Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 1 of 13
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLORADO
`DENVER DIVISION
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`UPSTREAM DATA INC.,
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`Plaintiff,
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`CRUSOE ENERGY SYSTEMS LLC,
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`Defendant.
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`) JURY TRIAL DEMANDED
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`Civil Action No.
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`Plaintiff Upstream Data Inc. (“Plaintiff” or “Upstream”), by its attorneys, brings this
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`COMPLAINT
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`action for damages and injunctive relief against Crusoe Energy Systems, LLC (“Defendant” or
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`“Crusoe”) for patent infringement. Upstream alleges, based on personal knowledge with respect
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`to its own actions and upon information and belief with respect to all others’ actions, as follows:
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`NATURE OF THE ACTION
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`1.
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`This is a civil action against Crusoe for patent infringement under the patent laws
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`of the United States, 35 U.S.C. § 1, et seq, of U.S. Patent No. 11,574,372 (“the ’372 Patent”). A
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`true and correct copy of the ’372 Patent is attached hereto as Exhibit 1.
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`PARTIES
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`2.
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`Plaintiff Upstream is a Canadian corporation with its principal place of business
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`located at 4702 40 Ave., Lloydminster, Canada, S9V 2B6.
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`3.
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`Defendant Crusoe is a Delaware limited liability company with its principal place
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`of business located at 1641 California Street, Floor 4, Denver, Colorado 80202.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 2 of 13
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`4.
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`Crusoe makes, markets, sells, offers to sell, manufactures, distributes, and
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`operates flare gas capture technology, e.g., Crusoe’s so-called “Digital Flare Mitigation” or
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`similar technology comprising cryptocurrency mining systems connected to sources of stranded
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`natural gas in, at least, Colorado, North Dakota, and Texas. Further, Crusoe is registered to do
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`business in Colorado and has infringed Upstream’s ’372 Patent in Colorado and in other states
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`where it does business.
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`JURISDICTION AND VENUE
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`5.
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`This Court has subject matter jurisdiction over Plaintiff Upstream’s patent
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`infringement claims pursuant to 28 U.S.C. §§ 1331 and 1338(a) because they arise under the
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`laws of the United States, specifically those related to the infringement of U.S. Patents, 35
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`U.S.C. § 1, et seq.
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`6.
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`This Court has specific and general personal jurisdiction over Crusoe at least
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`because it makes and uses infringing products and methods in this judicial district and markets,
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`distributes, offers for sale, uses, and/or sells infringing products and methods throughout the
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`United States from this judicial district. This Court further has specific personal jurisdiction over
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`Crusoe, because, as described herein, it purposefully avails itself, and enjoys the benefits, of the
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`laws of Colorado, it has sufficient minimum contacts with the State of Colorado and this judicial
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`district, this action arises out of these contacts, and exercising jurisdiction over Crusoe would be
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`reasonable and comport with the requirements of due process. For example, Crusoe
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`manufactures containerized modular cryptocurrency mining systems connected to sources of
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`stranded natural gas, e.g., so-called “Digital Flare Mitigation” systems (hereinafter referred to as
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`“Infringing Crusoe Products”), in this district. Moreover, Crusoe uses its facilities in this district
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`to enter into contracts to install and operate Infringing Crusoe Products, as well as to actually
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 3 of 13
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`install, operate and service Infringing Crusoe Products. Crusoe has previously availed itself of
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`this Court’s jurisdiction by commencing patent litigation in this district, including through
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`Crusoe’s filing of a complaint against a customer of Upstream in Crusoe Energy Systems LLC v.
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`Alkane Midstream LLC, DCO-1-22-cv-02142, and a copy of this complaint is attached as Exhibit
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`2. (Alkane Midstream LLC is hereinafter referred to as Alkane.) Crusoe’s allegations within that
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`complaint further confirm Crusoe’s significant and substantial contacts with this district.
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`7.
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`Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391 and 28
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`U.S.C. § 1400(b) at least because Crusoe has committed acts of infringement and has regular and
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`established places of business in this district.
