C-Innovation, LLC v. Trendsetter Eng'g, Inc.
| Decision Date | 26 January 2021 |
| Docket Number | CIVIL ACTION NO. 20-2631 SECTION M (1) |
| Parties | C-INNOVATION, LLC v. TRENDSETTER ENGINEERING, INC. |
| Court | U.S. District Court — Eastern District of Louisiana |
Before the Court is the motion of defendant Trendsetter Engineering, Inc. ("Trendsetter") to dismiss for lack of personal jurisdiction and/or case or controversy.1 Plaintiff C-Innovation, LLC ("C-Innovation") responds in opposition,2 and Trendsetter replies in further support of its motion.3 Having considered the parties' memoranda, the record, and the applicable law, the Court issues this Order & Reasons denying the motion.
This case involves a patent dispute over a process to unclog subsea flow lines. In oil-and-gas production, subsea flow lines transport oil and gas from production wells. Sometimes these pipes get clogged with solid bodies known as hydrates. Hydrate remediation is the process by which this backup is cleared so the oil and gas can continue to flow. Essentially, this case revolves around which company invented a new method to unclog the pipes and whether the companies are even using the same method.
Trendsetter is alleged to be a corporation with its headquarters and principal place of business in Texas that occasionally does work in Louisiana.4 C-Innovation is alleged to be a company headquartered in Mandeville, Louisiana.5 Meetings with representatives of Trendsetter and C-Innovation have taken place in both Texas and Louisiana.6
In November 2015, an oil platform operator hired FMC Technologies Offshore, LLC d/b/a FTO Services ("FTO Services"), a joint venture affiliated with C-Innovation, to "remediate a hydrate plug in subsea flow lines in the Gulf of Mexico" (the "2015 Project").7 The process used was outlined in a document titled "Operations Procedure."8 On February 3, 2016, FTO Services filed International Patent Application No. PCT/US2016/016320 describing and claiming this process.9 On August 10, 2017, the application was published as international publication No. WO 2017/135941 A1.10 The joint venture was dissolved in August 2016.11 In October 2016, members of the 2015 Project team presented a paper outlining the method called "Hydrates Remediation: An Innovative, Simplified Effective and Field Proven Solution" at the Rio Oil & Gas Expo and Conference in Brazil.12
On August 25, 2016, C-Innovation, Trendsetter, and Halliburton Energy Services, Inc. ("Halliburton") entered into a memorandum of understanding to form a coalition "to conduct subsea hydraulic well intervention ... and field inspection, maintenance and repair ... operations in the Gulf of Mexico."13 C-Innovation and Halliburton were identified as Louisiana companies.14 C-Innovation would be the prime contractor responsible for leading the marketing effort and managing onshore and offshore projects.15 Trendsetter would be the subcontractor responsible for managing subsea equipment and operations, supporting marketing, and providing subsea engineering and offshore technicians.16 This collaboration set the stage for the patent dispute at the center of this case.
By Trendsetter's account, on September 28, 2016, Trendsetter learned that Halliburton was invited to submit a proposal to LLOG Exploration Company ("LLOG") on a hydrate-intervention job.17 Trendsetter completed the actual proposal on October 4, 2016.18 According to Trendsetter, on October 11, 2016, representatives from C-Innovation, Trendsetter, and Halliburton met with LLOG to discuss the project.19 Halliburton proposed the hydrate-remediation plan used in the 2015 Project.20 Trendsetter alleges that, after hearing Halliburton's proposal, Mike Cargol, vice president of rentals and services at Trendsetter, "proposed a new and different hydrate remediation process for the LLOG project, which later formed the basis of Trendsetter's '785 Patent."21 LLOG agreed to use the newly-developed method and orally awarded the contract to Halliburton on October 20, 2016.22 Trendsetter began work the next day even though there was no formal, written contract.23
According to C-Innovation, representatives of C-Innovation, Halliburton, and Trendsetter met several times from October 2016 through December 11, 2016 "including in Covington, Mandeville, and Port Fourchon, Louisiana," to plan and complete two hydrate-remediation projects.24 C-Innovation alleges that they agreed to use the process employed in the 2015 Project.25 Through these meetings, Kevin Knight, a systems engineer at C-Innovation, who formerly worked with FTO Services, disclosed details and copies of technical reports and schematic drawings of the 2015 process to Trendsetter executives and other project team members.26
