Packers Plus Energy Services Inc. v. Essential Energy Services Ltd.

Packers Plus Energy Services Inc. v. Essential Energy Services Ltd.
Court (s) Database
Federal Court Decisions
Date
2017-12-06
Neutral citation
2017 FC 1111
File numbers
T-1569-15, T-1728-15, T-1741-13, T-2088-15
Decision Content
Date: 20171206
Dockets: T-1741-13
T-1569-15
T-1728-15
T-2088-15
Citation: 2017 FC 1111
Ottawa, Ontario, December 6, 2017
PRESENT: The Honourable Mr. Justice O'Reilly
Docket: T-1741-13
BETWEEN:
PACKERS PLUS ENERGY SERVICES INC.
Plaintiff
(Defendant by Counterclaim)
and
ESSENTIAL ENERGY SERVICES LTD.
AND TRYTON TOOL SERVICES LIMITED PARTNERSHIP
Defendants
(Plaintiffs by Counterclaim)
Docket: T-1569-15
AND BETWEEN:
RAPID COMPLETIONS LLC AND
PACKERS PLUS ENERGY SERVICES INC.
Plaintiffs
and
BAKER HUGHES CANADA COMPANY
Defendant
Docket: T-1728-15
AND BETWEEN:
PACKERS PLUS ENERGY SERVICES INC. AND RAPID COMPLETIONS LLC
Plaintiffs
(Defendants by Counterclaim)
and
WEATHERFORD INTERNATIONAL PLC. WEATHERFORD CANADA LTD. WEATHERFORD CANADA PARTNERSHIP AND HARVEST OPERATIONS CORP.
Defendants
(Plaintiffs by Counterclaim)
Docket: T-2088-15
AND BETWEEN:
PACKERS PLUS ENERGY SERVICES INC. AND RAPID COMPLETIONS LLC
Plaintiffs
(Defendant by Counterclaim)
and
RESOURCE WELL COMPLETION TECHNOLOGIES INC. AND RESOURCE COMPLETION SYSTEMS INC.
Defendants
(Plaintiffs by Counterclaim)
JUDGMENT AND REASONS
I. Overview
[1] This action is a consolidation of various proceedings involving the plaintiffs and defendants identified above. The parties are all companies involved in the oil and gas industry, most particularly, the extraction of hydrocarbons by a process called fracturing (or frac’ing). The action relates to a claim by the plaintiff Packers Plus Energy Services Inc that two of the defendants, Essential Energy Services Inc and Tryton Tool Services Ltd, have infringed Packers’ Canadian Patent No 2,412,072 (the ‘072 patent) (Tryton is a division of Essential, and Essential assumes responsibility for Tryton, so I need only refer to Essential in these reasons.) Packers’ claim against Essential has been merged with the collective defendants’ counterclaims that the ‘072 patent is invalid. Separate proceedings on damages, if necessary, are scheduled to take place in early 2018.
[2] There are two main issues: infringement and invalidity, the latter consisting of several sub-issues. The issues may be summarized as follows:
Has Essential infringed the ‘072 patent?
Is the ‘072 patent invalid because:
(a) The subject-matter of the patent was previously disclosed?
(b) The subject-matter of the patent was obvious?
(c) The patent’s claims lack utility?
(d) The specification of the patent was deficient?
[3] In my view, Essential has not infringed the ‘072 patent either directly or in concert with others. Further, Essential did not induce others to infringe the patent. In addition, I find that the patent is invalid because the invention was previously disclosed and for obviousness; the subject matter of the claims in issue did not represent an inventive step compared to the state of the art at the relevant time. Therefore, I must dismiss Packers’ claim of infringement and grant the defendants’ counterclaim of invalidity.
II. The ‘072 Patent
A. The Disclosure and Claims
[4] Packers filed the ‘072 patent on November 19, 2002, citing a prior US patent filed a year earlier, November 19, 2001. The patent will expire on its Canadian 20th anniversary, November 19, 2022.
[5] The ‘072 patent, owned by Packers, is entitled “Method and Apparatus for Wellbore Fluid Treatment”. The named inventors are Mr Jim Fehr and Mr Daniel Themig. Mr Themig has occupied a number of positions with Packers since he helped found the company in 2000; he is currently its CEO and Chief Technology Officer. Mr Themig testified at length in this action, and I will cite his evidence extensively, especially in my discussion of the subject matter of the patent and the events leading up to its filing.
