Schlumberger Technology Corporation v. Bico Drilling Tools, Inc.
Filing
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MEMORANDUM OPINION AND ORDER DENYING 30 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM (BICO's Third Counterclaim - Inequitable Conduct), DENYING 24 Corrected MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM (Correcting Dkt. 23).(Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)
United States District Court
Southern District of Texas
ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SCHLUMBERGER TECHNOLOGY CORPORATION, §
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Plaintiff,
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v.
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BICO DRILLING TOOLS, INC.,
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Defendant.
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May 03, 2018
David J. Bradley, Clerk
CIVIL ACTION H-17-3211
MEMORANDUM OPINION AND ORDER
Pending before this court are two motions to dismiss defendant and counterplaintiff BICO
Drilling Tools, Inc.’s (“BICO”) counterclaims. Dkt. 24, 30. After considering the motions, related
briefing, the arguments made during an oral hearing that was held on Tuesday, May 1, 2018, and the
applicable law, the court is of the opinion that both motions should be DENIED.
I. BACKGROUND
This is a patent case relating to plaintiff and counterdefendant Schlumberger Technology
Corporation’s (“Schlumberger”) patent for “Optimized Liner Thickness for Positive Displacement
Drilling Motors,” U.S. Patent No. 6,604, 921 (“the ‘921 Patent”). Dkt. 1. The ‘921 Patent was filed
on January 24, 2002, and the date of the patent is August 12, 2003. Dkt. 25, Ex. D. Schlumberger
contends that BICO infringed one of more claims of the ‘921 Patent, including but not limited to
Claims 1 and 8, by importing, making, using, offering to sell, and/or selling products or systems that
embody the patented inventions, including but not limited to stators BICO uses in various products.
Dkt. 1.
In BICO’s second amended answer and counterclaim, it asserts several affirmative defenses
including non-infringement, invalidity, and inequitable conduct. Dkt. 29. It asserts the following
counterclaims, which are parallel to the aforementioned affirmative defenses: (1) a declaratory
judgment of non-infringement of the ‘921 Patent; (2) a declaratory judgment of invalidity of the ‘921
Patent; and (3) a declaratory judgment of unenforceability of the ‘921 Patent due to inequitable
conduct. Id.
Schlumberger now moves for dismissal of a portion of the second and all of the third
counterclaim. Dkts. 24, 30. Schlumberger contends there is no plausible reading of the alleged prior
art that supports BICO’s claim that the patent is invalid because prior art anticipated or made
obvious a claim in the patent-in-suit. Dkt. 24. Additionally, Schlumberger contends that the
inequitable conduct counterclaim fails because all of the alleged prior art was disclosed to the patent
examiners. Dkt. 30.
These motions are fully briefed and argued. The court will first review the relevant legal
standards and then discuss whether dismissal of the second and third counterclaims is appropriate.
II. LEGAL STANDARD
A.
Motion to Dismiss
“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the
claim showing that the pleader is entitled to relief.’” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127
S. Ct. 1955, 1964-65 (2007). In considering a Rule 12(b)(6) motion to dismiss a complaint, courts
generally must accept the factual allegations contained in the complaint as true. Kaiser Aluminum
& Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). Generally,
when “deciding a motion to dismiss for failure to state a claim, courts must limit their inquiry to the
facts stated in the complaint and the documents either attached to or incorporated in the complaint.”
Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1017 (5th Cir. 1996). “[A] complaint attacked
by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, [but] a plaintiff’s
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obligation to provide the ‘grounds’ of his ‘entitle[ment] 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 555 (citations omitted). The “[f]actual allegations must be enough to raise a right to
relief above the speculative level.” Id. The supporting facts must be plausible-enough to raise a
reasonable expectation that discovery will reveal further supporting evidence. Id. at 556.
Under Federal Rule of Civil Procedure 9(b), in cases in which a party alleges fraud or
mistake, the “party must state with particularity the circumstances constituting fraud or mistake.
Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed.
R. Civ. P. 9(b). A claim of inequitable conduct must be plead with particularity pursuant to the
requirements of Rule 9(b). Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1318 (Fed. Cir.
2009); Cent. Admixture Pharmacy Servs., Inc. v. Advanced Cardiac Sols., P.C., 482 F.2d 1347, 1356
(Fed. Cir. 2007) (requiring inequitable conduct to be pled with particularity and noting that the
Federal Circuit applies its own law “to the question of whether the pleadings [are] adequate”). To
plead the circumstances of inequitable conduct with particularity “requires identification of the
specific who, what, when, where, and how of the material misrepresentation or omission committed
before the PTO.” Exergen Corp., 575 F.3d at 1327. Additionally, “a pleading of inequitable conduct
under Rule 9(b) must include sufficient allegations of underlying facts from which a court may
reasonably infer that a specific individual (1) knew of the withheld information or of the falsity of
the material misrepresentation, and (2) withheld or misrepresented this information with a specific
intent to deceive the [U.S. Patent and Trademark Office (“USPTO”)].” Id. at 1328-29.
B.
Invalidity of a Patent
BICO asserts invalidity under 35 U.S.C. §§ 102 and 103, and portions of § 112. Section
102(a) indicates that a person is not entitled to a patent if the claimed invention was already patented,
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“described in a printed publication, or in public use, on sale, or otherwise available to the public
before the effective filing date of the claimed invention.” 35 U.S.C. § 102(a)(1). “Section 102
embodies the concept of novelty—if a device or process has been previously invented (and disclosed
to the public), then it is not new, and therefore the claimed invention is ‘anticipated’ by the prior
invention.” NewMoneyIN, Inc. v. VeriSign, Inc., 545 F.3d 1359, 1369 (Fed. Cir. 2008). “[I]n order
to show anticipation, the proponent must show ‘that the four corners of a single, prior art document
describe every element of the claimed invention.’” Id. (quoting Xerox Corp. v. 3Com Corp., 458
F.3d 1310, 1322 (Fed. Cir. 2006)). Additionally, the prior art reference must “disclose those
elements ‘arranged as in the claim.’” Id. (quoting Connell v. Sears Roebuck & Co., 722 F.2d 1542,
1548 (Fed. Cir. 1983)).
Under § 103,
A patent for a claimed invention may not be obtained,
notwithstanding that the claimed invention is not identically disclosed
as set forth in section 102, if the differences between the claimed
invention and the prior art are such that the claimed invention as a
whole would have been obvious before the effective filing date of the
claimed invention to a person having ordinary skill in the art to which
the claimed invention pertains. Patentability shall not be negated by
the manner in which the invention was made.
35 U.S.C. § 103. Section 112 relates to the form of the patent application. 35 U.S.C. § 112.
C.
Inequitable Conduct
“A patent may be rendered unenforceable for inequitable conduct if an applicant, with intent
to mislead or deceive the examiner, fails to disclose material information or submits materially false
information to the [USPTO] during prosecution.” Dig. Control, Inc. v. Charles Mach. Works, 437
F.3d 1309, 1313 (Fed. Cir. 2006). A party therefore “may show inequitable conduct by producing
clear and convincing evidence of (1) material prior art, (2) knowledge chargeable to the patent
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applicant of prior art and its materiality; and (3) the applicant’s failure to disclose the prior art to the
[USPTO] with intent to mislead.” Avid Identification Sys., Inc. v. Crystal Imp. Corp., 603 F.3d 967,
972 (Fed. Cir. 2010). “Information is material if there is a ‘substantial likelihood that a reasonable
examiner would consider it important in deciding whether to allow the application to issue as a
patent.’” Id. (quoting J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1559 (Fed. Cir. 1984)).
