`___________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
`
`
`
`BAKER HUGHES INCORPORATED and
`BAKER HUGHES OILFIELD OPERATIONS, INC.,
`Petitioners
`
`v.
`
`PACKERS PLUS ENERGY SERVICES INC.,
`Patent Owner
`
`___________________
`
`Case IPR2016-00598
`Patent 7,861,774
`___________________
`
`
`
`
`
`EXCLUSIVE LICENSEE RAPID COMPLETIONS LLC’S
`PRELIMINARY RESPONSE
`
`
`Mail Stop “PATENT BOARD”
`Patent Trial and Appeal Board
`U.S. Patent and Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-1450
`
`
`
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`TABLE OF CONTENTS
`I.
`Introduction. ..................................................................................................... 1
`II. Wellbore completion background. .................................................................. 4
`A. Water shut-off completions prevent unwanted fluids from entering a
`wellbore. ................................................................................................ 5
`Hydraulic fracturing completion is very different from a water shut-
`off completion. ...................................................................................... 7
`The ’774 patent technology is a nonobvious multistage fracturing
`approach that is an alternative to cased-hole plug-and-perf fracturing.
` .............................................................................................................10
`The ’774 patent technology has been praised as “revolutionary” and
`“game-changing.” ................................................................................15
`The asserted prior art describes a modified plug-and-perf completion
`and a water shut-off completion, not open hole multistage fracturing.
` .............................................................................................................18
`1.
`Thomson is directed to a variation of a plug-and-perf
`completion. ................................................................................18
`Ellsworth is directed to a conventional water shut-off
`completion. ................................................................................19
`III. Claim constructions. ......................................................................................19
`IV. Petitioners have not established that the challenged claims are unpatentable
`under any of the proposed grounds................................................................20
`A. Grounds 1 and 2—Petitioners fail to establish that Thomson is a prior
`art printed publication. ........................................................................20
`Ground 1—Petitioners fail to establish that claims 1–16 are
`unpatentable over Thomson and Ellsworth. ........................................25
`1.
`Claims 1–16—A person of ordinary skill in the art would not
`have combined Thomson and Ellsworth. ..................................25
`a)
`Applicable law. ...............................................................26
`
`B.
`
`C.
`
`D.
`
`E.
`
`2.
`
`B.
`
`
`
`
`- i -
`
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`A person of ordinary skill in the art would not have
`expected a combination of Thomson and Ellsworth to
`yield predictable results. .................................................27
`Combining Thomson and Ellsworth would alter the
`“basic principles” of their operation. ..............................31
`Claim 1—Petitioners fail to show that Thomson and Ellsworth
`disclose every claim feature. .....................................................33
`a)
`Petitioners fail to show that either Thomson or Ellsworth
`discloses pumping fracturing fluid into an open hole and
`uncased annular segment to fracture the formation, as
`claimed. ...........................................................................33
`Petitioners fail to show that Thomson discloses the
`claimed solid body packers. ............................................34
`Claim 4—Petitioners fail to show that Thomson discloses the
`claimed hydraulically driven compressing piston. ...................38
`Ground 2—Petitioners fail to establish that claim 15 is unpatentable
`over Thomson and Hartley. .................................................................40
`Conclusion. ....................................................................................................41
`
`2.
`
`3.
`
`C.
`
`b)
`
`c)
`
`b)
`
`- ii -
`
`
`
`V.
