Baker Hughes Oilfield Operations, Inc., v. Packers Plus Energy Services Inc et al
Filing
61
OPINION AND ORDER. Defendant's Motion to Dismiss 26 is DENIED without prejudice. Baker Hughes' Motion to Compel 34 as to the "coatings" documents is GRANTED.(Signed by Judge Melinda Harmon) Parties notified.(rhawkins)
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
BAKER HUGHES OILFIELD OPERATIONS §
LLC,
§
§
Plaintiff,
§
VS.
§
§
PACKERS PLUS ENERGY SERVICES INC, §
et al,
§
§
Defendants.
§
March 06, 2018
David J. Bradley, Clerk
CIVIL ACTION NO. 4:17-CV-1422
OPINION AND ORDER
Pending before the Court in the above-referenced cause, and under FED. R. CIV. P.
12(b)(6), is Defendants Packers Plus Energy Services Inc. and Packers Plus Energy Services
(USA) Inc.’s (together, “Packers Plus”) Motion to Dismiss, Doc. 26, Plaintiff Baker Hughes
Oilfield Operations LLC’s (“Baker Hughes”) Complaint for Patent Infringement (“Complaint”),
Doc. 1, Baker Hughes’s Response, Doc. 27, and Packers Plus’s Response, Doc. 28. Also before
the Court is Baker Hughes’s Motion to Compel Production of Technical Materials, Doc. 34,
Packer Plus’s Response, Doc. 40, and Baker Hughes’s Reply, Doc. 43. Having considered the
Motions, the facts in the record, and the applicable law, the Court concludes that Packer Plus’s
Motion should be denied and Baker Hughes’ Motion should be granted.
Baker Hughes and Packers Plus supply specialized ball-actuated valves to frack oil wells.
The valves open when a ball sits in a seat, allowing pressure to force the seat downhole, opening
the valve. At issue is Baker Hughes’s patent infringement claim and discovery concerning the
pluggable seat in these valves.
I.
Background
On May 8, 2017, Baker Hughes filed this lawsuit against Packers Plus, alleging
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infringement of U.S. Patent No. 8,365,829 (“the ’829 Patent”). Doc. 1. Packers Plus filed its
Motion to Dismiss, Doc. 26. The parties next entered into a Joint Discovery/Case Management
Plan wherein the parties disputed whether Baker Hughes should be allowed discovery under
Local Patent Rule 2-1(b) prior to filing its Preliminary Infringement Contentions under Local
Patent Rule 3-1. Doc. 29 at 11–15. And a discovery dispute ensued. Docs. 34, 40, & 43. Baker
Hughes’s Motion to Compel was referred to Magistrate Judge Stacy, Doc. 35, but was referred
back to the Court.
Subsequently, Baker Hughes filed its Motion for Leave to file its First Amended
Complaint (“FAC”), Doc. 54-1, which was initially opposed by Packers Plus. But on February
20, 2018, Packers Plus withdrew its opposition to the FAC. Doc. 56 at 1. The Court then granted
Baker Hughes’s motion, and Baker Hughes filed its FAC. Doc. 59.
In its Motion to Dismiss, Packers Plus asks the Court “Whether Baker Hughes fails to
plead facts sufficient to state a plausible claim for patent infringement against Packers Plus.”
Doc. 26 at 5. The Court first addresses the Motion to Dismiss before addressing the Motion to
Compel.
Allegations of Baker Hughe’s First Amended Complaint (#59)
In its FAC, Baker Hughes alleges the ‘829 Patent is “used with ball-drop fracking
systems.” Doc. 59 at 5. A ball-drop fracking system is illustrated in Baker Hughes’s Motion to
Compel, and is included here as a conceptual reference only:
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Doc. 34 at 6.1
Within the ball-activated sliding sleeve, the ‘829 Patent includes a “pluggable seat”
composed of two portions: First, an upstream cup that frequently holds a ball, described in the
patent as a “frustoconical surface,” or a bottomless cup, “receptive to a runnable member,”
usually a ball; and second, a downstream portion to prevent the ball from going through the cup,
described as a “profile” within a “smaller” “radial dimension” “configured to increase resistance
to extrusion of a runnable member past the pluggable seat,” or something to stop the ball. Doc.
59 at 4–5, 30 (‘829 Patent Claim 1). To increase resistance, the profile may use “one or more
teeth, while in others it comprises a chamfer, knurl, serration, or buttress,” Claims 2, 3, 7, 8, 9, or
“a material attached to the pluggable seat” “to increase friction”, Claims 10 & 13, or “require
greater pressure to extrude the ball therepast,” Claim 11. Doc. 59 at 5, 30. Also, according to
Baker Hughes, the pluggable seat allows for “minimal material overlap” which “increase[es] the
1
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Baker Hughes also includes a video in its motion Motion
https://www.youtube.com/watch?v=vE6VrhHJ0x0. Doc. 34 at 5.
to
Compel:
stage count in ball-drop fracking systems,” or in other words, smaller seat increments allow for
more valves in a given fracking tube. Id.