[6] The patent describes the field of the invention as being a method and apparatus for wellbore fluid treatment and, “in particular, ... for selective communication to a wellbore for fluid treatment”. This description refers to a means of sending fluids to selected, isolated areas of a wellbore. The patent explains that it is sometimes necessary to “stimulate” the wellbore by pumping fluids into it in order to improve the flow of petroleum products out of it. The fluids include fracturing fluids, and one method of stimulating a wellbore is fracturing. Essentially, fracturing involves sending fluids down a wellbore at pressure high enough to break the adjacent rock formation, enabling hydrocarbons to be released from the fractured formation.
[7] The patent summarizes some of the prior art relating to stimulation of isolated segments of a wellbore. It also describes the use of tools called “packers” to achieve isolation, and explains the drawbacks of setting and moving packers sequentially for that purpose: it takes time and it is expensive.
[8] The invention, says the patent, allows selective communication (ie, transmission) of fluids to different segments of a wellbore by way of a tubing string consisting of a series of packers and ports. The packers extrude (ie, expand) against the wellbore in order to create segments along its length, each of which contains a port and sliding sleeve mechanism, allowing each segment to be operated independently. Each port is opened by way of a plug or ball sent down the tubing string to land on a seat connected to a sliding sleeve that pushes open the port. The apparatus and methods of the invention, according to the patent, can be used in a variety of wellbores, including “open holes, cased holes, vertical holes, horizontal holes, straight holes or deviated holes.”
[9] The patent states that the packers could be of any desired type that would create a seal between the wellbore and the tubing string. The patent makes reference to “solid body” packers, which would be preferable in an open hole versus a cased hole. The patent defines these packers as including a “solid, extrudable packing element” and “a plurality of extrudable packing elements”.
[10] In sum, by way of these components and techniques, the patent provides a method for fluid treatment of a wellbore. The method consists of a tubing string, situated along the long axis within the wellbore, which contains ports that are opened by way of sliding sleeves, and that allow fluids to pass through the ports to the wellbore. The packers extrude against the wellbore to isolate segments of it, with each segment containing a port and sliding sleeve mechanism.
[11] Annex A contains a diagram taken from the patent (Figure 1a) that depicts a series of packers, ports, and sliding sleeves. The parties found it convenient to refer to the method shown in this diagram as the “ball-drop system”.
[12] The patent sets out 162 claims. Only claims 96 to 111 are in issue here.
[13] The principal claim is claim 96. It claims the method described above – a means for fracturing a hydrocarbon-containing formation in an open hole using a tubing string essentially consisting of a series of packers, ports, and sliding sleeves. The claim provides more details of the various components and actions that make up the method of the invention including:
A first port that creates an opening in the tubing string wall;
A second port, further downhole from the first, that also makes an opening in the tubing string wall;
A first sliding sleeve of a diameter that, when the first port is closed, allows fluid to pass down the tubing string, and when the first port is open, allows fluid to pass through the port to the wellbore;
A second sliding sleeve with a diameter smaller than the first, which operates similarly to the first sleeve;
A first solid-body packer mounted on the tubing string uphole from the first port and capable of making a seal between the tubing string and the wellbore;
A second solid-body packer mounted on the tubing string between the first and second ports and also capable of making a seal between the tubing string and the wellbore;
A third solid-body packer mounted on the tubing string on the opposite side of the second port from the second packer;
A tubing string run into the wellbore with the packers in an unset position;
The three packers expanding outward and creating seals against the wellbore wall in an open hole, securing the tubing string in place. The packers create annular spaces between the tubing string and the wellbore wall and do not permit fluids to move between the annular spaces, but do allow fluids to communicate with the formation within those annular spaces; and
Sending a fluid-conveyed sealing device down the tubing string, passing through the first sliding sleeve and landing on the seat of the second sliding sleeve, moving the second port to the open position and allowing fracturing fluids to flow through that port into the annular space defined by the packers.
