Sunoco Partners Mktg. & Terminals L.P. v. U.S. Venture, Inc.

• Decision Date: 14 April 2022
• Docket Number: CIVIL ACTION NO. H-19-1145
• Citation: 598 F.Supp.3d 520
• Parties: SUNOCO PARTNERS MARKETING & TERMINALS L.P., Plaintiff, v. U.S. VENTURE, INC., Defendant.
• Court: U.S. District Court — Southern District of Texas

598 F.Supp.3d 520

SUNOCO PARTNERS MARKETING & TERMINALS L.P., Plaintiff,

v.U.S. VENTURE, INC., Defendant.

CIVIL ACTION NO. H-19-1145

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

Signed April 14, 2022

Michael Charles Krill, John R. Keville, Sheppard, Mullin, Richter, Hampton, LLP, Houston, TX, Michelle Cherry Replogle, Winston and Strawn, Houston, TX, for Plaintiff.

Jeffrey Nicholas Costakos, Pro Hac Vice, Kimberly K. Dodd, Pro Hac Vice, Foley & Lardner LLP, Milwaukee, WI, Terrell R. Miller, Foley & Lardner LLP, Houston, TX, Michaela Grace Bissett, Foley Gardere et al., Houston, TX, Andrew Michael Gross, Pro Hac Vice, Foley Lardner LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

SIM LAKE, SENIOR UNITED STATES DISTRICT JUDGE

This is a patent infringement suit filed by Sunoco Partners Marketing & Terminals L.P. ("Plaintiff" or "Sunoco") against U.S. Venture, Inc. ("Defendant" or "USV"), involving two claims from a single patent, United States Patent No. 9,207,686 ("’686 Patent").¹ Pending before the court are Plaintiff Sunoco's Motion for Summary Judgment (Docket Entry No. 92), Plaintiff Sunoco's Motion to Exclude Certain Damages Opinions of James Malackowski (Docket Entry No. 94); U.S. Venture, Inc.’s Motion for Summary Judgment ("USV's MSJ") (Docket Entry No. 96), and U.S. Venture, Inc.’s Motion to Exclude Jeffrey A. Compton (Docket Entry No. 98). For the reasons stated below, USV's MSJ will be denied as to patent misuse and granted as to ineligibility and noninfringement, and the remaining motions will be denied as moot.

I. Background

A. Technology at Issue

On December 8, 2015, the ’686 Patent was issued by the United States Patent and Trademark Office ("PTO") to inventors, Mattingly, et al., and subsequently, Sunoco acquired all right, title and interest in the ’686 Patent.² The ’686 Patent is for an invention relating to "versatile systems for continuous in-line blending of butane and petroleum."³ The ’686 Patent belongs to a family of patents that claim priority to United States Patent 6,679,302 ("the ’302 Patent") granted on January 20, 2004.⁴

The ’302 Patent explains that blending butane with gasoline "at several points of the gasoline distribution chain," was a common, well-known practice long before it or the ’686 Patent were granted.⁵ The ’302 Patent explains that blending butane into gasoline is generally desirable for two reasons. First, to increase profitability, because when purchased at the wholesale level, butane is generally less expensive than gasoline. Blending butane with gasoline thereby allows suppliers to increase the overall volume of their gasoline while reducing its cost on a volumetric basis. Second, to increase gasoline's volatility or ability to combust, which is especially desirable in colder months when gasoline is more difficult to combust. A common measure of gasoline volatility is Reid Vapor Pressure ("RVP"). Because the United States Environmental Protection Agency ("EPA"), as well as many states, regulate the maximum allowable RVP of gasoline sold at retail outlets such as gasoline stations, and because these regulations vary by region, state, and locality throughout the year, blending of butane into gasoline as close to the point of final sale as possible is desirable.⁶

B. The Parties’ Litigation History

Sunoco has sued USV on at least two previous occasions: First, in Civil Action 15-8178 filed in the Northern District of Illinois, Sunoco alleged infringement of five other patents in the same family as the ’686 Patent ; and then later in Civil Action 17-01390-LPS filed in the District of Delaware, Sunoco alleged infringement of various patents in the same patent family, including different claims of the ’686 Patent than those at issue in this case.⁷

C. Allegations of Infringement

Sunoco alleges that USV owns and operates terminals throughout the United States that receive refined petroleum products, including gasoline, from refineries via pipelines, store the products in tanks, and distribute the products to tanker trucks for further distribution to retail outlets, including gasoline stations. Sunoco alleges that at some of its terminals USV uses systems to blend butane into the gasoline before the gasoline is distributed to tanker trucks.⁸ Sunoco alleges that

[u]ntil 2017, [USV]’s butane blending systems were designed to largely automatically blend butane into gasoline to achieve a target RVP, which is typically set slightly below the maximum legal RVP limit. As explained by Dan Morrill, [USV]’s Director of Terminal Operations, the systems would begin blending a preset percentage of butane into gasoline, sample the butane-blended gasoline, measure the RVP of the butane-blended gasoline, and transmit the measured RVP value to a programmable logic controller ("PLC"). The PLC would then compare the measured RVP value to a target RVP value, calculate an adjustment to the blend ratio, and then use a control value to adjust the flow rate of the butane stream to achieve the calculated blend ratio...

