BAKER HUGHES INC. v. NALCO CO.

• Decision Date: 11 December 2009
• Docket Number: Civil Action No. H-09-1885.
• Citation: 676 F. Supp.2d 547
• Parties: BAKER HUGHES INCORPORATED, et al, Plaintiffs, v. NALCO COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

676 F.Supp.2d 547

BAKER HUGHES INCORPORATED, et al, Plaintiffs, v. NALCO COMPANY, Defendant.

Civil Action No. H-09-1885.

United States District Court, S.D. Texas, Houston Division.

December 11, 2009.

John Hanson Barr, Jr., Christopher Aaron Shield, Glenn A. Ballard, Jr., Bracewell Giuliani LLP, Houston, TX, for Plaintiffs.

Jason Alexander Engel, Michael J. Abernathy, Patricia Kane Schmidt, K&L Gates LLP, Chicago, IL, Roderick B. Williams, K&L Gates LLP, Austin, TX, for Defendant.

AMENDED MEMORANDUM OPINION AND ORDER FOR INJUNCTIVE RELIEF

KENNETH M. HOYT, District Judge.

I. INTRODUCTION

Before the Court is the plaintiff Baker Hughes Incorporated's¹ application for a preliminary injunction (Docket Entry No. 1), the defendant Nalco Company's response to Baker Hughes' application (Docket Entry No. 18), Baker Hughes' motion on remand for additional findings of fact and entry of preliminary injunction (Docket Entry No. 50), Nalco's opposition to the motion on remand (Docket Entry No. 56) and Baker Hughes' reply to the opposition to its motion to remand (Docket Entry No. 61). Further before the Court is Nalco's motion for leave to supplement the record (Docket Entry No. 59), Baker Hughes response to Nalco's motion for leave to supplement the record (Docket Entry No. 63), and Nalco's reply in support of its motion (Docket Entry No. 64). Also before the Court are the parties' responses, replies, memoranda and the testimony of witnesses. The Court, taking all matters under advisement, determines that Baker Hughes' application for a preliminary injunction should be granted and Nalco's motion for leave to supplement the record should be denied.

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On or about March 3, 2009, the Patent and Trademark Office ("PTO") issued patent number 7,497,943 (the '943 patent) to inventors Nguyen, Kremer and Weers. In turn, they assigned the patent to Baker Hughes. The patent claimed a method for removing or transferring metals and/or amines from a hydrocarbon (crude oil) during the desalting process by using a composition that contains water-soluble hydroxyacids. The invention teaches that the "water soluble hydroxyacid may be glycolic acid, gluconic acid, C2-C4 alpha-hydroxyacids, poly-hydroxy carboxylic acids, thioglycolic acid, chloroacetic acid, polymeric forms of the above acids, poly-glycolic esters, glycolate ethers and ammonium salt and alkali metal salts of these hydroxyacids, and mixtures thereof."²

In 2002, Exxon-Mobil and Chevron, in particular, sought a process that would permit them to refine a crude oil that was being collected from the Doba Field in Chad. In response, both Baker Hughes and Nalco, and perhaps others, set out to develop a process or method by which high levels of calcium and metals might be removed from these crudes. By 2007, Baker Hughes reached a point in its testing process where it was successfully removing calcium and metals from Doba crude without side effects. In 2009, Baker Hughes successfully demonstrated its method in the United States at the Sunoco Plant in Philadelphia, Pennsylvania. Nalco, who had a contract for other services with Sunoco, successfully demonstrated its calcium and metal removal method or process in April of 2009, after Baker Hughes' successful demonstration and after the '943 patent had issued in March of 2009.

On September 11, 2009, this Court issued a preliminary injunction in this case. Nalco filed an emergency motion to stay and sought relief in an appeal to the Federal Circuit Court of Appeals. The Federal Circuit vacated the preliminary injunction and remanded the case to this Court, instructing this Court that its opinion and findings of facts were insufficient to sustain the injunction, particularly on the subject of irreparable harm.