[14] The remaining claims in issue (97-111) amount to minor dependent variations on claim 96. I need not describe all of them. Claim 98 specifies that the packers may be set hydraulically. Claim 103 refers to a variety of potential fracturing fluids, including acid, water, oil, carbon dioxide, and nitrogen. Claims 110 and 111, respectively, state that the sealing device may be a plug or a ball.
B. Construing the Claims
[15] Claims are meant to be construed purposively from the perspective of the ordinary skilled person within the field of the invention. The parties essentially agree that the skilled person is a petroleum or mechanical engineer, having between two and five years’ field experience.
[16] The claims are straightforward. They relate to a series of components of the so-called “ball-drop system” – tubing string, packers, ports, sliding sleeves, and sealing devices (plugs or balls) – which are put to use in performing a method of liquid fracturing of an open-hole wellbore.
[17] There are only two points of controversy between the parties relating to the construction of the claims. First, what is meant by the phrase in claim 96 that “the first, second and third solid body packers when expanded, secure the tubing string in place in the wellbore”. Second, does claim 96’s reference to “solid body packers” include swellable packers?
[18] On the first issue, Essential offered Mr Michael Chambers’ expert evidence to the effect that the word “secure” in claim 96 means that the packers ensure that, by firmly fixing it in place, the tubing string “cannot be moved”. Mr Chambers conceded on cross-examination, however, that the claim does not state that the tubing string will not move at all.
[19] Packers’ expert, Dr Jennifer Miskimins, interpreted the word “secure” to mean that the packers will stop the tubing string from moving up and down the wellbore. She testified that a packer that extrudes against the wellbore achieves isolation in the system but also “is holding the whole system in place.” A skilled person, in her view, would understand that the packers would secure the tubing string “sufficiently” to allow a successful selective fracturing operation to be carried out. She testified that there “might be a small amount of leaking” of fluids from one segment to another, but the skilled person “would understand that that small amount of leaking is not going to inhibit the successful hydraulic fracturing treatment.”
[20] I agree with Dr Miskimins’ opinion. I believe a skilled person would understand the role that packers play in the method described in the patent. The packers create a seal that allows sections along the wellbore to be fractured separately. In addition, they hold the tubing string in place to ensure that the fracturing occurs at the desired location. A skilled person would understand the importance of selecting packers that would perform those two interrelated functions. A packer that did not create a proper seal would be unlikely to prevent the tubing string from moving along the wellbore.
[21] Therefore, interpreting the patent purposively, I would construe claim 96 as extending to packers that are capable of creating a reliable seal against the wellbore and ensuring that the tubing string is effectively held in place. I would not interpret the claim as requiring that the packers completely immobilize the tubing string. Some inconsequential movement would still permit an effective selective fracturing operation to be performed.
[22] With respect to the second issue, Essential argues that the term “solid body packer” in claim 96 does not include a swellable packer. The difficulty is that, according to a number of witnesses, the name “solid body packer” is not well known or accepted in the industry. Mr Chambers, for example, said that he is “unaware of any plain and ordinary meaning for the term ‘solid body packer’” and felt that the term is “too ambiguous to be construed.” Similarly, Essential’s witness, Mr Wes Lyster, was unfamiliar with the term “solid-body packer.” How, then, would the skilled person, probably unfamiliar with the term, interpret it?
[23] Essential relies on Mr Chambers’ opinion that a skilled person would likely consider a solid body packer to be a packer that is set hydraulically or mechanically by way of a compressive force against a solid extrudable element, such as rubber. The force would cause the element to expand outward, creating a seal against the wellbore.
[24] Essential also submits that a swellable packer is not a solid body packer. A swellable packer consists of material that expands when exposed to a liquid. When that material is held between two fixed points, it will extrude outwards. The main difference between a swellable packer and a solid-body, hydraulically-set packer is that the source of the force causing extrusion in a swellable packer is generated from within the packing element, not from without. Essential argues that a swellable packer cannot meet the definition of a solid-body packer because its packing element is not squeezed outward by an external force. In addition, a swellable packing element is not compressed – its linear external dimensions never change.
