Shell Global Solutions (us) Inc. v. Rms Eng'g Inc.

• Citation: 782 F.Supp.2d 317,2011 Markman 1103046
• Decision Date: 15 August 2011
• Docket Number: Civil Action No. 4:09–cv–3778.
• Parties: SHELL GLOBAL SOLUTIONS (US) INC., and Shell Oil Company, Plaintiffs,v.RMS ENGINEERING, INC., Tesoro Corporation, and Tesoro Refining and Marketing Company, Defendants.
• Court: U.S. District Court — Southern District of Texas

782 F.Supp.2d 317

2011 Markman 1103046

SHELL GLOBAL SOLUTIONS (US) INC., and Shell Oil Company, Plaintiffs,

v.RMS ENGINEERING, INC., Tesoro Corporation, and Tesoro Refining and Marketing Company, Defendants.

Civil Action No. 4:09–cv–3778.

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

March 21, 2011.Order Denying Reconsideration Aug. 15, 2011.

Matthew G. Reeves, Locke Lord et al., Tanya Lynn–Coate Chaney, Michael O. Sutton, Locke Lord Bissell and Liddell LLP, Houston, TX, for Plaintiffs.Charles D. Rusciano, Attorney at Law, Paul J. Goldenberg, William K. Luyties, Lorance & Thompson P.C., Houston, TX, J. Daniel Harkins, Cox Smith et al., San Antonio, TX, Raymond W. Mort, III, Dinovo Price et al., William Morrison Parrish, Dinovo Price Ellwanger & Hardy LLP, Austin, TX, for Defendants.

MEMORANDUM AND ORDER

KEITH P. ELLISON, District Judge.

In this patent infringement suit, the Court is asked to construe the asserted claims of U.S. Patent No. 6,221,318 (the “318 Patent”). A hearing was held on December 1, 2010, during which the parties presented argument in support of their proposed constructions. This Court now construes the disputed claim terms as a matter of law under Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed.Cir.1995), aff'd, 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996).

In addition, pending before the Court are Defendants' Motion for Summary Judgment on Equitable Estoppel and Laches (Doc. No. 58), Defendants' Motion for Summary Judgment on Indefiniteness (Doc. No. 50), and Defendants' Motion to Exclude Expert Testimony of Ye–Mon Chen (Doc. No. 87).¹ Upon considering the Motions, all responses thereto, and the applicable law, the Court finds that the Motion for Summary Judgment on Equitable Estoppel and Laches (Doc. No. 58) should be denied, the Motion for Summary Judgment on Indefiniteness (Doc. No. 50) should be denied, and the Motion to Exclude Expert Testimony of Ye–Mon Chen (Doc. No. 87) should be denied as moot.

I. BACKGROUNDA. Technological Background

This patent infringement case involves a device known as a spent catalyst distributor, which functions within the fluid catalytic cracking unit (“FCC Unit”) of an oil refinery. Refineries convert heavy crude oil, which cannot be directly used, into lighter products such as gasoline and diesel. Refineries use a process called “fluid catalytic cracking” (“FCC”) in order to perform this conversion. The FCC process takes place within the FCC Unit. The FCC Unit consists of two vessels—a reactor and a regenerator. Within the reactor, two streams of material are introduced: (1) liquid hydrocarbon feedstock (i.e. the crude oil); and (2) catalyst material that comes from the regenerator. The catalyst is made up of fine particles that are “fluidized” (meaning that the particles act like a liquid when lifted up or diffused by gas). Inside the reactor, the hydrocarbon is “cracked”—so called because the large hydrocarbon molecules constituting the heavy fractions are broken up into smaller molecules—by the presence of heat and the active catalyst. As the cracking process occurs, the heavy carbonaceous material or a “coke layer” deposits itself onto the catalyst, which is subsequently termed “spent catalyst.” The lighter hydrocarbon molecules are separated from the spent catalyst via cyclones and siphoned off into a separate “product recovery system.” The spent catalyst leaves the reactor via a “spent catalyst transfer line” and enters the regenerator through an “inlet conduit” and “spent catalyst distributor.” The spent catalyst distributor is the subject of Plaintiffs' 318 patent. The spent catalyst distributor distributes the spent catalyst among heated air (which comes into the regenerator via an “air distributor”) so that the spent catalyst is once again “fluidized.” The heated air burns the carbon or coke off of the catalyst, thereby rendering the catalyst usable again. The regenerated catalyst leaves the regenerator by way of a “withdrawal well” or “hopper,” which takes the regenerated catalyst back to the reactor. The FCC process repeats itself. The continuous flow of catalyst between the reactor and generator allows the continuous processing of crude oil.

Shell Global Solutions (US), Inc. and Shell Oil Company (collectively, “Plaintiffs” or “Shell”) own the 318 Patent, which teaches a process and apparatus for distributing fluids in a container. Shell has alleged that the spent catalyst distributor installed during renovation of the FCC Unit in the Salt Lake City refinery (the “SLC Refinery”) of Tesoro Corporation and Tesoro Refining and Marketing Company (collectively, “Tesoro”) infringes claims 1–4 of the 318 Patent. RMS Engineering, Inc. (“RMS”) acted as a consultant to Tesoro during the renovation and installation process of the FCC Unit at the SLC Refinery. Tesoro and RMS (collectively, “Defendants”) have filed summary judgment motions asserting defenses of equitable estoppel, laches, indefiniteness, and anticipation. The parties now seek to construe certain terms contained in the patent-in-suit, as well as rulings on the summary judgment motions regarding equitable estoppel, laches, and indefiniteness.