III. CONTENTIONS OF THE PARTIES

A. Baker Hughes' Contentions

Baker Hughes contends that it owns the '943 patent, which is entitled "Additives to Enhance Metal and Amine Removal in Refining Desalting Process." It further contends that the '943 patent is valid and enforceable and that Nalco is currently infringing and/or contributing to its infringement at the Sunoco Plant in Philadelphia. Baker Hughes asserts that only after it successfully demonstrated its process at Sunoco was Nalco able to successfully remove calcium and metals from the crude oil at Sunoco. Nalco's success, according to Baker Hughes, is a result of Nalco copying the Baker Hughes process. According to Baker Hughes, after it successfully ran its process, Nalco obtained a "Safety Data Sheet" that revealed the various acids that Baker Hughes had used in its process. At the time, Baker Hughes contends, Nalco had other contractual relationships with Sunoco and, thereby, had access to the desalting process at the plant. See Plaintiff's Exhibit 9, Baker Hughes-Analytical Services Report, (May 18, 2009). Concerning its allegation that Nalco has not successfully removed calcium and metals from Doba crude, Baker Hughes points to the fact that up to April or May of 2009 Nalco had failed. As well, Baker Hughes points out, Nalco never used malic acid or the C2-C4 alpha-hydroxy acids, but instead had relied unsuccessfully on maleic acid. See Plaintiff's Exhibit 8, Nalco Material Data Sheet, (Aug. 28, 2006). Therefore, Baker Hughes seeks an injunction enjoining Nalco from performing or soliciting the use of the Baker Hughes process, or assisting or inducing the use of its patented process.

B. Nalco's Contentions

Nalco contends that Baker Hughes' application for a preliminary injunction should be denied. First, Nalco argues that Baker Hughes cannot satisfy the requirements for the issuance of an injunction. In this regard, Nalco argues that Baker Hughes cannot show a likelihood of success on the merits with respect to validity, enforceability and infringement. Nalco argues that the '943 patent language "consisting of is restrictive and, therefore, fails to include other additional steps; for example, the addition of a corrosion inhibitor in the process. Nalco's process includes a corrosion inhibitor step, which it argues adds an additional step, thus avoiding infringement of the '943 patent.

Second, Nalco contends that its process does not include "crude oil" as required by the '943 patent. In this regard, Nalco argues the '943 patent calls for a "pure crude oil" i.e., devoid of all diluents or solvents. Nalco modifies its crude oil "using conventional desalting techniques i.e., adding a demulsifer to the cold crude oil." Hence, Nalco claims that it does not add a "wash water" to the crude to create an emulsion as called for in the '943 patent.

Third, Nalco contends that a substantial fact question exists as to the validity of claims 1 and 17 based on the arguments that: (a) claims 1 and 17 are anticipated by the Reynolds '463 patent (U.S. 7,789,463); (b) claims 1 and 17 are obvious in light of Hickock and/or Strong (U.S. Patent Nos. 2,767,123 and 3,449,243, respectively); (c) claims 1 and 17 are obvious in the view of Hickock and/or Naeger (the Hickock '123 patent and U.S. Patent No. 4,992,210); and, (d) claims 1 and 17 are obvious in light of the Reynolds '463 patent.

Finally, Nalco asserts that Baker Hughes cannot demonstrate that it will suffer irreparable harm. In this regard, Nalco argues that there is no evidence of: (a) lost sales; alternatively, that any loss would be immeasurable; (b) price erosion due to the Nalco process; and (c) loss of goodwill by Baker Hughes. To round out its argument against the issuance of an injunction, Nalco asserts that the balance of hardships favors Nalco, and that the public interest does not favor the issuance of an injunction because the '943 patent is invalid.

IV. STATEMENT OF AUTHORITIES

The Supreme Court has held that equitable injunctive relief is available to a party in patent infringement cases to prevent violation of any right secured by a patent. See eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 126 S.Ct. 1837, 1839, 164 L.Ed.2d 641 (2006). The Patent Act provides that "the several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent violation of any right secured by a patent...." See 35 U.S.C. § 283. The form and scope of an injunction is governed by Federal Rule of Civil Procedure 65(d). It provides in part that:

every order granting an injunction and every restraining order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained....

Id.

A plaintiff seeking an injunction must satisfy a four-factor test by demonstrating that: (1) it has or will suffer an irreparable injury; (2) remedies available at law such as monetary damages, are inadequate to compensate for that injury; (3) considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and, (4) the public interest would not be disserved by the injunction. See eBay, Inc., 126 S.Ct. at 1839. "The standard for a preliminary injunction is essentially the same as for a permanent injunction with the exception that the plaintiff must show a likelihood of success on the merits rather than actual success." Amoco Prod. Co. v. Village of Gambell, AK, 480 U.S. 531, 546, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987); Erico Intern. Corp. v. Vutec Corp., 516 F.3d 1350, 1357 (Fed.Cir.2008) (Newman, J., dissenting). The decision to grant or deny an injunction is a matter within the discretion of the court. eBay, Inc., 126 S.Ct. at 1839; see also Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1374 (Fed.Cir. 2006).

V. ANALYSIS AND FINDINGS OF FACTS

A preliminary injunction should be granted, according to Baker Hughes, because: (a) there is a reasonable likelihood that it will succeed on the merits; (b) it will and is suffering irreparable injury; (c) the balance...