[25] Essential points to a number of sources that it says support its argument that swellable packers are not solid-body packers. These include:
One of Packers’ US provisional patent applications defines a solid-body packer as one which is extruded either mechanically or hydraulically;
Mr Themig’s testimony that a solid-body packer is “compressive loaded” and “typically loaded primarily axially”;
Mr Chambers’ statement that a solid-body packer contains elements that are “linearly compressed and extruded” by a “compressive force” that is generated hydraulically or mechanically; and
On cross-examination, Dr Miskimins’ testimony that, with swellables, there is a compressive force, but not one that is applied externally or hydraulically.
[26] I am persuaded by Dr Miskimins’ opinion on this point. Dr Miskimins stated that a solid-body packer has a solid element that could either be hydraulically set or swellable. It would not include, however, an inflatable packer, which expands when filled with fluid. On the latter point, all experts agreed.
[27] Under cross-examination, Dr Miskimins explained that swellable packers do not extrude by applying a compressive force on them as is the case with hydraulically-set packers. However, she also stated that “there is a compressive force there, but we are not necessarily setting it by compression . . . . We are not forcing it by putting compression on it.”
[28] I accept the contention that swellables are different from hydraulically-set packers. However, I cannot conclude that the differences are sufficient to classify the latter as solid-body packers and the former as not.
[29] The relevant question is whether the packer contains a solid element. Inflatable packers, whose elements expand balloon-like when infused with a liquid, are therefore not solid-body packers. On the other hand, swellable packers, whose elements expand sponge-like in the presence of a liquid, can be considered solid-body packers.
[30] Further, given that the term “solid body packer” has no well-accepted definition, I see no reason why the skilled person would interpret it as including packers that extrude as a result of an externally-generated, hydraulic or mechanical compressive force, but excluding packers that extrude as a result of an internally-generated, absorptive compressive force. In both cases, the extruding element is a solid. As Dr Miskimins’ explained in her testimony, the packing element on a swellable packer “is just solid, but it swells out against the casing and so it holds that area, it swells out enough that it holds the area from the tubing string out to the casing string itself.”
[31] Accordingly, a skilled person would consider the term “solid-body packer” to include a swellable packer.
[32] Therefore, I construe claim 96 to include packers that create a seal against the wellbore and hold the tubing string securely enough to enable selective fracturing. In addition, the “solid body packers” referred to in claim 96 include swellable packers that extrude against the wellbore as a result of a compressive force originating in the solid absorptive packing element.
III. Issue 1 – Has Essential infringed the ‘072 patent?
[33] Essential concedes that when its system is used in an open-hole fracturing job, all the steps of claims 96 to 109, and 111 will have been performed.
[34] However, Essential argues that it has not infringed the ‘072 patent because there is no evidence showing that its packers secure the tubing string in place in an open-hole wellbore. In addition, it maintains that its swellable packers are not “solid body packers”.
[35] Further, Essential submits that it does not perform the core elements of the patent and, therefore, cannot be found to have infringed it.
[36] Finally, Essential contends, contrary to Packers’ allegation, that it has not acted in concert with others to infringe the patent; nor has it induced others to infringe the patent.
[37] I have already construed claim 96 of the patent to include packers that secure the tubing string sufficiently in place to enable successful selective fracturing. In addition, the claim includes swellable packers.
[38] Based on that construction, it is clear that Essential’s equipment, called the Tryton Multi-Stage Fracturing System (Tryton MSFS), infringes the ‘072 patent when used in an open-hole fracturing operation. In the circumstances, it is unnecessary to provide any more than a brief description of that equipment. A detailed description is set out in an expert report by Dr Miskimins, in which she concludes that all of the steps of claim 96 of the ‘072 patent are followed when using the Tryton MSFS to fracture isolated zones of an open-hole wellbore. Further, she concludes that the remaining claims in issue are also infringed depending on the choice of packers and sleeves within the Tryton MSFS (other than claim 110, which refers to a plug rather than a ball).
[39] Promotional information for the Tryton MSFS describes it as allowing “producers to isolate and fracture several intervals of the horizontal section of a well separately and continuously.” It goes on to state that the MSFS “is a ‘ball and seat’ system in which downhole sleeves are opened in sequence by dropping progressively larger synthetic balls through a liner to allow precise fracs to occur in stages along the non-cased horizontal leg of a well.” In other words, the Tryton MSFS is a ball-drop system used for selective fracturing of a horizontal open-hole wellbore.
