Crystaphase Prods., Inc. v. Criterion Catalysts & Techs., LP

• Decision Date: 20 August 2018
• Docket Number: CIVIL ACTION NO. 3:17-CV-00265
• Parties: CRYSTAPHASE PRODUCTS, INC. Plaintiff. v. CRITERION CATALYSTS & TECHNOLOGIES, LP; CRITERION CATALYST COMPANY; SHELL GROUP; AND SHELL GLOBAL SOLUTIONS, INC. Defendants.
• Court: U.S. District Court — Southern District of Texas

CRYSTAPHASE PRODUCTS, INC.Plaintiff. v. CRITERION CATALYSTS & TECHNOLOGIES, LP; CRITERION CATALYST COMPANY;SHELL GROUP; AND SHELL GLOBAL SOLUTIONS, INC.Defendants.

CIVIL ACTION NO. 3:17-CV-00265

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS GALVESTON DIVISION

August 20, 2018

MEMORANDUM AND RECOMMENDATION

Pending before the Court is Defendants' Motion to Dismiss Plaintiff's Second Amended Complaint(the "Shell Group's Motion to Dismiss").Dkt. 27.All dispositive pretrial motions in this case have been referred to this Court for report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B).Dkt. 30.Having considered the motion, the responses, and applicable law, the Court RECOMMENDS that the Shell Group's Motion to Dismiss be GRANTED IN PART and DENIED IN PART.

I.BACKGROUND

Crystaphase Products, Inc.("Crystaphase") brings this suit against Criterion Catalysts & Technologies, LP; Criterion Catalyst Company; Shell Group; and Shell Global Solutions, Inc.(collectively the "Shell Group") for patent infringement under patent laws of the United States, 35 U.S.C. § 1 et seq., and for violations of the Lanham Act,15 U.S.C. § 1051 et seq.

Crystaphase is a Texas-based company that supplies reactor solutions for the hydrocarbon processing industry.In this lawsuit, Crystaphase alleges that the Shell Group has been promoting, offering for sale, and selling "solutions" that involve the use of OptiTrap Medallion ceramic units for fluid distribution in a chemical reactor.These medallions include multiple ellipsoidal openings.Crystaphase owns two United States Patents of methods using ceramic units including multiple ellipsoidal openings for fluid distribution in a chemical reactor.¹Crystaphase also alleges that even though the Shell Group promotes, offers for sale, and sells solutions involving the OptiTrap Medallions, the Shell Group does not utilize such medallions in the solutions sold to its customers.Instead, the Shell Group allegedly utilizes "poorer performing" units that use triangular openings ("Penta Ring units") instead of the ellipsoidal openings.Crystaphase contends that the Shell Group does not inform the market or customers that it made the substitutions.Crystaphase alleges that by promoting, offering for sale, and selling solutions purported to use ellipsoidal OptiTrap Medallions, and swapping the units with "poorer performing" Penta Ring units, the Shell Group misrepresents the nature, characteristics, and qualities of its goods and services.Moreover, Crystaphase asserts it is consequently forced to compete in a market against promoted solutions involving products that were never delivered to customers.Additionally, Crystaphase alleges that the Shell Group's customers are misled to believe they are purchasing solutions that use ellipsoidal units equivalent to the OptiTrap Medallions offered by Crystaphase.

II.THE 12(b)(6) STANDARD

A Rule 12(b)(6) motion tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim."Ramming v. United States, 281 F.3d 158, 161(5th Cir.2001).The court must accept the factual allegations of the complaint as true, view them in a light most favorable to the plaintiff, and draw all reasonable inferences in the plaintiff's favor.Seeid.To defeat a motion to dismiss filed pursuant to Rule 12(b)(6), a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face."Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570(2007)."A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."Ashcroft v. Iqbal, 556 U.S. 662, 678(2009)(citingTwombly, 550 U.S. at 556)."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."Id.(quotingTwombly, 550 U.S. at 557).Although Rule 12(b)(6) is a powerful tool to use in expediting the judicial process and excising court calendars of cases in which there are no judicially cognizable claims, it is a disfavored motion and is rarely granted."Clark v. Amoco Prod. Co., 794 F.2d 967, 970(5th Cir.1986).