The pluggable seat as illustrated in the patent is below:
Id. at 24.
Baker Hughes alleges that Packers Plus makes and sells an infringing pluggable seat,
infringing on claims 1, 10, 11, and 13. Id. at 15. Baker Hughes alleges that Packers Plus’s valve
“contains a seat that is receptive to a ball or a plug.” Id. at 14. Allegedly like the ‘829 patent, the
seat contains two portions: the first is “frustoconical” and the second downstream portion “has a
radial dimension . . . smaller than . . . the first portion.” Id. The seat also allegedly contains a
profile, whether a “coating and/or physical structure” “configured to increase the seat’s
resistance to extrusion of a ball past the seat.” Id. And by allegedly infringing on the ‘829 Patent,
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Packer Plus “minimizing the differences in diameter needed between ball seats, . . . thereby
increases the maximum number of available fracture stages.” Id. at 15.
In support of their allegations, Baker Hughes attaches Packer Plus marketing literature.
Docs. 59 at 31–105, 158–164, Ex. B–H, & Q.2 The Court notes that the Original Complaint only
generally references Exhibits B–H, and does not cite to them specifically when Baker Hughes
makes its infringement assertions on “information and belief.” Doc. 1 at 4–9. Unlike the Original
Complaint, the FAC calls the Court’s attention to Exhibit B & Q, which concerns Packer Plus’s
“StackFrac HD-X System.” Doc. 59 at 32. Exhibit B indicates that this system includes “[a]n
advanced seat and port activation design along with a proprietary anti‐erosion coating enables
smaller ball and seat increments to be used for increased stage counts.” Id. at 14–15, 32. Exhibit
Q indicates that the “StackFRAC HD-X system is capable of more than 80 single-point entry
stages” compared with average systems that result in “35 to 40 stages.” Id. at 160–61. The
StackFRAC system accomplishes this change by a “recent development in ball-seat technology”
that allows for “much smaller seat increments.” Id. at 161.
Baker Hughes asserts, upon information and belief, that these materials evidence Packer
Plus’s patent violation because both systems include a pluggable seat with a method of
increasing resistance to the ball going through the seat, which in turn allows for smaller seat
increments, and those smaller seat increments allow for more available fracture stages. Id. at 14–
15. Baker Hughes further asserts that additional evidentiary support will be available following
discovery, citing FED. R. CIV. P. 11(b)(3), and presumably under Local Rule 2-1(b). Id. at 6.
2
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Baker Hughes is in possession of additional documents, which are not attached, and
which the parties dispute access to. Docs. 46; 54-1 at 12–15. These documents are not
considered by the Court at this time.
Packers Plus’s Motion to Dismiss (#26) and Reply (#28)
In its Motion to Dismiss, Packers Plus contends that Baker Hughes fails “in any factual
manner try to map features of the accused products to the asserted claims of the ’829 Patent.”
Doc. 26 at 10. More specifically, Packers Plus asserts that Baker Hughes “points to nowhere
in . . . pictures or exhibits to support the allegation accused products have a second portion
“configured to increase resistance to extrusion of a runnable member.” Doc. 26 at 9. Because the
Complaint identifies “Packers Plus products” without “factual support tying, even speculatively,
features of the accused products with the first portion and second portion,” Baker Hughes’
allegations are no more than “naked assertions devoid of further factual enhancement,” which are
insufficient to state a claim. Id. at 10.
In its Reply, Packers Plus reiterates that it is not asking for an “element-by-element
infringement contention,” again focuses on the second portion or “profile” feature, and suggests
that P.R. 2-1(b) should not be allowed to “backfill the plaintiff’s deficiencies.” Doc. 28.
Packer Plus’s Motion is now ripe for adjudication.
II.
Legal Standard
Motions to dismiss are not unique to patent law, but are evaluated under the law of the
regional circuit. Bascom Glob. Internet Services, Inc. v. AT&T Mobility LLC, 827 F.3d 1341,
1347 (Fed. Cir. 2016) (citing In re Bill of Lading Transmission & Processing Sys. Patent Litig.,
681 F.3d 1323, 1331 (Fed. Cir. 2012)). Because of the recent abrogation of Form 18 of the
Federal Rules of Civil Procedure, a complaint alleging patent infringement must comply with
Iqbal and Twombly to state a claim under Rule 12(b)(6). See Lubrizol Specialty Prods., Inc. v.
