Fighting over multistage fracking patents
Packers Plus wins judgment before Federal Court of Canada; other disputes pile up as companies try to gain edge in operating costs
For Petroleum News
The Federal Court of Canada has delivered a landmark ruling in favor of technology pioneer Packers Plus Energy Services which sued a rival company for patent infringement, ending the current stage of a hard-hitting legal spat.
The privately owned Packers Plus, with Schlumberger as a small equity holder, which has laid claim to inventing the first reliable system for multistage fracturing, won a C$7.7 million judgment against Canuck Completions.
The verdict will likely be closely examined by participants in a host of other legal tussles and comes on the heels of an agreement five months ago by Calgary-based Pason Systems to pay C$115.8 million to Houston-based multinational National Oilwell Carco, ending 10 years of litigation over three alleged patent infringements involving automatic driller technology.
These actions are attracting considerable attention at a time when exploration and production companies are engaged in a frantic search for ways to lower their operating costs through research and development and open the way to a revival in the oil and gas business.
The United States is swamped by similar battles where countless oil services companies are trying to lock up exclusive rights to technology breakthroughs that are laying the groundwork for production of oil and gas deposits previously considered uneconomic or impossible to access.
Bloomberg News has estimated that Schlumberger, Halliburton and Baker Hughes secured 1,257 patents in the United States in 2014, more than doubling the tally of a decade earlier.
Other actions possibleIn the Packers Plus case it is not clear whether the company intends to take action against competitors who have been using similar fracturing methods.
In its defense, Canuck Completions - now a branch of Houston-based TMK Completions - claimed the Packers Plus patents were invalid because similar technologies pre-dated the emergence of Packers Plus and has counter-sued for the damage to its reputation.
David Yager, an entrepreneur and consultant in the oilfield services sector, said the upstream business has made considerable gains over the past five years since horizontal wells using multistage fracturing displaced vertical wells.
He told the Financial Post that advances in drilling and completion over the last five decades now account for 75 percent of the wells drilled in resource plays, largely because the work can be completed so much faster.
Packers Plus technologyPackers Plus, co-founded by engineer Dan Themig, said its proprietary method involves dropping a fluid-filled ceramic ball the size of an orange into a horizontal well, following which sand is pumped down at high pressure to fracture the rock.
When the initial fracturing stage is completed, another ball is launched - a process that is repeated at high speed multiple times.
Packers Plus, with 800 global employees - about 100 in both Canada and the United States - has applied the technology in the Bakken and Montney fields.
Industry observers say rival companies have since refined the methods to meet demands for lower drilling costs.
2012 patentPackers Plus obtained a patent for its invention in 2012, claiming in a court statement filed in July that “this is a meritorious invention which has received wide acclaim from persons skilled in the art and has been copied by a number of companies including (Canuck Completions).”
It said the patent gives it the “exclusive right, privilege and liberty of making, constructing and using the claimed invention and selling it to others.”
Packers Plus argued before the Canadian court that Canuck did not have the skilled staff or resources to develop the technology and sought an injunction to prevent further use.
Canuck countered that the packers Plus patent is invalid and the technology is not new, claiming the methods was first used in the United States in the late 1990s.
In addition, the defendant said its methods are different.
Canuck also accused Packers Plus of making false and misleading statements to discredit its business, products and services and of engaging in “malicious, high-handed, egregious and outrageous conduct, deserving of sanction.”
Intellectual propertyThemig said the court has scuttled Canuck’s allegation that Packers’ patent has no validity.
He said the intellectual property belongs to his company even though the “development of these (fracturing) methods and the apparatus and process that have been widely adapted by the industry.”
The court also ordered Canuck to repay Packers C$495,000 for costs - an amount already paid - dismissed the counterclaim and ordered Canuck and others to stop infringing on the patent.
Themig said that regardless of the 63 “families” of patents and many offshoots, the “drop ball” technique is one of the most significant because it allows operators to break up tight formations and produce the oil and gas.
He described the technique as one of only a few key methods that have impacted the global supply of oil and gas.
In fall 2013, Packers also started a lawsuit against Essential Energy Services for alleged violations of the same patent. A trial date has been set for February 2017.
Essential, in a countersuit and statement of defense, claimed that the “methodology and equipment on which the patent is based has been in use in the oil and natural gas industry prior to the patent’s effective filing date of Nov. 19, 2001.”