On April 3, 2017, [USV] modified its blending systems such that a human operator must manually enter the blend ratio and manually enter any changes to the blend ratio, but the other aspects of [USV]’s systems remained the same ... [USV] refers to these systems as the "Modified Systems."

Upon information and belief, [USV] has been using its Modified Systems to blend butane into gasoline at its terminals throughout the United States, including at its terminal in the Southern District of Texas.⁹

Sunoco alleges that USV, in violation of 35 U.S.C. § 271(a), literally or under the doctrine of equivalents, infringes Claims 16 and 17 of the ’686 Patent by using the Modified Systems to perform the claimed methods, and by making, selling and offering to sell gasoline blended with butane by performing the claimed methods.¹⁰ Claims 16 and 17 of the ’686 Patent describe

16. A method for in-line blending of petroleum and a volatility modifying agent comprising:

a) providing a petroleum stream that comprises a petroleum vapor pressure and a flow rate;

b) providing an agent stream that comprises an agent vapor pressure;

c) providing an allowable vapor pressure; d) calculating a blend ratio based upon a blended petroleum vapor pressure, said agent vapor pressure, said flow rate and said allowable vapor pressure;

e) blending said agent stream and said petroleum stream at said blend ratio to provide a blended petroleum stream wherein the blended vapor pressure is less than or equal to said allowable petroleum vapor pressure; and

f) measuring vapor pressure of the blended petroleum stream.

17. The method of claim 16, further comprising:

a) withdrawing agent from said agent stream; and

b) measuring sulfur content of said agent withdrawn from said agent stream.¹¹

D. USV's Answer and Counterclaims for Declaratory Judgment

On August 23, 2019, USV filed Defendant U.S. Venture, Inc.’s Answer, Affirmative Defenses, and Counterclaims to Plaintiff's Complaint for Patent Infringement ("USV's Answer, Defenses and Counterclaims") (Docket Entry No. 28). USV denies Sunoco's allegations of infringement,¹² asserts ten affirmative defenses, including an affirmative defense of invalidity based on 35 U.S.C. §§ 101, 102, 103, and/or 112,¹³ and three counterclaims seeking Declaratory Judgment of non-infringement, invalidity, and unenforceability, injunctive relief, attorneys’ fees, and costs.¹⁴

E. Markman Hearing

On June 24, 2020, the court conducted a Markman Hearing at which the parties disputed the proper construction of three claim terms: (1) "said agent vapor pressure," (2) "calculating," and (3) the phrase "calculating a blend ratio based upon a blended petroleum vapor pressure, said agent vapor pressure, said flow rate and said allowable vapor pressure." After carefully considering the parties’ arguments, the evidence, and the applicable law, the court issued a Memorandum Opinion and Order (Docket Entry No. 53), holding that each of these three terms should be construed as having its plain and ordinary meaning.

II. Cross Motions for Summary Judgment

Sunoco seeks summary judgment on the following issues:

A. whether 35 U.S.C. § 287 does not apply as a matter of law to limit Sunoco's pre-suit damages because Sunoco has only asserted method claims (not apparatus claims);

B. whether the Court should dismiss [USV]’s affirmative defenses that:

1. Sunoco is precluded from seeking costs under 35 U.S.C. § 288 when no claim of the ’686 patent was found invalid prior to the start of this litigation (or at any time);

2. Sunoco's infringement claims are barred by prosecution history estoppel when [USV] does not intend to rely on it and has never identified any support for it;

3. the ’686 patent is unenforceable for inequitable conduct when [USV] does not intend to rely on this defense and only identified its arguments from the Illinois Case in support (which were dismissed on summary judgment and never appealed);

4. the ’686 patent is unenforceable for patent misuse when [USV]’s underlying factual allegations, taken as true, would not render the patent unenforceable; and

5. Sunoco's claims are barred by equitable estoppel when [USV]’s underlying factual allegations, taken as true, cannot prove equitable estoppel.¹⁵

USV seeks summary judgment that the ’686 Patent is not infringed, is invalid as ineligible under 35 U.S.C. § 101, and is unenforceable because of patent misuse by Sunoco.¹⁶

A. Standard of Review

Summary judgment is authorized if the movant establishes that there is no genuine dispute about any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Disputes about material facts are genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). "The party moving for summary judgment must ‘demonstrate the absence of a genuine issue of material...