Around October 28, 2016, C-Innovation alleges that for the first project, it deployed the Island Performer from Port Fouchon to perform hydrate-remediation operations employing the process used in the 2015 Project and utilizing support from Trendsetter employees working in Louisiana.27 From December 2 through 11, 2016, C-Innovation again deployed its vessel from Port Fouchon to complete the second flow-line project.28 C-Innovation says the process utilized in the 2015 Project method was used once more.29
On November 11, 2016, Trendsetter filed an application for a provisional patent on what it claims to be its hydrate-remediation process.30 But C-Innovation alleges that the figures in Trendsetter's application appear to mimic the schematic drawings C-Innovation shared during the 2016 meetings in Louisiana.31 On November 9, 2017, Trendsetter filed a non-provisional patent application, No. 15/808,255.32 The patent was awarded as U.S. Patent No. 10,273,785 B2 (the "'785 Patent") on April 30, 2019.33 C-Innovation alleges that Trendsetter applied for this patent using the information C-Innovation provided at the 2016 meetings.34 Trendsetter, however, insists that it discovered the remediation process described in the '785 patent on its own.35
In May 2019, C-Innovation was approached by a client to remediate a flow line.36 C-Innovation planned on using the process from the 2015 Project.37 On May 30 2019, Trendsetter notified C-Innovation that Trendsetter had received the '785 Patent.38 On June 24, 2019, Trendsetter sent a copy of the '785 Patent to C-Innovation's prospective client.39 The client expressed concern to C-Innovation "about what it viewed as an express threat of litigation."40 And the client allegedly would not hire C-Innovation for a project in Louisiana unless C-Innovation obtained a license for the '785 Patent.41
On July 1, 2019, David Older, the executive vice president of corporate development at Trendsetter, and David Sheetz, vice president of C-Innovation, met at C-Innovation's Houston office to discuss the patent.42 Older attests that "[p]rior to this time, I had not been aware of the 2015 Project nor had I previously seen the documents provided by Mr. Sheetz but informed Mr. Sheetz that I felt confident that the Trendsetter method was clearly distinct from the FTO Services method and would survive a validity challenge."43 C-Innovation asserts that Older, somewhat contradictorily, "refused to concede that the remediation method utilized by C-Innovation did not infringe the '785 Patent."44 C-Innovation asserts further: 45 As a result of this meeting and subsequent negotiations, C-Innovation entered into a license agreement (the "License Agreement") with Trendsetter to take a non-exclusive license to the '785 patent.46 The License Agreement identifies C-Innovation as a Louisiana company,47 and Dino Chouest executed the agreement on C-Innovation's behalf from its office in Cut-Off, Louisiana.48 C-Innovation alleges that Trendsetter used "express and tacit threats of a patent infringement suit" to coerce it into entering into the License Agreement.49 The hydrate-remediation project requiring the License Agreement was mobilized from Louisiana.50 C-Innovation, from its Louisiana offices, paid Trendsetter $124,000 in royalties.51 C-Innovation was the only licensee under the Trendsetter patent, but the license had to be renewed "on a 'project' basis."52
As a consequence, on July 24, 2020, Sheetz (C-Innovation), with a prospective client in hand, emailed Older (Trendsetter) asking if the rates and terms of the existing License Agreement could be continued for a new hydrate-remediation project.53 Older stated the original terms would be honored.54 On August 25, 2020, Older requested an update to which Sheetz responded: "Nothing as of now."55
When C-Innovation requested a change to the License Agreement to clarify that the license covered its client, BP, and other contractors, Trendsetter responded that it would need to contract directly with BP.56 Nicholas Gault, vice president of finance at Trendsetter, subsequently emailed Sheetz: 57 C-Innovation took this to be an express threat of litigation.58
On September 28, 2020, C-Innovation sent a letter terminating the License Agreement,59 telling Trendsetter "that it intends to move forward with new projects without payment of royalties."60 C-Innovation then filed this lawsuit seeking to have the '785 Patent declared invalid, unenforceable, and not infringed,61 asserting that it "does not intend to make any substantial changes to its hydrate remediation process for future...
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