[40] The evidence shows that Essential’s fracturing system secures the tubing string in place with either hydraulic or swellable packers. Essential argues that it employs an additional, intermediate packer to secure the tubing string which is not contemplated by the ‘072 patent. Mr Wes Lyster, an Essential employee, testified that this intermediate packer (the “liner/hanger packer”) “helps hold the system in place.”
[41] However, Dr Miskimins explained that the packers in the Tryton MSFS have extrudable elements that seal against the tubing string and the wall of the open hole wellbore. That seal holds the tubing string in place and creates zones of isolation between the packers. She testified that the Tryton MSFS packers “create these isolated zones so that we can then hydraulically fracture those isolated zones.” Mr Lyster agreed that the packers hold the string in place at least “a little bit.”
[42] The Tryton MSFS consists of a variety of available packers, most of which are hydraulically set (eg, the “IsoPac I” and “IsoPac II”), but one of which is swellable (the “SwellRight”). In reality, Essential has never actually used or sold swellable packers, although it offers them for sale. In any case, Dr Miskimins concludes that the Tryton MSFS follows the steps of claim 96 whichever packers are chosen. They are all solid-body packers, in her view.
[43] I have already discussed and set out my agreement with Dr Miskimins on this point. The term “solid-body packer” includes packers that are hydraulically or mechanically set, as well as swellable packers. Accordingly, when put in use in an open-hole fracturing operation, the Tryton MSFS falls within the relevant claims of the ‘072 patent (except claim 110).
[44] Essential next argues that it cannot be found to have infringed the patent because it is simply not engaged in the key activities involved in fracturing. In particular, Essential does not decide whether a formation should be fractured or whether to complete an open-hole versus a cased-hole wellbore. Essential points out that the relevant claims relate to a method of fracturing a formation, not the equipment itself. Therefore, according to Essential, Packers must prove that Essential has actually worked the method of the patent – that is, that it has carried out a fracturing operation using the teachings of the alleged invention – not merely sold the components of the ball-drop system.
[45] Packers maintains that Essential has infringed the patent even though it has not conducted any fracturing. Packers says that Essential is liable for having jointly committed infringing activities with other companies in the fracturing industry. Alternatively, Packers contends that Essential induced others to infringe the ‘072 patent.
[46] I disagree with Packers.
[47] I first note that Dr Miskimins does not conclude that Essential has infringed the ‘072 patent. Rather, she carefully opines that use of the Tryton MSFS would include all of the steps set out in the patent’s claims. She does not provide an opinion on liability for infringement.
[48] In terms of liability for acting in concert with others, Packers has not pointed to any legal support for that theory of liability. Packers points to the well-known English case of Fabio Perini SPA v LPC Group PLC & Ors, [2009] EWHC 1929. There, Justice Floyd found that a company that installed a machine on the defendant’s premises and enabled it to be operated according to the patented method was jointly liable with the defendant for infringement (at para 179). That finding was cited, in obiter, by Justice Johanne Gauthier in Bauer Hockey Corp v Easton Sports Canada Inc, 2011 FCA 83 at para 75. However, there is no authority in Canadian law for the proposition that a person can be found liable for infringement on the theory of common design. At common law, however, parties who act in concert to commit a tortious act can each be found liable if all of the parties involved arrived at an agreement to carry out the tort (Sea Shepherd UK v Fish & Fish Ltd, [2015] UKSC 10 at para 40).
[49] However, there is simply no evidence showing any such agreement between Essential and the other companies with whom it acted – operating companies, drilling companies, or fracturing companies. Therefore, Essential cannot be found liable for infringement based on a common design.
[50] Packers also alleges inducement. The parties agree that a plaintiff alleging inducement must satisfy a difficult test requiring proof of three distinct elements: (1) direct infringement by a third party; (2) the defendant influenced the third party to the point that the infringing act would not have occurred without that influence; and (3) the defendant knew that its influence would bring about the infringing act (Corlac Inc v Weatherford Canada Ltd, 2011 FCA 228 at para 162).
