Reed Tool Co. v. Dresser Industries, Inc.

• Decision Date: 25 September 1980
• Docket Number: 76-H-1968.,Civ. A. No. 76-H-1703
• Citation: 499 F. Supp. 935
• Parties: REED TOOL COMPANY, Plaintiff, v. DRESSER INDUSTRIES, INC., Defendant. REED TOOL COMPANY, Plaintiff, v. SMITH INTERNATIONAL INC., Defendant.
• Court: U.S. District Court — Southern District of Texas

499 F. Supp. 935

REED TOOL COMPANY, Plaintiff, v. DRESSER INDUSTRIES, INC., Defendant.

REED TOOL COMPANY, Plaintiff, v. SMITH INTERNATIONAL INC., Defendant.

Civ. A. Nos. 76-H-1703, 76-H-1968.

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

September 25, 1980.

COPYRIGHT MATERIAL OMITTED

A. H. Evans, Vinson, Elkins, Searls, Connally & Smith, Houston, Tex., for plaintiff Reed Tool Co.

Floyd R. Nation, Arnold, White & Durkee, Houston, Tex., for defendant Dresser Industries, Inc.

Andrew J. Belansky, Christie, Parker & Hale, Pasadena, Cal., for defendant Smith Intern., Inc.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

McDONALD, District Judge.

This case was tried before the Court from December 3, 1979, through December 19, 1979. Extensive post-trial briefs and memoranda were filed and oral argument was heard on March 3, 1980. Additional memoranda were submitted after oral argument. The Court has now had a full opportunity to review the facts, the law, and the arguments of the parties. In accordance with Fed.R.Civ.P. 52, the Court hereby enters the following Findings of Fact and Conclusions of Law.

I. FINDINGS OF FACT

A. NATURE OF THE ACTION

1. This is an action for infringement of United States Patent No. 3,495,668, a patent which relates to a three-cone rotary rock bit used to drill oil and gas wells. It was originally brought as two separate cases. The first was filed by plaintiff Reed Tool Company against defendant Dresser Industries, Inc., on October 18, 1976. The second was filed by plaintiff Reed Tool Company against defendant Smith International, Inc., on December 1, 1976. The two cases were consolidated by order of the Court on November 7, 1978.

2. The defendants deny infringement and have set forth defenses asserting invalidity and unenforceability of the patent both on statutory grounds and on the grounds of laches and estoppel. Defendant Dresser Industries, Inc., also seeks a declaratory judgment by way of counterclaim that the patent is invalid, unenforceable, and not infringed.

B. THE PARTIES

3. Plaintiff Reed Tool Company (hereinafter referred to as Reed) is a corporation of the State of Texas, having its principal place of business in Houston, Texas. Reed is primarily engaged in the business of manufacturing and selling rotary drilling equipment, including rotary rock drill bits.

4. Defendant Dresser Industries, Inc. (hereinafter referred to as Dresser), is a corporation of the State of Delaware, having a regular and established place of business in the Southern District of Texas. Defendant Smith International, Inc. (hereinafter referred to as Smith), is a corporation of the State of California, having a regular established place of business in the Southern District of Texas. Defendant Dresser, through its Security Division, and Defendant Smith, through its Smith Tool Division, are also manufacturers and sellers of rotary rock drilling bits, and are principal competitors of Reed.

C. ROCK BITS AND THEIR USAGE

5. Three-cone rotary rock bits have been used to drill oil and gas wells for over forty years. They consist of a head portion and three cone-shaped cutters. The top end of the head is threaded. The three cutters are mounted on legs protruding from the lower end of the head. Their apexes extend generally toward the center of the bit.

6. In order to drill a well, the threaded portion of the head of the bit is screwed into the lower end of a "drill string," an interconnected series of drill pipes. The drill string is then lowered into a borehole and rotated. Sufficient downward force is applied to the drill string to cause the cutters to drill through rock formations as they are rotated. In the meantime, a fluid medium, usually a thickened liquid, called "mud," but in some instances air, is pumped down through the center of the pipe to emerge at the drill bit, where it picks up the cuttings loosened at the bottom of the hole and carries them off upwardly through the hole to the surface.

7. As would be expected, the cutting elements on all drill bits become worn with use, and when the rate of penetration of a drill bit decreases to an unsatisfactory level as a result of dullness of the cutting elements or any other malfunction of the bit, it is necessary to change the bit. To effect a change, the drilling crew must typically raise the entirety of the drill string, uncoupling it and stacking it at the drilling rig in sections, and attach a new drill bit to the bottom of the pipe. Then the entire string of drill pipe is recoupled and the bit is lowered to the bottom of the hole for renewed drilling.

