Hydraulic-Fracturing-Related Patent Determined to Be Unenforceable Due to Inequitable Conduct

IP LAWSUITS

Between declining gas prices and the controversy over the increased incidence of earthquakes, the state of the Oklahoma oil and gas industry, particularly the use of hydraulic fracturing, or “fracking,” seems to be a daily local news topic. A decision last week in the United States District Court for the District of North Dakota could also affect the use of certain fracking methods.

On January 14th, in the case of Energy Heating, LLC et al. v. Heat On-the-Fly, LLC et al., Case No. 4:13-cv-10, Chief Judge Ralph R. Erickson determined that United States Patent No. 8,171,993 (‘993 patent) was unenforceable due to inequitable conduct. The basis for the Court’s decision was that Mark Hefley (the inventor) and his company Heat On-the-Fly, LLC (the owner and licensor of the ‘993 patent) withheld material information of prior sales from the USPTO with an intent to deceive the USPTO into granting the ‘993 patent.

The ‘993 patent is entitled “Water Heating Apparatus for Continuous Heated Flow and Method for Use in Hydraulic Fracturing.” A provisional application was filed on September 18, 2009, making the ‘993 patent’s “critical date” September 18, 2008, for analyzing the on-sale and public use bars under 35 U.S.C. § 102(b). The evidence presented at trial established that Hefley and his company performed at least 61 frack jobs using water heating systems covered by claim 1 of the ‘993 patent prior to the critical date. Invoices for these 61 jobs showed that Hefley’s companies collected more than $1.8 million prior to the critical date. As a result, the Court found clear and convincing evidence of substantial on-sale and public uses of the invention date to as early as October 2006.

Hefley’s in-court testimony also established that he knew the significance of the critical date and its one-year “grace period” for filing a patent application. Hefley testified that he and his business partner had discussed the requirement that an application be filed within one year after the invention was first offered for sale or used publicly. Even though he was aware of this requirement and his company’s prior sales, Hefley signed a declaration with the USPTO that he understood the contents of the application and acknowledged his duty to disclose material information. The Court also refused to buy Hefley’s arguments that uses of the claimed invention prior to the critical date were experimental in nature.

Finding inequitable conduct, the Court concluded that there was clear and convincing evidence Hefley and his company deliberately withheld information regarding prior sales; the patent would not have issued if the Examiner had been provided with the sales information; and the withheld information was material to the issuance of the patent. Therefore, the ‘993 patent is now unenforceable.

Photo courtesy of Pixabay.

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