Ortloff Corp. v. Gulsby Engineering, Inc.

• Decision Date: 02 May 1988
• Docket Number: Civ. A. No. H-83-3062.
• Citation: 706 F. Supp. 1295
• Parties: The ORTLOFF CORPORATION, Plaintiff, v. GULSBY ENGINEERING, INC., and Tenneco Oil Company, Defendants.
• Court: U.S. District Court — Southern District of Texas

706 F. Supp. 1295

The ORTLOFF CORPORATION, Plaintiff, v. GULSBY ENGINEERING, INC., and Tenneco Oil Company, Defendants.

Civ. A. No. H-83-3062.

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

May 2, 1988.

Dana M. Raymond, William F. Eberle and John D. Murnane of Brumbaugh, Graves, Donohue & Raymond, New York City, William E. Wright of Wright & Patton, P.C., Houston, Tex., and William C. Morrow, Midland, Tex., for plaintiff.

Guy L. McClung of Vaden, Eickenroht, Thompson & Boulware, N. Elton Dry of Pravel, Gambrell, Hewitt, Kimball & Krieger, and Alfred B. Smith, Jr., Houston, Tex., for defendant, Tenneco Oil Co.

G. Byron Jamison, II, and Martin McGregor of Jamison & McGregor, Houston, Tex., for defendant, Gulsby Engineering, Inc.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

HITTNER, District Judge.

FINDINGS OF FACT

I. NATURE OF ACTION AND PLEADINGS

1. This is an action under the patent laws of the United States for infringement of United States Patent No. 4,278,457 (hereinafter called the '457 patent) and for misappropriation of confidential information under the common law of Texas.

2. The Court has jurisdiction over the patent issues under 28 U.S.C. § 1338(a) and venue is proper under 28 U.S.C. § 1400(b). The Court has jurisdiction over the common law claim under 28 U.S.C. § 1338(b).

3. The complaint, filed on May 13, 1983, charges that Defendant Tenneco Oil Company and Defendant Gulsby Engineering, Inc., have each infringed the '457 patent. The amended complaint, filed on March 4, 1985, includes the patent claims and also charges both Defendants with misappropriation of Plaintiff's confidential information.

4. Tenneco's answer, filed on June 13, 1983, and Gulsby's answer, filed on June 12, 1983, raise the defenses of noninfringement, invalidity, unenforceability, and misuse of the '457 patent. Gulsby's answer to the amended complaint, filed on May 13, 1985, included counterclaims against Plaintiff and its parent, Elcor Corporation, under the antitrust laws of the United States and under the Texas law of unfair competition. Gulsby dropped such counterclaims on the first day of trial, March 5, 1987, and the Court dismissed them by Order dated March 6, 1987.

II. THE PARTIES

5. Plaintiff, the Ortloff Corporation (Ortloff), is a Texas corporation with its principal place of business in Midland, Texas. The '457 patent in suit issued on July 14, 1981, naming Roy E. Campbell and John D. Wilkinson as the inventors. The patent was and is assigned to Plaintiff Ortloff and Ortloff has been the sole owner of all rights, title, and interest in the '457 patent since its issuance.

6. Defendant Tenneco Oil Company (Tenneco) is a Delaware corporation with its principal place of business in Houston, Texas.

7. Defendant Gulsby Engineering, Inc. (Gulsby) is a Texas corporation with its principal place of business in Kingwood, Texas.

III. THE PROCESS WHICH IS THE SUBJECT OF THE SUIT

A. Background

8. Ortloff charges infringement of the '457 patent in suit by virtue of the design, construction and operation of a cryogenic gas processing plant which was designed and built by Gulsby under contract with Tenneco in Johnson's Bayou, Louisiana, in the Sabine Pass. The accused plant (hereinafter called Sabine Pass Plant) commenced operations in November, 1982.

9. Ortloff gave Tenneco notice of the '457 patent on October 5, 1981. Gulsby was aware of the '457 patent in November, 1981. Ortloff advised both Gulsby and Tenneco on March 2, 1982, that the Sabine Pass Plant then under contract may infringe the Ortloff patent.

10. The processes of the '457 patent in suit relate to gas separation processes. The natural gas used for fuel in commerce is largely methane, which is the most volatile hydrocarbon gas. Typically, however, natural gas also contains ethane (the next most volatile gas) and smaller amounts of heavier hydrocarbons. Ethane has value as a component in the production of a variety of petrochemicals. Accordingly, producers of natural gas have found it profitable to recover ethane and other components from natural gas.