Because there is rarely direct evidence supporting the intent element, it is generally “proven by
inferences drawn from facts, with the collection of inferences permitting a confident judgment that
deceit has occurred.” Akron Polymer Container Corp. v. Exxel Container, Inc., 148 F.3d 1380, 1384
(Fed. Cir. 1998). Importantly, “the scope and content of prior art and what the prior art teaches are
questions of fact.” Dig. Control, Inc., 437 F.3d at 1319.
III. ANALYSIS
A.
Invalidity
Here, BICO contends in its counterclaim that the ‘921 Patent is invalid because (1) as early
as 1997 Wilhelm Kachele Gmbh of Welheim, Germany (“Kachele”) commercialized stators, motors,
and power sections that embody the ‘921 Patent by publicly displaying, offering for sale, and selling
those products to customers; (2) as early as December 2000, BICO commercially used these same
stators, motors, and power sections purchased from Kachele; (3) prior to January 24, 2002 (the date
the patent was filed), oil field services companies developed and commercialized a class of “Even
Wall” stators that included internal liners that were thickest proximate to the inwardly projecting
lobes of the stator; (4) the ‘921 Patent was anticipated by U.S. Patent No. 6,543,132 (“the ‘132
Patent”) and U.S. Patent No. 5,145,342 (“the ‘342 Patent”); (5) U.S. Patent No. 5,171,138 (“the ‘138
Patent”) and the ‘342 Patent make obvious the apparatuses claimed in the ‘921 Patent by disclosing
each of the claimed elements, and a person of ordinary skill in the art would have known that the
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thickness of the liner varied; and (6) the ‘921 Patent fails to sufficiently describe the patent as
broadly as Schlumberger interprets it. Dkt. 29.
Schlumberger moves for dismissal of the invalidity counterclaim for failure to state a claim
under Rule 12(b)(6). Dkt. 24. Schlumberger contends there is no plausible reading of the alleged
prior art that could anticipate or make obvious any claim in the patent-in-suit. Id. Schlumberger
asserts that the stator in the ‘921 Patent must have a liner “‘wherein a thickness of the liner is at a
maximum proximate the at least two radially inwardly projecting lobes’ of an inner surface of the
external tube of the stator.” Id. (quoting the ‘921 Patent). Schlumberger asserts that the alleged prior
art stators have liners with uniform thickness. Id. It argues that BICO’s statement that these earlier
patents disclose a liner “that was thickest proximate to the inwardly projecting lobes of the stator”
is not plausible because it is contrary to the express teachings of these patents. Id.
BICO argues that its counterclaim asserts that earlier stators, like the stator in the ‘921 Patent,
also had uneven liners thicker at the lobes, which makes the ‘921 Patent invalid. Dkt. 25. BICO
points out that its allegations that the prior liners were uneven must be accepted as true when
analyzing Schlumberger’s motion under Rule 12(b)(6). Id. BICO asserts that the references it cites
in its counterclaim support its contention that the earlier liners are thicker at the lobes because they
all say the liners are “substantially” or “relatively” uniform, not that they are absolutely uniform.
Id. BICO argues that the assertion of uniform liners in the prior art patents is in relation to
traditional liners that were even thicker at the lobes than the liners in the ‘921 Patent and the other
patents discussed. Id. Additionally, BICO asserts that Schlumberger failed to address its contention
that the ‘138 Patent teaches that the thickness of the elastomer may be varied. Id.
In reply, Schlumberger contends that the court need not accept BICO’s factual assertions as
true if they contradict the actual contents of the alleged prior art patents since these patents are
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referred to in the counterclaim. Dkt. 27. Schlumberger asserts that the text of the ‘132, ‘342, and
‘138 patents “unequivocally contradicts BICO’s allegations by expressly and repeatedly describing
the respective stator liners as having a ‘uniform thickness.’” Id. Schlumberger argues that the
USPTO reviewed the alleged prior art patents and determined that they do not anticipate or render
obvious the ‘921 Patent claims and that the ‘921 Patent is thus presumed valid over all of BICO’s
alleged prior art patents. Id. Moreover, Schlumberger contends that even if one interprets the prior
art patents’ mention of liners with “substantially uniform” thickness as meaning the liners have an
uneven thickness, nothing in the patents suggests a non-perfectly uniform liner would be “at a
maximum proximate the at least two radially inwardly projecting lobes” of the external tube as
claimed in the ‘921 Patent. Id. In other words, the claims require more precision than simply an
“uneven” liner. Id.
