Oil Rig Builders Can't Dodge $650K Exhaust Patent Verdict

Posted on 02-18-2015 by
Tags: Trending News & Topics , EPA , Energy Industry , Energy

The article below has been republished in full courtesy of Law360, written by Jeremy Heallen. 

A Texas federal judge on Tuesday refused to throw out a $650,000 verdict L.C. Eldridge Sales Co. Inc. scored in litigation over an oil-rig exhaust system patent, but said there was not enough evidence to support the jury’s finding of willful infringement.

U.S. District Judge Michael Schneider ruled that shipbuilder Jurong Shipyard Pte. Ltd., engineering firm Azen Manufacturing Pte. Ltd. and subsidiaries of Seadrill Ltd. failed to meet “the high burden of setting aside the jury’s verdict,” which he said is supported by “substantial evidence” that the companies infringed Houston-based Eldridge's patent for a diesel exhaust blower. But he added that Eldridge did not sufficiently prove that the defendants willfully infringed the patent at issue, which would have opened the door for the court to potentially triple the jury’s verdict.

Although the jury ultimately rejected the defendants’ claim that Eldridge’s patent covered “obvious” technology, Judge Schneider said that that the defense raised a “good faith, credible, and objectively reasonable invalidity argument.”

“Accordingly, the court finds that plaintiffs did not prove by clear and convincing evidence that there was an objectively high likelihood that defendants’ actions constituted infringement of a valid patent,” Judge Schneider said.

And in another win for the defendants, Judge Schneider refused to issue a permanent injunction forcing them to remove infringing exhaust systems from three rigs currently operating in the Gulf of Mexico. Because Eldridge already has been compensated for its loss, the cost to the defendants and the safety risk to the public imposed by retrofitting the rigs are unjustified, Judge Schneider ruled.

However, the defendants are prohibited from importing additional rigs into U.S. waters that infringe Eldridge’s patents, Judge Schneider ruled.

Eldridge attorney R. Paul Yetter of Yetter Coleman LLP said Tuesday his client was pleased with the court's decision.

"We will continue to protect [Eldridge's] patent rights here and abroad," Yetter said.

Eldridge sued Jurong, Azen and Seadrill in November 2011, alleging they used stolen patented technology on several oil rigs the companies built and operated.

Eldridge alleged that during the bid process for a third-party rig, it provided a proprietary drawing in a quotation that was then used by Seadrill and passed along to other companies. Even after Eldridge notified the parties it had a patent application pending, they continued to use the technology without authorization, the suit said.

Azen and the other companies moved to dismiss the claims, arguing that the technology was used only overseas or offshore in operations in Singapore, Australia and Brazil, and couldn't support claims under the U.S. Patent Act.

But Judge Schneider ruled in December 2012 that although the allegedly offending rigs were built or are being built in Singapore and operate off the shores of Australia, Brazil and in the Gulf of Mexico, the sale of the rigs to American units of Seadrill and Atwood meets the minimum standard for the suit to be heard in federal court.

The rig makers and operators suffered another setback in May 2013 when the judgequashed their motion for summary judgment arguing that the patent was invalid because its claims were too vague.

The case eventually went to trial in November, and jurors concluded that Jurong, Atwood and Seadrill willfully infringed Eldridge’s oil rig exhaust patent and that the defendants should pay $217,000 in damages on each of three rigs that incorporate the allegedly stolen technology.

Representatives for the defendants did not respond Tuesday to a request for comment.

The patent-in-suit is U.S. Patent No. 7,707,828.

L.C. Eldridge is represented by Walter Lackey Jr. and Eric Findlay of Findlay Craft LLP and R. Paul Yetter, Eric P. Chenoweth, Thomas M. Morrow and Chris R. Johnson of Yetter Coleman LLP.

The defendants are represented by Harry L. Gillam and Melissa Richards Smith of Gillam & Smith LLP, David A. Allgeyer Christopher R. Sullivan and Carrie Ryan Gallia of Lindquist & Vennum LLP and Kerry C. William, Kenneth W. Bullock II and Collin A. Rose of Chamberlain Hrdlicka White Williams & Aughtry.

The case is L.C. Eldridge Sales Co. Ltd. et al. v. Azen Manufacturing Pte., Ltd., et al., case number 6:11-cv-00599 before the U.S. District Court for the Eastern District of Texas.

--Additional reporting by Dan Prochilo. Editing by Richard McVay.

This article has been republished in full and is courtesy of Law360. For the latest breaking news and analysis on energy industry legal issues, visit Law360 today.

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