`
`
`
`
`
`
`
`
`
`
`Table of Authorities
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`Cases:
`
`A.C. Dispensing Equip. Inc. v. Prince Castle LLC,
`IPR2014-00511, Paper 16 (Sept. 10, 2014) ............................................................. 21
`
`Blue Calypso, LLC, v. Groupon, Inc.,
`815 F.3d 1331 (Fed. Cir. 2016)................................................................................ 24
`
`Bungie, Inc. v. Worlds Inc.,
`IPR2015-01321, Paper 13 (Nov. 30, 2015) ............................................................. 22
`
`Cisco Sys., Inc. v. Constellation Techs. L.L.C.,
`IPR2014-01085, Paper 11 (Jan. 9, 2015) ................................................................. 20
`
`Creston Electronics, Inc. v. Intuitive Building Controls, Inc.,
`IPR2015-01379, Paper 16 (Dec. 15, 2015) ........................................................ 22–23
`
`DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc.,
`567 F.3d 1314 (Fed. Cir. 2009).......................................................................... 27, 29
`
`DeSilva v. DiLeonardi,
`181 F.3d 865 (7th Cir. 1999) ................................................................................... 21
`
`GP Strategies Corp. v. Chart Inc.,
`IPR2015-00558, Paper 8 (July 31, 2015) ................................................................ 23
`
`In re Hall,
`781 F. 2d 897 (Fed. Cir. 1986)........................................................................... 20–21
`
`In re Klopfenstein,
`380 F.3d 1345 (Fed. Cir. 2004)................................................................................ 23
`
`In re Lister,
`583 F.3d 1307 (Fed. Cir. 2009)................................................................................ 24
`
`In re Ratti,
`270 F.2d 810 (1959) ................................................................................................. 27
`
`
`
`- 1 -
`
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`
`
`KSR Int’l Co. v. Teleflex, Inc.,
`550 U.S. 398 (2007) ................................................................................................. 27
`
`Kyocera Wireless Corp. v. Int’l Trade Comm’n,
`545 F.3d 1340 (Fed. Cir. 2008)................................................................................ 22
`
`Massachusetts Institute of Technology, v, AB Fortia,
`774 F.2d 1104 (Fed. Cir. 1985)................................................................................ 23
`
`Plas-Pak Indus., Inc. v. Sulzer Mixpac AG,
`600 F. App’x 755 (Fed. Cir. 2015) .................................................................... 27, 31
`
`SRI Int’l, Inc. v. Internet Sec. Sys., Inc.,
`511 F.3d 1186 (Fed. Cir. 2008)................................................................................ 21
`
`Symantec Corp. v. The Trustees of Columbia University in the City of New York,
`IPR2015-00370, Paper 13 (June 17, 2015) .............................................................. 20
`
`Wright Med. Tech., Inc. v. Biomedical Enters., Inc.,
`IPR2015-00786, Paper 7 (Aug. 10, 2015) ......................................................... 23, 24
`
`Other Authority:
`
`
`MPEP 2143 .............................................................................................................. 27
`
`
`
`
`
`- 2 -
`
`
`
`Exhibit
`2001
`
`2002
`
`2003
`
`2004
`
`2005
`
`2006
`
`2007
`
`2008
`
`2009
`
`2010
`
`2011
`
`2012
`
`2013
`
`
`
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`Exhibit List
`Description
`A. Casero, Open Hole Multi-Stage Completion System in
`Unconventional Plays: Efficiency, Effectiveness and
`Economics, SPE 164009, Society of Petroleum Engineers
`(2013)
`Encyclopedia of Hydrocarbons, Chapter 3.1: Upstream
`technologies. Novel well and production architecture (ENI:
`Istituto Della Enciclopedia Italiana Fondata Da Giovanni
`Treccani S.p.A. 2007)
`D. Lohoefer, Comparative Study of Cemented versus
`Uncemented Multi-Stage Fractured Wells in the Barnett Shale,
`SPE 135386, Society of Petroleum Engineers (2010)
`R. Seale et al., Effective Stimulation of Horizontal Wells—A
`New Completion Method, SPE 106357, Society of Petroleum
`Engineers (2006)
`Canada’s Top Energy Innovators 2015: Exploration and
`Development, Alberta Oil Magazine (Mar. 2015)
`J. Bentein, Leading the Way: Multistage fracking pioneer
`Packers Plus plays major role in cracking the tight oil code,
`Canadian OilPatch Technology Guidebook, vol. 4 (2012)
`J. Pachner, Entrepreneur of the Year: National Winner,
`Financial Post Magazine (Dec. 2009)
`Innovation—Groundbreaking Innovation in Calgary, Calgary
`Herald (Feb. 12, 1014)
`J. Chury, The Oil Patch Report: Packers Plus Technology
`Becoming the Industry Standard, Resource World Magazine
`(Dec. 2010/Jan. 2011)
`P. Roche, Open-Hole or Cased and Cemented, New
`Technology Magazine (Nov. 2011)
`R. Ghiselin, Qittitut Consulting, Sleeves vs. Shots—The Debate
`Rages (Aug. 2011)
`Van Dyke, Kate, “Fundamentals of Petroleum,” Fourth Ed.,
`The University of Texas at Austin (1997)
`“Proven Performance: Read how Packers Plus systems and
`solutions have delivered results around the world,” Packers
`Plus Energy Services Inc., accessed May 24, 2016,
`http://packersplus.com/proven-performance/?type=case-
`study&system=stackfrac-hd-system&pag=3%20#p3
`
`- 1 -
`
`
`
`
`I.