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`FACTUAL BACKGROUND
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`8.
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`As detailed in the ’372 Patent, many remote oil and gas sites are located in
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`unpopulated areas that are hundreds of kilometers outside of the nearest towns. See Ex. 1 at col.
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`8:20-24. Such wells produce natural gas, including as a by-product of oil production at the well
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`site. See e.g., Ex. 1 at col. 6:34-54. Due to their remoteness, many natural gas-producing well
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`sites cannot economically process and sell their gas; instead the gas is vented to the atmosphere
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`or flared (burned) at the well site. See e.g., Ex. 1 at col. 7:46-8:10. Either option is (1) wasteful
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`and (2) harmful to the environment due to the release of greenhouse gasses such as methane
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`and/or CO2. Id. Gas that must be vented or flared because the remote production site lacks the
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`infrastructure (e.g., a pipeline) to deliver it to a user is sometimes called “stranded gas.”
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`9.
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`The problem of stranded gas is vexing and pervasive. Vented methane is a
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`powerful greenhouse gas that can be 80 times more potent at warming than carbon dioxide over a
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`20-year period as estimated by a recent United Nations report. See https://www.unep.org/news-
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`and-stories/story/methane-emissions-are-driving-climate-change-heres-how-reduce-them. The
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 4 of 13
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`World Bank estimates that 139 billion cubic meters of natural gas is flared each year, enough gas
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`to power the whole of sub-Saharan Africa. See
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`https://www.worldbank.org/en/programs/gasflaringreduction/gas-flaring-explained. The flaring
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`results in 350 million tons of CO2 equivalent emissions annually. Id.
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`10.
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`Stephen Barbour, the sole named inventor of the ’372 patent and the founder of
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`Upstream, set out to find a solution to provide well owners and operators with an incentive to
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`stop the wasteful venting and flaring of stranded gas. Mr. Barbour realized that the gas could be
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`effectively “un-stranded” by converting it at the well site to a digital currency such as Bitcoin.
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`11. As is well-known and described in the ’372 Patent, generating a digital currency
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`(also known as a cryptocurrency) such as Bitcoin is referred to as blockchain mining and
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`involves energy-intensive computational efforts comprising running a cryptographic hashing
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`algorithm on specialized mining processors. See Ex. 1 at col. 13:5-52, 17:9-22. Since the energy
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`cost of running blockchain mining equipment is the primary operating cost, cryptocurrency
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`miners traditionally congregate in locales with cheap electric power such as China. See Ex. 1 at
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`col. 14:4-20. Such concentration is undesirable because it undermines the distributed and secure
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`architecture of the cryptocurrency. Id. Of course, it is also costly because the energy consumed
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`by blockchain mining could be put to other productive uses.
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`12. Mr. Barbour conceived of and reduced to practice a pioneering solution to the
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`stranded gas problem which had the further benefit of allowing blockchain mining without costly
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`energy consumption and undesirable concentration. This pioneering technology is described in
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`the ’372 patent which claims priority to a February 8, 2017 provisional application by Mr.
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`Barbour.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 5 of 13
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`13. By way of an illustration, Fig. 2 of the ’372 patent shows an embodiment of Mr.
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`Barbour’s invention comprising a system for powering a blockchain mine at a remote oil well 14
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`where the well site is equipped with an engine 56 using stranded gas to drive a generator 28
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`powering a Bitcoin mine 12:
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`14. Embodiments of the inventive stranded gas blockchain mining system are
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`containerized or enclosed on a skid or trailer for ease of installation and maintenance at remote
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`and difficult-to-access well sites as illustrated in Fig. 6. Exemplary components of a blockchain
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`mine are illustrated in Fig. 4 and include multiple mining processors 92; cooling equipment such
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`as ventilation fan 76; various electrical power distribution and transformation components;
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`network equipment 88 to wirelessly connect the remote mine to the internet; and a controller 86
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`to manage and modulate mine operation automatically and in response to energy availability.
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`15.