III.ARGUMENT

A. CRYSTAPHASE'S METHOD PATENT INFRINGEMENT CLAIMS (COUNTS I AND II)

In Counts I and II of the Second Amended Complaint ("Complaint"), Crystaphase alleges that the Shell Group has directly infringed its '521 and '863 patents by selling or offering to sell Crystaphase's patented methods.²The Shell Group moves to dismiss Counts I and II, arguing that Crystaphase failed to allege that the Shell Group "sells" or "offers to sell"performance of the method patents, and Crystaphase failed to allege a legally cognizable "offer to sell" because promotional materials are not "offers" as a matter of law.Crystaphase argues in response that it has sufficiently pled its method claims, and its method claims are not limited to the promotional materials cited in the Complaint.

Before discussing the parties' arguments, the Court first describes the method patents involved in this case.

The '521 and '863 Patents.The '521 and '863 method patents each contain the following summary description of the patents:

The method of the present invention for removing contaminants from an organic-based feed stream, in a chemical reactor may include the steps of providing a layer of ceramic filter units, at least some of the ceramic filter units should have a plurality of openings extending therethrough, at least some of the openings having a shape selected from the group consisting of ellipses or trisoids, the layer of ceramic filter units being in an amount sufficient to filter some or all of the contaminants from the organic-based feed stream, and passing the organic-based feed stream through the layer of ceramic filter units.The organic-based feed stream may be an organic- based liquid, a vapor phase, or both, and the contaminants may include dirt, iron oxide, iron sulfide, asphaltenes, coke fines, catalyst fines, sediments, other entrained foreign particulate matter or polymer precursors such as diolefins.

Dkt. 22-2at 9;Dkt. 22-3at 8.The specifics related to the summary description are contained in the various claims made in each patent.Each patent contains multiple claims, with slight differences.For the purpose of this discussion, the Court provides the language from two of the claims, which together provide a fair characterization of the steps required to perform the '521 and '863 patent methods:

What is claimed:

.A method of fluid distribution in a chemical reactor comprising the steps of:

providing a layer of a plurality of ceramic filler units, at least some of the ceramic filter units including a body having a substantially annular outer peripheral shape, a central opening extending through the body, and at least three elliptical openings extending through the body and positioned between the central opening and an outer periphery of the body so that a combination of the central opening and the at least three elliptical openings define a plurality of fluid flow passageways extending through the at least some of the plurality of ceramic filler units;

contacting an organic-based feed stream with the layer of the plurality of ceramic filler units; and

subdividing the organic-based feed stream into a plurality of smaller fluid streams by passing the organic-based feed stream through the plurality of fluid flow passage-ways prior to the organic-based feed stream contacting a catalyst bed in the chemical reactor.

.A method as defined in claim , further including the steps of: removing contaminants hum a contaminated organic-based feed stream; and

providing a decontaminated and uniformly spread organic-based feed stream to a catalyst bed for further processing in the chemical reactor.

Dkt. 22-2at 13.This detailed language is consistent with the summary description of the method Crystaphase alleges in its Complaint:

In connection with such offerings, Defendants have offered for sale and sold solutions using Criterion's OptiTrap Medallion ceramic filter unit in accordance with a method wherein:

46.1. a layer of such units is provided inside a chemical reactor;

46.2. an organic-based feed stream is contacted with the layer;

46.3. the feed stream is subdivided into a plurality of smaller streams as it passes through the openings in the units forming the layer;

46.4. the plurality of smaller streams are uniformly spread across the layer as they pass through the units;

46.5. contaminates are removed from the feed stream; and

46.6. the decontaminated feed stream is provided to a catalyst bed for further processing in the chemical reactor.

Dkt. 22at 21-22.

With this understanding of the patents involved in this case, the Court turns to the relevant legal authority and the Shell Group's arguments.

What is method patent infringement?To state a claim for direct patent infringement, a plaintiff must allege that the defendant, "without authority[,] makes, uses, offers to sell, or sells [the] patented invention."35 U.S.C. § 271(a);see alsoHewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, 1469(Fed. Cir.1990)."An 'offer for sale' sufficient to give rise to liability for patent infringement must meet the traditional contract law definition of that term.Thus, [a]defendant must communicate a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it."Superior Indus., LLC v. Thor Glob. Enters. Ltd., 700 F.3d 1287, 1294(Fed. Cir.2012)(citations and internal quotation marks omitted)."[A] sale includes the concept of a transfer of title or property . . . .[and] also requires a thing capable of being transferred."NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1319(Fed. Cir.2005)...