While the court agrees with Schlumberger generally that if the prior art, which the court may
consider at this stage because it is discussed in the counterclaim, does not teach a liner that is thicker
at the lobes, then the substance of the earlier patents could override BICO’s assertion in its
counterclaim that they the prior art teaches a liner that is thicker at the lobes. However, the teachings
of the prior art patents are questions of fact, and the court finds it inappropriate to make such a
factual finding at this stage. Dig. Control, Inc., 437 F.3d at 1319. Because the court takes BICO’s
assertions in its counterclaim as true, the motion to dismiss the invalidity counterclaim is DENIED.
B.
Inequitable Conduct
BICO’s third counterclaim seeks a declaratory judgment that the ‘921 Patent is unenforceable
due to inequitable conduct. Dkt. 29. It states that patents and printed publications describing the
claimed subject matter of the ‘921 Patent prior to January 24, 2001 (a year before the application)
render the claimed subject matter invalid, and that a person of ordinary skill in the industry of
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positive displacement motors and pumps understood that prior art manufacturing methods for stators
with shaped inner surfaces inherently produced uneven liners that were thicker at the stator lobes by
January 24, 2002 (the application date). Id. BICO claims that there were numerous patents and
printed publications that were publicly accessible prior to January 24, 2001, that described this prior
art. Id. It asserts that Schlumberger’s U.S. Patent No. 7,739,792 (“the ‘792 Patent”) is an example.
Id. The ‘792 Patent describes difficulty in controlling the desired thickness of an elastomeric layer
in stator bores in the prior art. Id. The counterclaim states that on information and belief the
examiner for the ‘921 Patent did not have knowledge of the industry standard definitions of the terms
“substantially uniform thickness,” “substantially the same wall thickness,” or “even walls.” Id. The
counterclaim incorporates the prosecution history of the ‘921 Patent, which BICO contends
demonstrates this lack of knowledge. Id. BICO asserts(1) that the prosecuting attorney had a duty
of candor with the USPTO; (2) that the prosecuting attorney had knowledge that non-uniform liners
such as the stator lobes of the ‘921 Patent were commonly described as “substantially uniform” in
the industry as is evidenced by another patent he was prosecuting at the same time; (3) that prior art
manufacturing methods for liners inherently resulted in liners having varied thicknesses including
slightly thicker portions at the stator lobes; and (4) that the examiner did not have knowledge of
these standard terms in the industry or of prior art manufacturing techniques. Id. BICO alleges
various mischaracterizations by the prosecuting attorneys, including that the supplemental
prosecuting attorney mischaracterized the term “practically the same wall thickness” in the Artemis
patent (a German patent) to mean “uniform liner thickness” even though a figure in the Artemis
patent (a German patent) appears to show thicker liner at the lobes. Id. at 23. According to BICO,
the supplemental prosecuting attorney “had a duty to disclose a person of ordinary skill’s
understanding of ‘substantially uniform’ in the initial Request for Supplemental Examination, or at
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the very least, in response to the examiner’s flawed conclusion based on an incomplete
understanding of the Artemis reference.” Id. at 23–24.