11. In standard commercial plants which have been built since around the 1960's the separation of ethane has been accomplished by cooling the natural gas to a temperature lower than about -130°F. At these temperatures, and at a pressure of several hundred pounds per square inch, some of the natural gas condenses to a liquid containing methane, ethane, and most of the less volatile hydrocarbons. The gas is separated in a distillation column to recover a liquid product containing a major part of the ethane which is relatively free of methane, usually referred to as C2 or C2+ liquids.

12. The distillation column in which the separation of the gas components occurs is referred to as a demethanizer column or fractionation column. It separates the methane content of the initial condensate into residue gas which is withdrawn from the top of the column, leaving the ethane and less volatile hydrocarbons as a liquid, which is withdrawn from the bottom. The residue gas from the top of the demethanizer column, which is discharged from the process, contains most of the methane in the original natural gas feed. Because of the low temperatures employed in some natural gas separation process, they are referred to as a "cryogenic" NGL (natural gas liquids) recovery processes.

13. A stream containing the desired C2+ hydrocarbons plus a large amount of methane, is supplied to the demethanizer column. Part of the stream rises as vapor and is discharged as residue gas from the top of the demethanizer column. The other part of the stream containing ethane, and a large amount of condensed methane, falls as liquid into the distillation column in which the methane is separated. The C2+ liquid is recovered from the bottom of the column.

14. Where the C2+ liquids are to be sold for their ethane content, recovery of a large part of the ethane in the natural gas is desirable.

B. The Invention

15. Roy E. Campbell and John D. Wilkinson discovered, in connection with cryogenic processing of natural gas containing carbon dioxide as an unwanted ingredient, that high percentages of ethane and heavier hydrocarbons could be recovered while reducing the risk of carbon dioxide icing by dividing the plant's inlet vapor into two streams, subcooling one stream and feeding that stream to the top of the demethanizer column while expanding and cooling the other stream and feeding that stream to the middle of the demethanizer column. The inventors discovered that, when the feeds to the top and mid-column of the demethanizer were suitably arranged, the concentration of carbon dioxide near the top of the demethanizer could be reduced, thereby reducing the risk of carbon dioxide icing in the demethanizer while simultaneously providing for high ethane recovery.

16. The Campbell and Wilkinson split vapor system has been widely adopted by Ortloff and others in the construction and operation of gas processing plants, resulting in design and construction by Ortloff of plants valued in excess of $68 million and in license fees paid to Ortloff greater than $1 million in connection with plants constructed by others.

17. A flow diagram for a cryogenic gas processing plant embodying the split vapor system invented by Campbell and Wilkinson and corresponding to Fig. 5 of the '457 patent is reproduced below:

C. The Claims in the '457 Patent

18. Ortloff asserts that Gulsby and Tenneco have infringed claims 3 and 4 of the '457 patent. Claim 3 reads as follows:

3. In a process for the separation of a feed gas containing methane and ethane into a volatile residue gas containing a major portion of said methane and a relatively less volatile fraction containing a major portion of said ethane, said feed gas containing hydrocarbons and at least 0.02 mole percent carbon dioxide, wherein methane and ethane together comprise a major portion of said feed gas, in said process

(a) said feed gas being cooled under pressure to provide a cooled feed stream;

(b) said cooled feed stream being expanded to a lower pressure whereby it is further cooled; and

(c) said further cooled feed stream is fractionated at said lower pressure in a fractionated column, the overhead temperature of said fractionation column being maintained at a temperature whereby the major portion of said ethane is recovered in said relatively less volatile fraction; the improvement wherein following cooling, said cooled feed stream under pressure is divided into a first and second gaseous streams; and

(1) said first stream is cooled to condense substantially all of it, and is thereafter expanded to said lower pressure;

(2) said second stream is expanded to said lower pressure; and

(3) said expanded first and second streams are thereafter supplied to said fractionation column at first and second feed points, respectively, said first feed point being the top liquid feed to said column, and said second feed point being at a mid-column feed position, the proportion of said feed gas comprising said second stream, and the temperature of said second stream being sufficient to reduce the risk of carbon dioxide icing in said column, and the temperature of said first stream being effective to maintain said overhead temperature of the fractionation column at a temperature whereby the major portion of said ethane is recovered in said relatively less volatile fraction.

19. Claim 3 is directed to a process for feeding natural gas to a fractionation column (demethanizer column) and recovering ethane as liquid product from the bottom of the column while methane leaves the top of the column as residue.

20. In its decision allowing the issuance of claim 3, the Board of Appeals held that claim 3 is to be interpreted as requiring that ethane shall be recovered and separated from methane in a fractionator column.

21. Claim 3 particularly points out and distinctly claims a particular cryogenic expansion...