Energy Heating, LLC. v. Heat On-The-Fly, LLC
889 F.3d 1291
Fed. Cir.2018Background
- The dispute centers on U.S. Patent No. 8,171,993 (the ’993 patent), claiming a method/apparatus for heating water "on-the-fly" during hydraulic fracturing; inventor Mark Hefley filed the earliest provisional in 2009 (critical date: Sept. 18, 2008).
- Prior to the critical date, Hefley and his companies performed at least 61 paid frac jobs using the accused on-the-fly system and billed over $1.8 million; these pre-critical-date activities were not disclosed to the PTO during prosecution.
- Energy (and Marathon) sued for declaratory relief challenging validity, unenforceability (inequitable conduct), and noninfringement; HOTF counterclaimed for infringement; jury and bench trials followed on mixed issues (jury: tortious interference and unlawful practices; bench: inequitable conduct).
- The district court found the ’993 patent unenforceable for inequitable conduct (finding pre-critical-date commercial uses, not experimental, and intent to deceive), entered judgment for tortious interference (jury awarded $750,000), and denied statutory remedies under a North Dakota statute because Energy had not pleaded that claim.
- The Federal Circuit affirmed the inequitable-conduct determination and the tortious-interference and state-law findings, declined to reach obviousness/infringement issues because the patent was held unenforceable, but vacated and remanded the denial of attorneys’ fees under 35 U.S.C. § 285 for further explanation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ’993 patent is unenforceable for inequitable conduct based on nondisclosure of 61 pre-critical-date jobs | Energy: jobs were material to on-sale/public-use bar, not experimental; nondisclosure + knowledge = inequitable conduct | HOTF: jobs were experimental, inventor lacked intent to deceive, later PTO allowance of a continuation shows immateriality | Affirmed: clear & convincing evidence of materiality and specific intent; jobs not experimental; patent unenforceable |
| Whether the district court should have considered PTO issuance of a continuation patent when assessing materiality/intent | HOTF: subsequent allowance shows nondisclosure was immaterial and negates intent | Energy: continuation issued later and claims differ materially; post-judgment PTO action irrelevant | Affirmed: court properly declined to consider continuation because it issued later and its claims materially differ |
| Whether HOTF tortiously interfered with Energy’s prospective business with Triangle by alleging patent infringement | Energy: HOTF’s employee warned Triangle of infringement, causing loss of contracts | HOTF: testimony admitting that statement was hearsay and the claim is preempted by federal patent law | Affirmed: record supports jury verdict; hearsay objection waived as to one witness; bad-faith exception to preemption satisfied |
| Whether district court abused discretion in denying attorneys’ fees under 35 U.S.C. § 285 after finding inequitable conduct | Energy/Marathon: inequitable conduct makes case exceptional warranting fees | HOTF: disputed facts and plausible defenses made case non-exceptional | Vacated and remanded: district court must articulate reasons for denying fees after inequitable conduct finding; current explanation insufficient |
Key Cases Cited
- Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (sets heightened standards for materiality and specific intent in inequitable conduct)
- Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998) (framework for on-sale bar: commercial sale/offers and readiness for patenting)
- Clock Spring, L.P. v. Wrapmaster, Inc., 560 F.3d 1317 (Fed. Cir. 2009) (experimental-use exception to the on-sale bar requires testing claimed features or workability)
- Allen Engineering Corp. v. Bartell Industries, Inc., 299 F.3d 1336 (Fed. Cir. 2002) (factors for evaluating whether prior uses were experimental)
- Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) (defines "exceptional" case standard for awarding fees under § 285)
- American Calcar, Inc. v. American Honda Motor Co., 768 F.3d 1185 (Fed. Cir. 2014) (post-Therasense precedent addressing materiality/intent despite later PTO allowance)
- Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014) (district court’s § 285 determinations reviewed for abuse of discretion)