Id. at col. 3:23-27) "The display may be used to
visually detect problem areas within the furnace so that the appropriate tube segments
may be repaired or replaced by the plant maintenance personnel." (Id. at col. 3:27-30)
8. It is important to note that figure 1OA specifically forecasts the fact that there
are two primary embodiments captured by the claims5 of the '87 4 patent, the "semi-

5

lndependent claim 1 and dependent claim 3 are representative of such:

1. A system for displaying inspection data collected from a furnace
with a specified physical geometry, wherein said furnace comprises a
plurality of tube segments interconnected by a plurality of bends so as
to allow stacking of at least a portion of said tube segments, said system
comprising:
a storage device for storing said inspection data; and
a computer programmed to:
partition said inspection data at a plurality of data markers each
of which identifies a location of a physical feature of said
furnace so as to correlate said inspection data to said physical
physical geometry of said furnace;
generate a display of at least a portion of said partitioned inspection

5

automatic" and the "automatic" embodiments. In the former (disclosed in examples 1-3
and arguably disclosed in independent claims 1, 11 and 33), a data analyst may
analyze the computer generated display of data and input bend location information into
the computer so that the computer can generate data markers. In the latter (disclosed
in example 4 and arguably disclosed in independent claims 24 and 40), the computer is
programmed to analyze the inspection data in order to generate the data markers.
Both embodiments use a computer to "partition" the inspection data at the data markers
in order to correlate the inspection data to the physical geometry of the furnace, and
then to generate a display of the inspection data reflecting such.
9. A further observation from the specification: The inventors of the '87 4 patent
contemplated the use of "relational data" in the storage device that, along with
"inspection data," help in generating the data markers that identify the locations of, e.g.,
furnace bends. A "plurality of time intervals" is one example given of such relational
data. (See, e.g., col. 7:16-28; figures 3, 4, and 8)
10. The parties have not asked the court to construe any claim limitations,
instead relying on "plain and ordinary meaning." It is apparent to the court, however,

data arranged to represent said physical geometry of a plurality of
said tube segments and enable visual detection of a problem area
comprising one or more of said tube segments; and
wherein said inspection data is collected by one or more devices selected
from the following group: an ultrasonic transducer, a laser profilometer, and combinations thereof.
3. The system of claim 1, wherein said computer is further programmed
to generate said data markers based upon input from a data analyst.
('87 4 patent, col. 16:24-50)

6

that the language used in the claims should be construed broadly in light of the
specification, especially the words "correlate" and "represent" in the context of the
introductory word "comprising" used in the independent claims. Quest's experts Dr.
Robert Caligiuri and Dr. Srinivasan Jagannathan did include in their supplemental and
rebuttal declaration the "plain and ordinary meaning" of three limitations, to wit:
38. The term "bend" means a connection between tube segments that
allows for a change in orientation.
39. The term "partitioning the inspection data" in the '874 [p]atent refers to
dividing the inspection data into subsets of smaller size.
40. The term "generate a display of at least a portion of said partitioned
inspection data arranged to represent said physical geometry" means to
create a visual representation of at least a portion of the inspection data
in a manner corresponding to the physical arrangement of tube segments.
(Civ. No. 14-1483, D.I. 96 at 8) The dictionary definition of the word "represent"
includes the following: "to serve as a sign or symbol," to portray by pictorial art:
delineate, depict," "to serve as the counterpart or image of; typify." Webster's Third
New Int'/ Dictionary 1926 (3d ed. 1993). "Correlate" is defined in the dictionary as "to
put in relation with each other: connect systematically," id. at 511, and referred to in the
patent as "mapping or scaling" ('874 patent, col. 2:14).
11. Legal standard. "The decision to grant or deny ... injunctive relief is an act
of equitable discretion by the district court." eBay, Inc. v. MercExchange, LLC, 547
U.S. 388, 391 (2006); Abbott Labs. v. Andrx Pharm., Inc., 452 F.3d 1331, 1334 (Fed.
Cir. 2006). The grant of such relief is considered an "extraordinary remedy" that should
be granted only in "limited circumstances." See Kos Pharma., Inc. v. Andrx Corp., 369
F.3d 700, 708 (3d Cir. 2004) (citation omitted). A party seeking preliminary injunction