D. THE EVOLUTION OF ROTARY ROCK BIT DESIGN

8. For many years, the principal type of rotary rock bits used in the drilling industry were milled tooth bits. In these bits, the cutting structure consisted of rows of elongated steel teeth which were formed integrally with the cutter. In manufacture, a thick-walled cutter was forged from steel and the walls were then milled-portions of the surface of the cutter were removed-leaving the teeth-like projections extending from the cutter surface. The outer surface of the teeth and cutter were then carburized, or "case-hardened," to increase wear-resistance and strength.

9. Because hard and soft formations yield most easily to different drilling forces, the design of these milled tooth bits varied in accordance with the type of formation for which they were intended. Bits designed for hard formations had shorter, more closely-spaced teeth, as these produced the vertical crushing action to which the hard formations most easily responded. Bits intended for soft formations had much longer and wider-spread teeth, as these produced the gouging and scraping action which worked best in the soft formations. Bits designed for the soft formations also included much greater "skew" or "offset." "Skew" or "offset" is present in a bit when the axis of rotation of each of the three cone-shaped cutters do not intersect at the centerline, or axis of rotation, of the bit. All rotary rock bits include some offset, but the greater the offset, i. e., the larger the difference between the intersection of the axes of rotation of the three bits and the axis of rotation of the bit as a whole, the more vigorous the gouging and scraping action produced by the bit's rotation. Thus, bits designed for the hard formations include approximately 1/32" to 1/16" offset, an amount so small that the bits are referred to as "non-offset" bits. Bits designed for the soft formations include 1/8" or greater skew and are referred to, not surprisingly, as "offset" bits.

10. Utilization of milled tooth bits over the years indicated that such bits were less than ideal for drilling hard formations. No matter how well-designed they were, milled tooth bits were limited by the strength of the metal with which they were constructed. In drilling the hard rock formations, the carburized steel of which the bits were constructed ground down very quickly. The teeth would simply wear away on the hard rock. In very hard rock formations, a milled tooth bit might drill for only a few feet, after which it would have to be pulled out of the hole and replaced. This was very expensive, not only in terms of the number of bits required for drilling a well, but also in terms of the time required for each "round trip" in which the drill string, often thousands of feet in length, would have to be removed from the hole and disconnected, joint by joint, so that the drill could be changed.

11. In the early 1950's this problem was substantially eliminated by the introduction of insert bits. These new bits used rounded or hemispherical elements of tungsten carbide to do the cutting. In contrast to the way milled tooth bits were manufactured, with portions of thick-walled cutters being machined away to create the cutter teeth, insert bits were manufactured by forging regular-walled cutters, boring sockets in them, and then placing tungsten carbide inserts into the sockets. The insert bits corresponded in design to the hard formation milled tooth bits in that the inserts were closely spaced and did not protrude far from the conical cutter. As tungsten carbide is much harder than carburized steel, however, they proved much more efficient and economical in drilling hard rock formations.

12. Although tungsten carbide inserts would have worn less quickly in medium and soft formations, insert bits were not, at first, used to drill in these formations. There were three reasons for this. First, unlike the carburized steel teeth in the milled tooth bits, the inserts in the insert bits were not an integral part of the cutter itself. Second, tungsten carbide, although stronger than carburized steel, is also more brittle than that metal. Thus, the inserts were more likely to break when subjected to the degree of offset utilized in drilling the soft and medium-density formations than were the milled teeth. Third, there was not as great a need for more wear-resistant teeth in soft and medium-density formation drilling. The milled tooth bits drilled these formations without much difficulty.

13. Even so, as time went on, the various characteristics which had been used to adapt milled tooth bits to softer formations were in turn incorporated into insert bits. Finally, in late 1967, the plaintiff introduced the Reed SCM bit. Designed to drill in medium-density formations, it was, according to counsel, the first commercially successful offset bit with extended inserts. It is the subject matter of the patent in suit.

E. THE PATENT IN SUIT

14. On July 5, 1968, Percy W. Schumacher, who developed the Reed SCM bit, filed his application for the patent in suit. United States Patent No. 3,495,668, the patent in suit issued on February 17, 1970, to G.W. Murphy Industries, Inc., now Reed Tool Company by change of name, upon the assignment of the inventor. Reed Tool Company, the plaintiff in this action, is the owner of the...