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` In 2017 Mr. Barbour founded Upstream to develop, manufacture and
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`commercialize his breakthrough invention. To date Upstream has deployed over 350 Bitcoin
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`mining systems at hundreds of remote well sites across U.S. and Canada thereby alleviating the
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 6 of 13
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`stranded gas venting and flaring problem. Mr. Barbour’s patented technology is embodied in a
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`number of Upstream’s products such as the Ohmm Combo bitcoin mining system illustrated
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`below:
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`16. Claims of the ’372 patent are directed to a number of technological solutions
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`invented by Mr. Barbour and practiced by Upstream’s products.
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`17. Defendant Crusoe competes with Upstream by manufacturing, selling and
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`operating cryptocurrency mining systems connected to sources of stranded gas. In particular,
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`Crusoe sells and/or operates so-called “Digital Flare Mitigation” systems illustrated in the
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`following figure from Crusoe’s website at https://www.crusoeenergy.com/digital-flare-
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`mitigation:
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 7 of 13
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`18.
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`In prior litigation brought by Crusoe in this district, its complaint described
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`Crusoe principals Charles Cavness and Chase Lochmiller as allegedly conceiving their so-called
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`Digital Flare Mitigation technology in 2018. See Ex. 2 at ¶¶ 26-28. Crusoe described this
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`technology as a “system, which harnesses stranded natural gas to create on-site power that
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`supports intensive computing functions, such as Bitcoin mining.” Ex. 2 at ¶ 27.
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`19. Whether in litigation, the press, social media, industry conferences or investor
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`presentations, Crusoe describes itself and its Digital Flare Mitigation systems (comprising the
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`Infringing Crusoe Products) as “pioneering” and “innovative.” See e.g., Ex. 2 at ¶ 29 and 30.
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`20. However, Crusoe developed the Infringing Crusoe Products years after Mr.
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`Barbour conceived and reduced to practice the truly innovative technology claimed by the ’372
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`patent and embodied in Upstream’s products. Accordingly, Crusoe is a follower rather than a
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`pioneer, and its Infringing Crusoe Products infringe one or more claims of the ’372 patent as
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`alleged herein.
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`21. On information and belief, at the time Crusoe was developing the Infringing
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`Crusoe Products and through today, Crusoe was aware of Upstream and its patented technology.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 8 of 13
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`For example, Crusoe maintains a company blog and a blog entry dated September 23, 2021
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`identified Upstream as a competitor. See
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`https://www.crusoeenergy.com/blog/3MyNTKiT6wqsEWKhP0BeY/understanding-the-problem-
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`crusoe-solves. Notably the Crusoe blog entry did not identify any technological differences
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`between itself and Upstream, alluding only to alleged business model differences. As another
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`example, claims in Crusoe’s patent applications, e.g., U.S. Pat. App. No. 16/529,152, were
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`rejected over Mr. Barbour’s patent disclosure which was then publicly available as U.S. Pub. No.
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`2020/0051184.
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`22. Crusoe substantially narrowed the scope of its patent claims in response to the
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`U.S. Patent Office’s rejections. Nevertheless, Crusoe asserted its resulting patents against
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`Upstream’s customer Alkane, see Ex. 2, despite the fact that the alleged inventions are at best
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`nominal and derivative implementations of fundamental technology first invented and patented
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`by Mr. Barbour.
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`23. A typical business model used by Crusoe involves a gas purchase agreement
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`wherein Crusoe installs, maintains and operates the Infringing Crusoe Products at a remote well
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`site, paying the well owner for the methane gas used to power its so-called Digital Flare
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`Mitigation Bitcoin mining systems. See e.g.,
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`https://www.crusoeenergy.com/blog/3MyNTKiT6wqsEWKhP0BeY/understanding-the-problem-
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`crusoe-solves.
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`24. The ’372 Patent, entitled “Blockchain Mine at Oil or Gas Facility” was duly and
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`legally issued by the United States Patent Office on February 7, 2023 from an application filed
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`on February 6, 2018, naming Stephen Barbour as the inventor. The ’372 Patent claims priority to
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`U.S. Provisional Application No. 62/456,380, filed on February 8, 2017.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 9 of 13
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`Patent.