7

relief must demonstrate: (1) a reasonable likelihood of success on the merits; (2) the
prospect of irreparable harm in the absence of an injunction; (3) that this harm would
exceed harm to the opposing party; and (4) the public interest favors such relief. See,
e.g., Sciele Pharma Inc. v. Lupin Ltd., 684 F.3d 1253, 1259 (Fed. Cir. 2012); Abbott
Labs

v. Sandoz, Inc., 544 F.3d 1341, 1344 (Fed. Cir. 2008). "If either or both of the

fundamental requirements -- likelihood of success on the merits and probability of
irreparable harm if relief is not granted -- are absent, an injunction cannot issue."
Antares Pharma., Inc. v. Medac Pharma., Inc., 55 F. Supp. 3d 526, 529 (D. Del. 2014)
(citing McKeesport Hosp. v. Accreditation Council for Graduate Med. Educ., 24 F.3d
519, 523 (3d Cir. 1994)).
12. At the preliminary injunction stage of a case, the movant '"must demonstrate
that ... at least one of [the] allegedly infringed claims will ... likely withstand the
validity challenges presented by the accused infringer."' Abbott Labs., 452 F.3d at 1335
(citation omitted).
As to the burden regarding invalidity allegations, "[v]alidity challenges
during preliminary injunction proceedings can be successful, that is,
they may raise substantial questions of invalidity, on evidence that
would not suffice to support a judgment of invalidity at trial." ... In
resisting a preliminary injunction, however, one need not make out a
case of actual invalidity. Vulnerability is the issue at the preliminary
injunction stage, while validity is the issue at trial. The showing of a
substantial question as to invalidity thus requires less proof than the
clear and convincing showing necessary to establish invalidity at
trial.
Id. (citation omitted).
13. Even if a movant demonstrates a likelihood of success on the merits, there
is no presumption of irreparable harm. See, e.g., eBay, 547 U.S. at 393. To establish

8

response, Quest argues that there is nothing in the patent which requires that the data
be partitioned during inspection. The fact that "inspection data [is] displayed onto
proper tube segments ... requires that the system partition the data at the bends to
properly arrange the data to the correct tube segment" (Civ. No. 14-1483, D.I. 93 at 2);
i.e., "the display inherently shows partitioned inspection data," regardless of when the
"partitioning" occurs. (Id.; 0.1. 96, 1J 100) At least to the extent the asserted claims of
the '874 patent are system claims, the court concludes that Quest has made a prima
facie showing of infringement by the CB system.
16. Likelihood of success on the merits: Invalidity. In the papers, the
parties address (in a not very helpful way) multiple prior art references. The court shall
address one, 6 the February 17-23, 2003 final report prepared by Quest for Orion Norco
Refining located in Norco, Louisianna. (Civ. No. 14-1483, 0.1. 61, ex. 12A) ("the Norco
Report") Quest, in the Norco Report, provides an explanation of the process employed
by its then current FTIS™. After the inspection of the furnace by the "FTIS™ Intelligent
Pig" is completed and "[o]nce the ultrasonic data is processed, it is then stored for
downloading to the data station at the end of the inspection." (Id. at 3)
The data analysis computer is a rugged, Pentium®-based portable
computer that utilizes the Windows NT®/XP® system. This computer is
provided with the custom FTIS application software. The FTIS software
enables the operator to configure the FTIS tool, download data from Flash
RAM, and process and display collected data.
6

The '874 patent claims priority from U.S. Provisional Patent Application No.
60/576,276, which was filed on June 1, 2004, the "critical date." A patent is invalid if the
invention was "in public use or on sale in this country more than one year prior to the
date of application in the United States." 35 U.S.C. § 102(b). Defendants contend,
inter alia, that Quest began publicly using versions of the FTIS system that embodied
every element in the asserted claims before the critical date of June 1, 2004.
11 '