In its motion to dismiss, Schlumberger asserts that BICO does not provide any actual
evidence that corroborates its implausible allegation of inequitable conduct. Dkt. 30. Instead,
according to Schlumberger, BICO’s documents confirm that terms like “even walls” and
“substantially uniform thickness” do not mean thickest at the lobes. Id. Moreover, Schlumberger
asserts that the counterclaim is not legally sufficient to assert an inequitable conduct claim because
(1) patent figures do not override the express written description of the patent; (2) patents that were
filed after the ‘921 Patent referred to in the counterclaim are not prior art; (3) manufacturing
tolerances or defects that cause liners to not be exactly uniform are not material to patentability; and
(4) the applicant’s arguments characterizing the prior art that was disclosed cannot give rise to
inequitable conduct. Id. Schlumberger contends that while some of the patents discussed in the
counterclaim seem to have non-uniform thickness, none of them suggests a liner that is thickest at
the lobes. Id. at 10–12. Moreover, it asserts that all of the prior art was disclosed to or considered
by the USPTO and thus cannot form the basis of inequitable conduct. Id. at 15. The only exception
is GB 2339598, and Schlumberger states that it is cumulative of other references. Id.
Schlumberger also responds to allegations related to Kachele’s “Even wall” stator in its
motion, noting that there is no support for the contention that “Even wall” means “thickest at the
lobes” or that the inventors knew that it meant that. Id. at 16–17. Schlumberger also contends that
BICO admitted that “substantially uniform” does not mean thickest at the lobes in an application for
a patent it filed on November 10, 2000, in which it indicated that substantially uniform thickness
meant uniform. Id. at 18. Finally, Schlumberger points out that if everyone knew “substantially
uniform” meant “thickest at the lobes,” why did the examiners not know? Id. at 20. Schlumberger
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argues that the examiners are assumed to have some expertise and be familiar with the level of skill
in the art. Id. (citing Am. Hoist & Derrick Co. v. Sowa & Sons, 725 F.2d 1350, 1359 (Fed. Cir.
1984)).
BICO responds that it pled specific facts to support four different grounds of inequitable
conduct. Dkt. 32. BICO contends that the initial prosecuting attorney omitted material information
related to industry understanding and misrepresented the content of the prior art with an intent to
deceive the USPTO. Id. at 3 (citing the complaint). It also asserts that the supplemental prosecuting
attorney omitted material information related to the industry understanding and misrepresented the
content of the prior art with an intent to deceive the USPTO. Id. at 6. BICO argues that the
inventors attested that they had no knowledge of Kachele’s prior art stator with a non-uniform liner,
but they actually did. Id. at 9 (citing complaint). BICO provides specifics in the complaint,
including that one of the inventors met with Kachele representatives in 1999 in Houston where
Kachele publicly displayed models of its stators. See id. at 10. With regard to the argument that all
the prior art was disclosed to the USPTO, BICO argues that the references were too difficult to
understand and that understating aspects of it was functionally equivalent to not disclosing it at all.
Id. at 18.
Schlumberger replies that the counterclaim does not provide sufficient facts to reasonably
infer that a specific individual knew of invalidating information that was withheld. Dkt. 33 at 1.
Schlumberger argues that none of the prior art discloses liners that are thickest at the lobes, and it
contends that the information regarding Kachele is inconsequential because both inventors of the
‘921 Patent agree that they knew about Kachele’s stators and understood that they did not include
a liner of non-uniform thickness on an external tube having a shaped interior surface. Dkt. 33 at 3.
Schlumberger contends that the inference that one of the inventors knew that “even wall” meant
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“thickest at the lobe” because he went to a booth displaying the stators is unsupported. Id. It asserts
that BICO’s own documents confirm there was no industry knowledge that “even wall” meant
“thickest at the lobes” and that, moreover, all the non-cumulative documents were before the
examiner and BICO cannot rebut that the attorney statements that emphasize differences between
an invention and prior art and downplay similarities cannot be inequitable conduct. Id. (citing cases).
Schlumberger asserts that BICO’s argument that the prior art references were too difficult to
understand should be disregarded because the references here are not very long or complex. Id.