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`25. Upstream holds, by assignment, all right, title, and interest in and to the ’372
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`26.
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`27.
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`Pursuant to 35 U.S.C. § 282, the ’372 Patent is presumed valid.
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`Pursuant to 35 U.S.C. § 287, Upstream has continuously marked its Bitcoin
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`mining products with the ’372 Patent since the ’372 Patent issued on February 7, 2023.
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`COUNT I
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`Infringement of the ’372 Patent
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`28. Upstream realleges and incorporates by reference the allegations of paragraphs 1
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`through 27 set forth above.
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`29. Crusoe has directly infringed and continues to infringe at least one claim of the
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`’372 Patent by making, using, offering for sale, selling, and/or importing products, including at
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`least the Infringing Crusoe Products, that meet every limitation, either literally or under the
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`doctrine of equivalents, of at least claims 1-2 the ʼ372 Patent, in violation of 35 U.S.C. § 271(a).
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`Exemplary infringement of claims 1-2 of the ’372 Patent by the Infringing Crusoe Products is
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`demonstrated in the claim chart Exhibit 3. Exhibit 3 and any exhibits thereto, including
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`embedded hyperlinks and references, are hereby incorporated in their entirety.
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`30. To the extent specific components of the Infringing Crusoe Products are provided
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`and/or operated by Crusoe’s customers, vendors or agents, Crusoe infringes at least claims 1-2 of
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`the ’372 Patent jointly with its customers, vendors, or agents. On information and belief, Crusoe
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`directs and controls such infringing act(s) of one or more of these third parties by establishing the
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`manner and timing of the one or more third parties’ infringing act(s) and conditioning the
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`participation of an activity or receipt of a benefit upon completion of the infringing act(s). Thus,
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`Crusoe and the one or more third-parties jointly infringe the ’372 Patent.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 10 of 13
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`31. With knowledge of the ʼ372 Patent, Crusoe has actively induced, and continues to
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`induce, its customers and/or end users of the Infringing Crusoe Products to directly infringe one
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`or more claims of the ʼ372 Patent, including claims 1-2, in violation of 35 U.S.C. § 271(b).
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`32. Crusoe has induced such customers and/or end users to infringe by selling, aiding,
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`providing support for, providing instructions for use of the Infringing Crusoe Products, and/or
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`otherwise encouraging its customers and/or end-users to make, use, sell, or offer for sale the
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`Infringing Crusoe Products to directly infringe, either literally and/or under the doctrine of
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`equivalents, one or more claims of the ʼ372 Patent, including claims 1-2.
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`33. As a result of Crusoe’s inducement, its customers and/or end users operate and/or
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`use the Infringing Crusoe Products, in ways that directly infringe at least one claim of the ʼ372
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`Patent. Crusoe had actual knowledge of its customers’ and/or end users’ direct infringement at
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`least by virtue of its sales, instruction, and/or otherwise promotion of the Infringing Crusoe
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`Products, as set forth above.
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`34. Crusoe has been and is continuing to contributorily infringe the ’372 patent in
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`violation of 35 U.S.C. § 271(c), at least by making available to third parties such as its customers
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`and/or end users substantially or fully complete Infringing Crusoe Products, knowing that such
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`Infringing Crusoe Products are especially made or adapted for practicing one or more claims of
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`the ’372 patent and that they are not a staple article or commodity of commerce suitable for
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`substantial non-infringing use. Specifically, Crusoe has known and knows that the Infringing
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`Crusoe Products installed at a remote well location directly infringe at least claims 1-2 of the
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`’372 patent as set forth herein.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 11 of 13
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`35. Crusoe has actual knowledge of the ’372 patent at least as of the date of service of
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`this Complaint. Moreover, Crusoe has actual and constructive notice of the ’372 patent and the
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`application upon which the ‘372 patent is based at least in part on:
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`a. Upstream’s marking and marketing of its products with the ’372 patent or the
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`application upon which the ’372 patent is based,
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`b. U.S. patent application publication no. 2020/0051184, which is the publication of
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`the application upon which the ’372 patent is based,
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`c. P.C.T. patent application publication no. WO/2018/145201, which is the P.C.T.