[51] Packers has not produced evidence of direct infringement by anyone. It merely implies that Essential’s main customers, the operating companies who own and operate the wells, are the infringers. However, the evidence shows that there are often numerous entities involved in a fracturing job, including the operating company and the various service entities it hires – drilling companies, pumping companies, cementing companies, tool companies, and fracturing companies. It is unclear who the direct infringer would be in that situation.
[52] Packers also refers to evidence of Essential’s involvement in fracturing jobs. Essential’s role includes:
Pre-installation planning and design;
Assembling, installing and operating the equipment, including setting the packers;
Supplying and loading the balls;
Providing an on-site supervisor, who would have access to data relating to the fracturing job; and
Conferring with the operating company on any problems that arise;
[53] However, Mr Lyster emphasized that the main decisions at the well-site are made by the operating company, not Essential. Those decisions include:
Whether to fracture;
Whether to drill horizontally;
Whether to complete the well in an open hole;
Whether to employ a ball-drop system;
The scheduling of the fracturing job;
The number of zones to treat;
The length of each zone;
The placement of the packers and sleeves;
The pressures to use;
The type of balls to launch; and
The kinds of fluids to pump.
[54] Further, according to Mr Lyster, other service companies perform important actions during the fracturing operation, including the pumping company (applying the pressure to set the packers and open the sleeves), the fracturing company (choosing the fluids and pressures), and the ball-launcher company (choosing and launching the balls). During the actual fracturing, Essential’s representative is mainly an observer, helping to troubleshoot, if necessary.
[55] Perhaps the collectivity of companies involved in a fracturing operation could be said to work the method claimed in the ‘072 patent. However, each of their respective contributions to the operation would amount to a partial or, at most, an indirect infringement, not a direct infringement of the patent. Therefore, Packers cannot meet the first branch of the test for inducement. It has not proved direct infringement by anyone.
[56] With respect to the second branch, Packers notes that there are many ways in which Essential can influence a potential infringer. Essential advertises its wares, makes sales calls, prepares job proposals, makes presentations, and indemnifies its clients against patent infringement suits. Packers points to a price quotation Essential provided to a customer and infers that Essential and the customer probably discussed the product and that Essential probably tried to persuade the customer to buy its equipment.
[57] This is speculation. Packers has provided no evidence that Essential’s conduct had any impact on any alleged infringer’s actions. Indeed, the evidence shows that Essential’s clients influenced Essential to develop its Tryton MSFS methodology. Other companies were already selling ball-drop systems for open-hole fracturing. To remain competitive, Essential decided it should offer a similar technology to its customers. Those customers were familiar with and already using competitors’ ball-drop systems.
[58] Further, there is no evidence that, absent Essential’s influence, direct infringement of the ‘072 patent would not otherwise have occurred. Essential may have persuaded some companies to purchase its tools, and some of its personnel have attended at fracturing sites to help troubleshoot. However, those activities did not amount to the degree of influence required to prove inducement.
[59] Finally, there is no evidence that Essential knew that its influence would result in the carrying out of infringing acts.
[60] Accordingly, Packers’ claim of infringement is unfounded.
IV. Issue 2(a) – Is the ‘072 patent invalid because the subject-matter of the patent was previously disclosed?
A. Overview
[61] A patentee merits a monopoly only when the claimed invention is truly new, useful and unobvious.
[62] Generally, an invention cannot be considered new if it had already been publicly disclosed and the disclosure provided enough information to enable a skilled person to use it. The defendants claim that Packers disclosed the subject matter of the ‘072 patent a number of times during the relevant period (that is, before November 19, 2001, one year before the filing date of the patent: Patent Act, RSC 1985, c P-4, s 28.2(1)(a)).
[63] Packers concedes that the invention described in the ‘072 patent may have been disclosed prior to the critical date. However, it maintains that those disclosures related either to experimental testing of the invention, or were made to persons who had a duty to keep them confidential. Therefore, says Packers, the disclosures fall within well-known exceptions to the general rule.
[64] I disagree with Packers. Mr Themig, of Packers, disclosed his claimed invention to customers before November 19, 2001. His disclosures did not occur in circumstances involving experimental testing of the ball-drop method, or requiring that the recipients keep the information confidential.