Flowchem LLC, 165 F. Supp. 3d 534, 538 (S.D. Tex. 2016) (and noting that this district has
comprehensive procedures for use in patent case).
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When a district court reviews a motion to dismiss under FED. R. CIV. P. 12(b)(6), it must
construe the complaint in favor of the plaintiff and take all well-pleaded facts as true. Wolcott v.
Sebelius, 635 F.3d 757, 763 (5th Cir. 2011) (citing Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir.
2009)). “Dismissal is appropriate only if the complaint fails to plead ‘enough facts to state a
claim to relief that is plausible on its face.’” Leal v. McHugh, 731 F.3d 405, 410 (5th Cir. 2013)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim [is plausible on its
face] when the pleaded factual content allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Montoya v. FedEx Ground Package Sys., Inc.,
614 F.3d 145, 148 (5th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (internal
quotation marks omitted). “The plausibility standard is not akin to a ‘probability requirement,’
but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556
U.S. at 678 (quoting Twombly, 550 U.S. at 556). “While a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual allegations, . . . a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and
a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 544
(citations omitted). A court may also review the documents attached to a motion to dismiss if the
complaint refers to the documents and they are central to the claim. Kane Enters v. MacGregor
(USA), Inc., 322 F.3d 371, 374 (5th Cir. 2003).
But “[w]hen a plaintiff’s complaint fails to state a claim, the court should generally give
the plaintiff at least one chance to amend the complaint under rule 15(a) before dismissing the
action.” Champlin v. Manpower Inc., No. 4:16-CV-421, 2016 WL 3017161, at *2 (S.D. Tex.
May 26, 2016) (citing Great Plains Trust Co. v. Morgan Stanely Dean Witter & Co., 313 F.3d
305, 329 (5th Cir. 2002)). The court should only deny leave to amend if it determines that “the
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proposed change clearly is frivolous or advances a claim or defense that is legally insufficient on
its face. 6 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and
Procedure § 1487 (2d. ed. 1990); Motten v. Chase Home Fin., 831 F. Supp. 2d 988, 994 (S.D.
Tex. 2011).
In local patent cases, Rule 2-1(b) allows a party claiming patent infringement to state in
the Joint Case Management Report, as Baker Hughes did here, that it “lacks sufficient
information concerning the opponent’s products. . . to provide the necessary specificity for the
Preliminary Infringement Contentions.” P.R. 2-1(b); Doc. 29 at 11–13. The presiding judge may
order production sufficient to make the analysis within twenty 21 days. Id. The party claiming
patent infringement must then disclose the Preliminary Infringement Contentions. P.R. 3-1. The
Preliminary Infringement Contentions are more detailed infringement contentions than in the
pleadings. See Lubrizol Specialty Prods., 165 F. Supp. 3d at 538 (concluding that “it is not just
and practicable to require pleadings in this patent case to contain the same level of specificity
regarding direct infringement claims as are to be provided by the preliminary infringement
contentions.”).
III.
Motion to Dismiss
Packers Plus asserts that Baker Hughes does not use the exhibits to support the allegation
that Packers Plus’s pluggable seat has a second portion “configured to increase resistance to
extrusion of a runnable member.” Doc. 26 at 9. Because it alleges that Baker Hughes does not
plead any facts in support, Packer Plus requests that this Court grant its Motion to Dismiss for
Backer Hughes’s threadbare assertions.
Although “it is a generally accepted principle that the filing of an amended complaint
supersedes the prior complaint, a motion to dismiss, which attacks the original complaint for
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deficiencies that persist in the amended complaint, should not be denied as moot.” People’s
Choice Home Loan, Inc. v. Mora, No. 3:06-CV-1709-G, 2007 WL 120006, at *2 (N.D. Tex. Jan.
18, 2007) (citing King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994)). In such a situation, the court
should instead apply the motion to dismiss to the amended complaint. Id. (citing Holmes v. Nat’l
Football League, 939 F. Supp. 517, 522 n.7 (N.D. Tex. 1996); Sunset Fin. Resources, Inc. v.
Redevelopment Grp. V, LLC, 417 F. Supp. 2d 632, 642 n.15 (D.N.J. 2006)).
Here, the alleged deficiency is cured by the FAC. Upon comparison of the Original
Complaint and the FAC, the Court notes that the FAC uses Exhibits B & Q to tie Packers Plus’s
pluggable seat to the ‘829 Patent. Doc. 59 at 14–15, 32, 160–61. Even if the Original Complaint
did not tie its assertions between the patent and the allegedly infringing products, Doc. 1, the
FAC does so tie. Thus, the FAC’s amendments moot Packers Plus’s Motion to Dismiss. See
contra Mora, 2007 WL 120006, at *2 (concluding that motion to strike was not mooted because
the claims in the amended complaint were materially identical those in the original complaint).