Inc., 239 F.3d 1343, 1351 (Fed. Cir. 2001) ("Because the claims of a patent measure the
invention at issue, the claims must be interpreted and given the same meaning for
purposes of both validity and infringement analyses."). As explained above, the claims
and the specification of the '874 patent (including the figures) inform the court as to the
scope of the invention disclosed and support a broad interpretation of the patent. Quest
agreed with such an interpretation when it argued, for infringement purposes, that it did
not matter when or how data partitioning is done, so long as the ultimate display
included data that was organized in a way that looked like the physical geometry of the
furnace. The court finds that the broad scope of the '874 patent likewise encompasses
the Norco Report.
18. Quest contends that the Norco Report is not invalidating prior art:
As is apparent, the display of the time strip charts are arranged to
represent the passage of time - not the "physical geometry" of the furnace
tube .... To be arranged to represent the physical geometry of the coil
system, the data must be displayed in the same orientation of the tube
coils so as to allow the user to easily identify a displayed problem in the
actual furnace tubes and identify grouped problems across the physical
geometry of the furnace .... In addition, in order to "partition at data
markers" as required by the ['87 4 patent,] the data must be separated
at data markers collected from the system. Here, in contrast, they merely
display data over time.
(Civ. No. 14-1482, D.I. 78 at 3)
19. Ironically, there is no figure in the '874 patent that represents the data as
described by Quest above, and as embodied in the latest version of Quest's FTIS™
commercial product. Instead, figures 3 and 4 of example 1 of the patent (called "strip
charts," as was figure 3 of the Norco Report) only display inspection data collected over
time. In example 1 of the '874 patent, it is contemplated that a data analyst would

14

further inspect the strip charts "in order to identify the locations of the furnace bends."
(Col. 10:47-48)
While analyzing strip chart 300 and/or strip chart 400, the data
analyst moves a mouse across the horizontal strips and marks the
locations of the furnace bends by clicking on the appropriate positions
on the strip charts. Based upon this input from the data analyst,
computer 102 is programmed to generate the date markers and place
a roman numeral (signifying the tube segment number) followed by an
"x" above the positions marked by the data analyst. The various
readings are thus partitioned at the data markers to thereby correlate
the readings to the appropriate tube segments of the furnace.
(Col. 10:58-67) (emphasis added) The above example is consistent with the explanation
in the Norco Report. It is evident that the inspection data in the Norco Report has been
divided into subsets of smaller size, i.e., according to data markers (return bends). The
resulting display, while not as user-friendly as any of the contemporary systems, still
presents the inspection data in a way that "maps" or "connects systematically" the data
to the physical geometry of the furnace.
20. The court concludes that there is nothing in the specification or claims of the
'874 patent that requires the inventive system to perform 7 or look8 exactly like Quest's
latest commercial iteration of its FTIS TM, so long as the inspection data can be displayed
in a way that suggests data markers representing the physical geometry of the furnace.
The Norco Report discloses all three of the "partitioning," "correlating," and

7

Recall that Quest's infringement position embraced systems that manually
partition the data or arguably do not partition the data at all.
8

According to Cokebusters, "2D/3D displays were not invented by Quest, and
were being used before the critical date to display the geometry of many objects
including furnace coils." (Civ. No. 14-1483, D.I. 102 at 6)
15