B. The Disclosures
[65] The evidence relates to Packers’ involvement in three US mine sites in the autumn of 2001. The first two, called Garner and Noelke, were operated by a company called Enron Oil and Gas (EOG). The third, called Dynneson, was owned by Headington Oil.
[66] Most of the relevant factual evidence comes from Mr Themig. His story relates the origin of the ideas reflected in the ‘072 patent, his involvement in the EOG and Headington projects, and the history of his company, Packers.
[67] Mr Themig described Packers as a high-end provider of downhole tools, particularly for purposes of fracturing horizontal, open-hole wells. Packers markets the method claimed in the patent under the name StackFRAC (and later, StackFRAC HD). Mr Themig maintained that the method described in the ‘072 patent transformed the industry, enabling operators to conduct multi-stage fracturing jobs with up to 70 isolated segments.
[68] Mr Themig confirmed that Packers’ first use of its StackFRAC system was at EOG in the autumn of 2001. That work came about after Packers had carried out high-pressure, open-hole water shut-off operations in North Dakota using solid-body packers. The packers were used to isolate sources of water and to prevent water from mixing with oil coming out of the wellbore. Somehow, in August 2001, an employee at EOG, Mr Gary Thomas, found out about Packers’ North Dakota work and wanted to discuss it with Mr Themig. Mr Thomas visited Mr Themig in Calgary and described EOG’s gas well operation in Midland, Texas. The two men discussed various ways of completing the wells and, a week or two later, EOG invited Mr Themig to meet its engineers in Midland for further discussions.
[69] Before the Midland meeting took place, Mr Themig received a fax dated August 17, 2001 from another EOG employee, Mr Glenn Carter, who provided some additional background information. The fax explained that EOG was carrying out fracturing jobs that were generating good production but only for a short period of time. Mr Carter stated that EOG was interested in drilling dual lateral wells, fracturing each leg separately, and using open-hole, resettable packers to perform smaller treatments in each lateral.
[70] Mr Themig travelled to Midland in late August 2001 and, en route, sketched out a few ideas that he intended to share with EOG. Mr Themig met with Mr Carter on August 29, 2001. They agreed that Mr Themig would present his ideas to a larger group the next day, and that the information flowing between Mr Themig and EOG would be treated as confidential, in both directions. Mr Themig assumed that Mr Carter had the authority to make that commitment on behalf of EOG; he did not specifically ask him. The discussion of confidentiality was general and brief – it did not address, for example, the duration of the parties’ commitments, the treatment of confidential documents, or the remedies that would be available in case of a breach.
[71] On August 30, 2001, Mr Themig met with EOG’s geologists, reservoir engineers, drilling engineers, and completion engineers – a group of between 12 and 20 people, some of whom may have come and gone over the course of the day. Mr Themig was not sure if the participants were all EOG employees or whether some of them might have been contractors or consultants. Mr Themig learned more about EOG’s wells and proceeded to present his sketches of potential strategies for increasing production. One of the last drawings depicted a series of solid-body packers (Packers’ RockSEALs) in an open-hole horizontal well, combined with hydraulic ball-activated ports – in effect, the ball-drop system, later known as the StackFRAC. Mr Themig described how the system worked. EOG saw that the benefit of this approach was that it permitted fracturing of multiple segments of the wellbore without having to move tools from one position to another. While Mr Themig believed he was describing a system that was novel in the industry, he is not sure there was any discussion at that meeting of confidentiality. As mentioned, that subject had been addressed in his verbal exchange with Mr Carter the day before. The parties did not enter into a written confidentiality agreement.
[72] After Mr Themig returned to Calgary, Mr Carter called him to organize a visit by EOG personnel to Canada to look at Packers’ tools and meet some of Packers’ customers. Mr Themig sketched out a fracport tool so that it could be built and tested before EOG’s arrival. Mr Themig took the EOG representatives to Edmonton to see Packers’ manufacturing site and to witness some testing of Packers’ tools, including the fracport tool. The meeting was a success; Packers entered into a contract with EOG for downhole tool services and supplied tools for use on two EOG wells, the Garner and the Noelke.