And the FAC need not be as detailed as the preliminary infringement contentions will be. See
Lubrizol Specialty Prods., 165 F. Supp. 3d at 538. Accordingly, the Court hereby
ORDERS that Packer Plus’s Motion to Dismiss is DENIED.
IV.
Motion to Compel
“A district court has broad discretion in all discovery matters, and such discretion will not
be disturbed ordinarily unless there are unusual circumstances showing a clear abuse.” Moore v.
CITGO Ref. & Chemicals Co., L.P., 735 F.3d 309, 315 (5th Cir. 2013) (quoting Kelly v. Syria
Shell Petroleum Dev. B.V., 213 F.3d 841, 855 (5th Cir.2000)). Under Rule 37, a party may move
for an order compelling discovery. FED. R. CIV. P. 37(a)(1). The moving party bears the burden
of showing that the materials and information sought are “relevant to any party’s claim or
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defense and proportional to the needs of the case.” FED. R. CIV. P. 26(b)(1). If the moving party
meets its burden, “the burden then shifts to the party resisting discovery to show why the
discovery . . . should not be permitted.” Marin v. Gilberg, No. CV-07-62, 2009 WL 426061, at
*2 (S.D. Tex. Feb. 19, 2009).
Here, the FAC moots Packer Plus’s objections because its objections were directed
against the Original Complaint, and the FAC cures its objections.
In its Motion to Compel, Baker Hughes requested Packers Plus to produce technical
“documents describing the detailed structure, composition, and operation of Packers’ Accused
Products, including all versions of Packers’ FracPort products.” Doc. 34 at 4. Baker Hughes also
served three Requests for production concerning drawings and diagrams, ball or plug catching
mechanisms, and ball catching surfaces, as follows:
Request For Production No. 1:
All technical Documents concerning the Accused Products, including, but not
limited to, CAD drawings, part diagrams, assembly diagrams, schematics,
plans, process diagrams, specifications, well completion diagrams, job
reports, daily logs, final reports or the like.
Request For Production No. 2:
All Documents concerning the mechanism or mechanisms by which each
Accused Product catches and retains a ball or plug, including, but not
limited to, Documents depicting and/or describing the geometry of said
mechanism or mechanisms.
Request For Production No. 3:
All Documents concerning the mechanism or mechanisms by which each
Accused Product inhibits a ball or plug from extruding through the
Accused Product, including, but not limited to, Documents depicting
and/or describing every surface within the Accused Product that is adapted
to contact a ball or plug
Id. at 8.
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Packers Plus responded by asserting that part of the Motion to Compel was moot, but
some of the documents were still withheld and contested: it had produced the “ball seat design”
documents, but had not produced the “coatings” documents. Doc. 40 at 2. Packers Plus withheld
the coatings documents because the Original “Complaint does not allege or implicate such
‘coatings’ as infringing features in the accused products.” Id. at 5. Thus, Packers Plus asserts that
it need not produce the coatings documents as “outside the allegations” and “not proportional to
the needs of the case under Fed. R. Civ. P. 26(b)(1).” Baker Hughes replied, asserting that its
Original Complaint did allege or implicate the coatings involved in the ball seat design in claims
10 and 13. Doc. 43 at 2.
Baker Hughes explicitly references coatings in its FAC. Doc. 59 at 14. Baker Hughes
references coatings both in reference to the profile, id. at 14 ¶ 57, and the anti-erosion coating
mentioned in Exhibit B attached to the FAC, id. at 42. Because Packers Plus’s objections were
grounded in the Original Complaint’s lack of reference to coatings, those objections are now
moot. See Mora, 2007 WL 120006, at *2 (holding that an amended complaint replaces the earlier
complaint). And so, Packers Plus has not met its burden as to why the discovery should not be
permitted. See Marin, 2009 WL 426061, at *2. Accordingly, the Court hereby
ORDERS that the Baker Hughes’s Motion to Compel, Doc. 34, as to the “coatings”
documents is GRANTED.
Baker Hughes is, however, cautioned that following this discovery, it must file timely its
Preliminary Infringement Contentions under Local Patent Rule 3-1.
V.
Conclusion
For the foregoing reasons, it is hereby
ORDERED that Defendant’s Motion to Dismiss, Doc. 26, is DENIED without
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prejudice.
IT IS FURTHER ORDERED that Baker Hughes’s Motion to Compel, Doc. 34, as to
the “coatings” documents is GRANTED
SIGNED at Houston, Texas, this 6th day of March, 2018.
___________________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
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