B. Factual History

Shell and Tesoro have had an extensive and ongoing business relationship. In 1998, Shell sold its Anacortes, Washington refinery to Tesoro. (Baebler Decl. ¶ 4.) At the same time, Shell's FCC expert, David Brosten, left Shell to join Tesoro as Tesoro's FCC specialist. ( Id.) During his employment with Tesoro, Brosten worked with Reza Sadeghbeigi, owner and president of RMS, in connection with the modification and repairs made to Tesoro's refinery in Mandan, North Dakota. ( Id.) In 2003, Brosten left Tesoro to rejoin Shell. ( Id.)

In turn, RMS has had an extensive and ongoing business relationship with Shell. Sadeghbeigi worked with Shell on the revamp of the FCC Unit at the Premcor refinery in Port Arthur, Texas. (Sadeghbeigi Decl. ¶ 4.) He worked with Shell employees to obtain bids for Tesoro's SLC Refinery revamp and a revamp of a FCC Unit in the Irving Oil Refinery in Canada. ( Id.) Sadeghbeigi routinely corresponded with Brosten about proposed designs and projects, and in January 2004, provided Brosten with information about consultants and industry contacts for Shell's business development. (Sadeghbeigi Decl. ¶ 3; Brosten Decl. ¶ 3; Doc. No. 58, Ex. 6; Doc. No. 58, Ex. 7.) In 2007, RMS was retained by the Lyondell refinery to evaluate the performance of its newly renovated FCC Unit, which used Shell technologies. ( Id. ¶ 6.) As part of the evaluation, Sadeghbeigi discussed the Lyondell operations extensively with Brosten. ( Id. ¶ 6.) RMS regularly conducts training seminars that Shell employees attend. ( Id. ¶¶ 3, 5; Doc. No. 58, Ex. 9)

In 2004, Tesoro began the process of gathering bids for the 2007 revamp of the FCC Unit in its SLC Refinery. (Baebler Decl. ¶ 8.) The FCC Unit has been originally built in 1944. (Baebler Decl. ¶ 6.) Over the years, the FCC Unit had utilized several types of spent catalyst distributors. ( Id. ¶ 7.) Around 1980, Tesoro modified the spent catalyst distributor to use a design that had a central riser with three fluid conveying arms extending outwardly and sloping downwardly at an angle of 30° from horizontal (the “1980 Design”). ( Id.) The revamp involved the replacement of several devices within the FCC Unit, including the spent catalyst distributor, the standpipe, and the withdrawal well. ( Id. ¶ 9.) Tesoro selected RMS to oversee the revamp of the regenerator of the FCC Unit. (Sadeghbeigi Decl. ¶ 7.)

In August 2004, Sadeghbeigi sent a Request for Quotation (“RFQ”) to various vendors, including Shell's development partner Foster Wheeler and Brosten. (Baebler Decl. ¶ 11; Sadeghbeigi Decl. ¶ 10; Doc. No. 58, Ex. 10.) The RFQ requested proposals to modify several devices within the FCC Unit, but did not request a proposal for the revamp or modification of the spent catalyst distributor. (Doc. No. 58, Ex. 11 at 3, 5; Chen Decl. ¶ 7.) The RFQ did disclose the then-current design of the FCC Unit, including the 1980 Design spent catalyst distributor. (Sadeghbeigi Decl. ¶ 10; Doc. No. 58, Ex. 11.) The RFQ described the spent catalyst distributor as follows: “The spent catalyst enters the regenerator through a center hub having three (3) 22.5? ID distributor arms. These distributor arms are pointed downward at 30° from horizontal.” (Doc. No. 58, Ex. 11 at 10.)

On August 24, 2004, Brosten emailed Ye Mon Chen, Shell's Fluid Catalytic Cracking Manager and Technology Licensing Manger in the American Region, about the RFQ. (Chen Decl. ¶ 2.) Brosten stated that Sadeghbeigi appeared to be using the “Shell CCET in his draw off-well design.” (Doc. No. 58, Ex. 15.) Brosten believed that the design was covered by Shell's patents and asked Chen's advice on how to proceed. ( Id.)

On August 31, 2004, Rien Elfring, a Shell employee, spoke with Matthew Baebler, Director for Energy Excellence at Tesoro, about the revamp of the FCC Unit. (Baebler Decl. ¶ 11.) Elfring explained that he was concerned that the technical solution relating to the standpipe and withdrawal well contained in the RFQ might infringe upon one or more of Shell's patents relating to standpipe and withdrawal well technologies. ( Id.) Baebler told Elfring that the issue would be “cleared up” before Tesoro continued with the proposal and that Tesoro desired to have an “open art approach” to technology. ( Id.) Elfring subsequently emailed several Shell employees, including Chen, about his conversation with Baebler. (Doc. No. 58, Ex. 16.) Elfring stated that he had explained to Baebler that “[Shell] suspect[s] the technical solution as developped [sic] by RMS for their revamp possibly infringes one or more of our patents ... I explained that as long as this is not resolved we, and Foster Wheeler, will decline to bid on the ITB as received from RMS.” ( Id.) Elfring noted with concern that Tesoro had...