While the court agrees with Schlumberger that the references here do not, at first glance,
appear to be long or complex, it is premature for the court to draw conclusions regarding the
meaning of certain terms in the industry. What it must do, at the motion to dismiss stage, is take the
well-pleaded facts as true. BICO pleads that “a person of ordinary skill in the industry of positive
displacement motors and pumps understood that prior art manufacturing methods for stators with
shaped inner surfaces inherently produced uneven liners that were thicker at the stator lobes” and
that “the examiner did not have knowledge of the industry standard definitions of the terms
‘substantially uniform thickness,’ ‘substantially the same wall thickness,’ or ‘even walls.’” Dkt. 29
¶¶ 27, 31, 34. Schlumberger takes issue with these claims because they are pled “on information and
belief” and contends that the counterclaim does not provide any facts to back up the assertions as is
required under Rule 9(b). However, the counterclaim provides examples as to why BICO believes
individuals in the industry would know liners were thicker at the lobes, why the examiner must not
have known this, and how the prosecution history shows that the prosecuting attorneys failed to
disclose these understandings in the paragraphs that follow the claims.1 See, e.g., id. ¶¶ 28–30,
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Schlumberger contends that it disclosed all of the prior art, with the exception of
cumulative prior art, to the USPTO, and that the alleged omission is not inequitable conduct as a
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32–33, 39–49. Schlumberger’s arguments relating to what the prior art discloses or whether the
inventor would have known about the width of the liner by visiting a booth at a conference relate to
factual issues that cannot be resolved at this stage. At this point, the claim is plausible, and the
claims are pled with enough particularity for the court to reasonably infer that at least one of the
inventors or prosecutors2 knew of the withheld information or of the falsity of the material
misrepresentation, and withheld or misrepresented this information with a specific intent to deceive
the USPTO. Accordingly, Schlumberger’s motion to dismiss is DENIED.
matter of law, citing Wright Asphalt Products Co., LLC v. Pelican Refining Co., LLC, No. H-091145, 2011 WL 2037631 (S.D. Tex. May 20, 2011) (Rosenthal, J.). In Wright Asphalt, Judge
Rosenthal denied a request to amend a counterclaim to add an inequitable conduct claim based on
representations the prosecuting attorney made during the patent prosecution. 2011 WL 2037631,
at *1. She analyzed Federal Circuit precedent and concluded that “as a general rule, when the
relevant prior art is disclosed to the examiner, attorney statements emphasizing differences between
the invention and the prior art while downplaying or ignoring similarities cannot be inequitable
conduct unless the prior art reference is so difficult to understand that omitting or understanding
aspects is functionally equivalent to not disclosing the prior art reference at all.” Id. at *6–*9. Judge
Rosenthal determined that the alleged misrepresentation in Wright Asphalt did ‘not approach the type
of affirmative misrepresentation required to give rise to an inequitable conduct claim.” Id. at *10.
It is important to note that in Wright Asphalt, Judge Rosenthal had already held a Markman hearing
and construed the terms of the patent. See Wright Asphalt Prods. Co., LLC v. Pelican Refining Co.,
LLC, No. H-09-1145, 2011 WL 845917, at *1 (S.D. Tex. Mar. 7, 2011). Here, the terms have not
been construed and the court finds it premature to attempt to put the prior art and alleged
misrepresentations into context before it has even construed the terms in the patent-in-suit.
2
“For purposes of identifying who owes a duty of candor to the [USPTO], [USPTO] Rule
56 defines ‘individual[s] associated with the filing or prosecution of a patent application’ as (1) each
named inventor, (2) each attorney or agent that prepares or prosecutes the application, and (3) every
other person who is substantively involved in the preparation or prosecution of the application and
who is associated with the inventor or assignee.” Avid Identification Sys., Inc., 603 F.3d at 973
(quoting 37 C.F.R. § 1.56( c)).
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IV. CONCLUSION
Schlumberger’s motions to dismiss (Dkts. 24,30) are both DENIED.
Signed at Houston, Texas on May 3, 2018.
___________________________________
Gray H. Miller
United States District Judge
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