`
`Introduction.
`The Board should not institute trial in this inter partes review because
`
`Case IPR2016-00598
`Patent 7,861,774
`
`Petitioners have not met their burden of showing a reasonable likelihood of
`
`prevailing in proving the unpatentability of any of the challenged claims of U.S.
`
`Patent No. 7,861,774 (the ’774 patent).
`
`Petitioners ask the Board to rewrite history and erase one of the great
`
`success stories of the oil and gas industry. The Patent Owner, Packers Plus Energy
`
`Services Inc., has been lauded by experts, customers, and respected journals for the
`
`tremendous achievement of its StackFRAC technology covered by the ’774 patent.
`
`Despite this praise, Petitioners allege that the claimed inventions were unimportant
`
`and obvious in light of two 1990s articles written by Halliburton engineers.
`
`Petitioners’ reliance on these two Halliburton articles immediately raises a
`
`red flag. Halliburton is one of the largest and most powerful companies in the oil
`
`and gas industry. Halliburton undoubtedly had the resources, engineers, and
`
`incentives to develop new technologies. Thus, according to Petitioners, it should
`
`have been obvious for Halliburton engineers to develop—years before the
`
`inventors of the ’774 patent—a technology praised as “game-changing” and
`
`“revolutionary.” But, that never happened. Petitioners’ assertion that such a
`
`valuable technology was obvious—despite having eluded Halliburton and the
`
`entire industry for years—is simply not credible. While this high-level observation
`
`
`
`- 1 -
`
`
`
`
`provides a strong inference of non-obviousness, a closer look at the Petition and
`
`Case IPR2016-00598
`Patent 7,861,774
`
`the claimed technology reveals fundamental flaws with Petitioners’ proposed
`
`grounds of unpatentability.
`
`Each proposed ground of unpatentability is primarily based on Thomson.
`
`But Petitioners provide no evidence or explanation that Thomson was actually
`
`published. Instead, Petitioners solely rely on an unsupported, conclusory statement
`
`that Thomson was published in 1997.
`
`Even assuming that Thomson was published, Petitioners fail to show that the
`
`suggested combinations render the challenged claims unpatentable. A person of
`
`ordinary skill in the art (PHOSITA) would not have combined Thomson and
`
`Ellsworth to achieve the claimed fracturing method in a non-vertical, open hole,
`
`and uncased wellbore for two reasons. First, the results of this suggested
`
`combination would have been unpredictable, as neither Thomson nor Ellsworth
`
`discloses open hole multistage hydraulic fracturing. Thomson is directed to a
`
`variation of plug-and-perf cased hole fracturing, and Ellsworth is directed to water
`
`shut-off operations, not even fracturing. And although Petitioners assert that
`
`combining Thomson and Ellsworth would have been straightforward and
`
`predictable, Petitioners’ own expert previously stated that, as of 2007, “whenever
`
`completion operations require hydraulic fracturing, the horizontal holes are in fact
`
`cased, cemented, and perforated to facilitate effective fracturing.” Second,
`
`
`
`- 2 -
`
`
`
`
`Thomson’s modified plug-and-perf fracturing operation is fundamentally based on
`
`Case IPR2016-00598
`Patent 7,861,774
`
`using a cased wellbore and a perforating gun. Combining Thomson and Ellsworth
`
`would eliminate Thomson’s required wellbore and perforating gun, changing the
`
`basic principle of operation of plug-and-perf fracturing. Even today, open hole
`
`multistage fracturing is seen as fundamentally different than plug-and-perf
`
`fracturing.
`
`Additionally, Petitioners fail to show that the suggested Thomson-Ellsworth
`
`combination discloses every claim feature. For example, Petitioners rely solely on
`
`Thomson for allegedly disclosing the claimed solid packer. But other than
`
`disclosing a few unclaimed packer features, Thomson is substantially silent about
`
`the packers’ particular structure and operation. So Petitioners resort to
`
`impermissibly speculating about the structure and operation of Thomson’s packers.