"representing" limitations. Defendants have raised a substantial question of invalidity. 9
21. Irreparable harm. Even if Quest had demonstrated a likelihood of success
on the merits, the court finds that Quest has not carried its burden to clearly establish
irreparable harm. In this regard, Quest asserted five types of irreparable harm.
a. Lost market share. The court recognizes that Quest and defendants
are direct competitors. For purposes of these proceedings, the court will assume that
defendants are now offering their inspection services as a free or discounted add-on to
their de-coking contracts. (D.I. 8 at 6) Quest estimates that it has lost at least one
inspection job to Clean Harbors in the past eight months (Civ. No. 14-1482, D.I. 78 at
11 ), and has lost at least two inspection jobs to Cokebusters in the past 12 months (Civ.
No. 14-1483, D.I. 93 at 11 ). According to Quest, because many of Quest's customers
are price sensitive, Quest "risks the loss of up to half of its FTIS business absent
preliminary injunctive relief." (Civ. No. 14-1482, D.I. 78 at 11; Civ. No. 14-1483, D.I. 93
at 11)
b. Price erosion. According to Quest, its customers have begun to
request pricing discounts to match defendants' lower pricing. "Absent injunctive relief,
Quest anticipates a need to lower pricing in order to prevent even more lost sales." (Civ.
No. 1482, D.I. 78 at 11 )10

9

Given the court's conclusion on invalidity under§ 102(b), defendants have also
raised substantial questions of invalidity under§ 103. (See, e.g., Civ. No. 14-1483, D.I.
54 at 2-10)
1

°The court notes that competition generally reduces prices, and even the
documents relied on by Quest suggest that the free inspection services are a temporary
marketing strategy. (See, e.g., Civ. No. 14-1482, D.I. 81, 1f 78)

16

c. Laying off trained field technicians. Quest has grown its field
technician workforce from 2 to 31 technicians during the time period 2005-2014. "Any
significant reduction in revenue due to the [d]efendants' continued alleged infringement
will likely force Quest to lay off a portion of its field technician workforce." (D.I. 9,

1f 81)

d. Lost opportunities. Quest has launched a new program to expand the
market to include smaller refineries, which have not previously used Quest's system
because they are "price sensitive." (D.I. 8 at 16) Quest suggests that such potential
customers will likely choose defendants' less expensive systems. "The irreversible
damage from this lost opportunity will be incalculable due to the lack of historical
transaction pricing in this new market." (Id.)
e. Loss of good will and reputation. Mr. Carter (a Quest expert) has
opined that, if defendants are permitted to continue infringing, Quest's "reputation may
be harmed due to the defendants' inferior inspection systems and services." (D.I. 9,

1l

95) Based on discussions with Mr. Roberts, 11 Mr. Carter states that "[t]he customer
views the poorly collected data using the accused display technology and then likely
associates the inferior inspection service with the patented technology." (Id. and at
n.144)
22. As noted above, Quest must "clearly establish" that monetary damages will
not suffice and that the alleged harm is related to the alleged infringing features of the
accused inspection services. Quest has failed to meet its burden. Quest has not even
attempted to analyze the relative importance of patented versus non-patented features
11

Discussions with Mr. Roberts form much of the basis of Mr. Carter's opinion on
the issue of irreparable harm.
17

and has tacitly conceded that several of the initially raised factors cannot be
demonstrated. (See Civ. No. 14-1483, D.I. 93 at 11) And although the court recognizes
that, to some extent, the irreparable harm analysis is a forward-looking exercise,
nevertheless, the court is not persuaded that Quest has demonstrated that defendants
pose a threat of irreparable harm if allowed to compete, given the size of the market, the
large number of refineries, and the fact that the parties have been competing for years.
(See Civ. No. 14-1483, D.I. 102 at 10)
23. Balance of harms. This factor is neutral or weighs in favor of defendants.
All the parties stand to either lose or gain sales and market share, depending on
whether Quest remains a legal monopolist or not. If Quest were the only entity able to
perform inspection services, however, Quest would be able to have preferred
relationships with particular de-coking companies to the detriment of others. Both
defendants would be harmed if Quest refused to work with them, or charged customers
higher rates to work with them.
24. Public harm. This factor is neutral. The public has an interest in protecting
valid patents. On the other hand, as the commercial technology improves and more
refineries (e.g., the smaller ones) embrace inspection systems like Quest's FTIS™, it
may not be in the public interest to have a single provider of inspection services, not only
in terms of pricing and but in terms of capacity and satisfying maket demand.

18

25. Conclusion. For the reasons stated, the court denies the pending motions
seeking a preliminary injunction. (D.I. 7)

19