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`publication of the application upon which the ’372 patent is based, and/or
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`d. The date the application upon which the ’372 patent is based was first cited during
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`prosecution of a U.S. patent application of Crusoe.
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`36. Because of Crusoe’s infringement of the ’372 Patent, Upstream has suffered and
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`will continue to suffer irreparable harm and injury, including monetary damages in an amount to
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`be determined at trial.
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`37. Crusoe will continue to infringe the ʼ372 Patent unless and until it is enjoined by
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`this Court. As a result of Crusoe’s unlawful activities, Upstream has suffered and continues to
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`suffer irreparable harm. Upstream has no adequate remedy at law against Crusoe’s acts of
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`infringement and, unless Crusoe is enjoined from its infringement of the ʼ372 Patent, Upstream
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`will continue to suffer irreparable harm.
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`38. Crusoe, with actual knowledge of the ’372 patent, willfully, deliberately, and
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`intentionally infringed (and continues to infringe) the ’372 Patent. Accordingly, an award of
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`treble damages and attorney’s fees is warranted at least under 35 U.S.C. §§ 284, 285.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 12 of 13
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff Upstream respectfully prays for relief, as follows:
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`1) A judgment that Crusoe has directly and willfully infringed, actively induced
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`infringement of, and/or contributorily infringed one or more claims of the ’372
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`Patent in violation of 35 U.S.C. § 271(a), (b), and/or (c);
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`2) An order and judgment preliminarily and permanently enjoining Crusoe, its
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`employees, agents, officers, directors, attorneys, successors, affiliates, subsidiaries
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`and assigns, and all of those in active concert and participation with any of the
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`foregoing persons or entities from further acts of infringement of the ’372 Patent,
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`including an order enjoining the marketing, making, manufacture, sale, offer for
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`sale, use, and/or importation of all Crusoe products found to infringe;
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`3) A judgment awarding Upstream damages in an amount sufficient to compensate for
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`Crusoe’s infringement of the ’372 Patent, and in no event less than a reasonable
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`royalty for Crusoe’s acts of infringement, including all pre-judgment and post-
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`judgment interest at the maximum rate permitted by law, plus costs, and all other
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`damages permitted under 35 U. S. C. § 284;
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`4) A judgment that Crusoe’s infringement of the ’372 Patent has been willful and
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`deliberate;
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`5) A judgment awarding Upstream treble damages as a result of Crusoe’s willful and
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`deliberate infringement of the ’372 Patent, pursuant to 35 U.S.C. § 284;
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`6) A judgment declaring this case is exceptional under 35 U.S.C. § 285 and awarding
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`costs, expenses, and attorneys’ fees to Upstream; and
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`7) Awarding Upstream such other further relief as the Court deems just and proper.
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`Case No. 1:23-cv-01252-SKC Document 1 filed 05/18/23 USDC Colorado pg 13 of 13
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`DEMAND FOR JURY TRIAL
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`Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff Upstream demands
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`a trial by jury on all issues triable of right by a jury.
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`Dated: May 18, 2023
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`/s/ Jake Zolotorev
`Jake Zolotorev
`Carrie Williamson
`DLA Piper
`2000 University Avenue
`East Palo Alto, CA 94303
`Tel: 650.833.2000
`Fax: 650.833.2001
`Email: jake.zolotorev@us.dlapiper.com
`Email: carrie.williamson@us.dlapiper.com
`
`Clayton Thompson
`DLA Piper
`1201 West Peachtree Street
`Suite 2900
`Atlanta, Georgia 30309-3449
`Tel: 404.736.7800
`Fax: 404.682.7800
`Email: clayton.thompson@us.dlapiper.com
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`Attorneys for Plaintiff
`UPSTREAM DATA INC.
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`13
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