[73] After the August 30, 2001 meeting, Mr Themig invoiced EOG for his expenses in a document referred to as a “field ticket.” The applicable standard terms and conditions were set out on the back of the field ticket. In addition, Packers entered into a master services agreement with EOG. Neither the field ticket nor the master services agreement dealt with the issue of confidentiality.
[74] Mr Themig presented Mr Carter with a completion proposal for the Garner well on September 30, 2001. It showed an open-hole ball-drop system with RockSEAL packers. The proposal was marked “Confidential not to be disclosed outside EOG.” Subsequently, around mid-October, the proposal was modified slightly to enable the tools to be pulled out of the well after the fracturing took place.
[75] Two weeks later, on November 1, 2001, Mr Themig provided EOG with a similar completion proposal for the Noelke well. It, too, was labelled “Confidential.” The proposal was similar to the Garner plan.
[76] Most of the documents Packers supplied to EOG were stamped “Confidential.” However, speaking generally, Mr Themig conceded that a confidential label was sometimes attached to documents or drawings that were not really secret; for example, it occasionally appeared on drawings of parts that could be purchased from third parties, or on information that was already in the public domain. He agreed that the question of whether something was truly confidential sometimes required a judgment call on the part of the recipient.
[77] Mr Themig’s confidence that his disclosures to EOG would be treated as confidential derived, in part, from EOG’s designation of the Garner and Noelke wells as “tight hole.” The term “tight hole” seems to have a range of meanings. For example, Mr Lyster, of Essential, explained that “tight hole” meant that an operating company wanted information about a particular well to be kept secret; employees of service companies working on that site would refrain from discussing details with others. In the context of the Garner and Noelke wells, however, the term had a more specific meaning – it was a designation that some used to describe a policy of the Railroad Commission of Texas, which allowed mining companies to delay reporting of certain information to the Commission. The limited significance of that designation was addressed by some of the expert witnesses whose evidence I will discuss below.
[78] In due course, after some relatively minor issues had been addressed at the wellhead, both the Garner and Noelke wells were fractured using the procedure Mr Themig had proposed. Mr Themig’s previous concerns – about achieving isolation, the location of the fractures, the ability of the packers to withstand high pressures, and the ball-launching procedure – appeared to have been overcome.
[79] In roughly the same time frame, in early September 2001, Mr Themig received a phone call from Mr Al Powell, a representative of Headington Oil, in Denver, Colorado. Like EOG, Headington had heard about some of Packers’ previous work using open-hole packers to achieve isolation in fracturing jobs. Mr Themig prepared proposals for Headington’s Dynneson well, which were similar to the EOG proposals, and asked that they be treated as confidential. Ultimately, due to problems at the wellbore, the Headington plan had to be revised from a three-packer system down to a single fracturing segment.
[80] The pumping company at Headington, named Sanjel, produced a report showing the fluid pressures throughout the Headington job. Its report is marked “tight hole” which, according to Mr Themig, meant extremely confidential. In addition, the charts contained in the report display a watermark with the word “Confidential” on them.
[81] From Mr Themig’s perspective, the three fracturing jobs in which Packers was involved in late 2001 – Garner, Noelke, and Dynneson – were all successful. Mr Themig believed that this technological development could change the industry. Packers filed its patent application on November 19, 2001. It started marketing its StackFRAC system soon thereafter, in January 2002.
[82] Mr Themig conceded that the StackFRAC system had been used prior to November 19, 2001 for EOG and Headington. However, he disagreed that Packers’ method had been used publicly, given the assurances of confidentiality that he had received from both EOG and Headington. He also regarded those jobs as experiments.
C. Experiments
[83] In respect of experiments, to merit an exception from the general rule that prior public disclosure will invalidate a patent, Packers must prove that the disclosure was in furtherance of a real experiment (Canadian Patent Scaffolding Co v Delgotto Enterprises Ltd (1980), 47 CPR (2d) 77 (FCA) at para 33).
[84] In Mr Themig’s view, the EOG and Headington jobs were essentially field trials. While he could not point to any documentary evidence to support his view, he maintained that if one looked at the entirety of the evidence and the circumstances of Packers’ work for those customers, one would realize that the parties all regarded the running of the StackFRAC system on those sites as experimental or as a field trial, even if those words were never used. Though he described these projects as experimental, Mr Themig