`
`Other than unsupported, conclusory statements, there is no record evidence that
`
`Thomson does indeed disclose the claimed solid body packer. As another example,
`
`Petitioners fail to show that either Thomson or Ellsworth discloses the
`
`hydraulically driven compression piston recited in claim 4.
`
`In sum, Petitioners have not shown a reasonable likelihood of prevailing in
`
`proving the unpatentability of any of claims 1–16. The Board should therefore
`
`deny institution.
`
`
`
`- 3 -
`
`
`
`
`II. Wellbore completion background.
`Before producing oil or gas from a well, a well must be drilled and then
`
`Case IPR2016-00598
`Patent 7,861,774
`
`“completed.” The term “completion” refers to the work performed on a well after
`
`being drilled, but before the well actual produces oil or gas. (See Ex. 2012, Van
`
`Dyke, p. 147 ( “After a well has been drilled and the company has determined that
`
`the reservoir will be economical to produce, the work of setting the final string of
`
`casing, preparing the well for production, and bringing in the oil or gas begins.”).
`
`Completion encompasses a wide variety of operations that can be performed on a
`
`well. For example, completions include (1) casing, liner, or tubing installation
`
`operations; (2) well stimulation operations such as hydraulic fracturing and matrix
`
`acidizing; (3) water shutoff operations; and (4) oil or gas lift operations. (See, e.g.,
`
`Id., Van Dyke, pp. 147–151 (casing, liner, or tubing installation operations), pp.
`
`158–160 (oil or gas lift operations); Ex. 1006 (well stimulation operations).) For
`
`this inter partes review proceeding, two types of completions are particularly
`
`relevant: hydraulic fracturing operations and water shut-off operations. Petitioners
`
`assert that tools and techniques used for water shut-off operations are
`
`interchangeable with tools and techniques for hydraulic fracturing. But this
`
`assertion fundamentally misunderstands the history and purposes of these two
`
`distinct completion types, as would have been understood by a PHOSITA.
`
`
`
`- 4 -
`
`
`
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`A. Water shut-off completions prevent unwanted fluids from
`entering a wellbore.
`
`Horizontal drilling allows operators to drill through narrow pay zones and
`
`significantly increase oil and gas production. One way to complete a horizontal
`
`wellbore is to perform an open hole completion. That is, casing may be cemented
`
`along the vertical wellbore section to protect wellbore integrity, but the horizontal
`
`wellbore portion is left without casing. In this open hole wellbore portion, the rock
`
`face is directly exposed to the wellbore, which allows oil and gas to seep into the
`
`wellbore and up to the surface, as illustrated below.
`
`
`
`
`
`- 5 -
`
`
`
`Another technique for completing a wellbore is to use a (non-cemented)
`
`Case IPR2016-00598
`Patent 7,861,774
`
`
`
`perforated liner or casing. This completion type is similar to an open hole
`
`completion, except that a length of liner or casing with holes is installed into the
`
`horizontal wellbore section. Similar to an open hole completion, the entire rock
`
`face of the horizontal wellbore section is directly exposed to the wellbore, but the
`
`liner or casing protects against collapse of the wellbore. This type of completion is
`
`illustrated below.
`
`Although an open hole completion (see Figure on p. 6) or a non-cemented
`
`cased hole completion (see Figure immediately above) can be effective for many
`
`
`
`
`
`- 6 -
`
`
`
`
`types of wells, these completions cause problems if a portion of the wellbore
`
`Case IPR2016-00598
`Patent 7,861,774
`
`passes through an undesirable formation. For example, if the wellbore extends into
`
`a brine-producing formation, brine water can seep into the wellbore and pollute the
`
`oil or gas flowing to the surface. The solution to this problem is a water shut-off
`
`completion. To perform water shut-off, a perforated tubing string with packers is
`
`installed to isolate the brine-producing formation from the oil-and-gas-producing
`
`formation. With this isolation, only oil and gas enters the wellbore. The annotated
`
`diagram below illustrates water shut off—the oil or gas (red) enters the perforated
`
`tubing string in the wellbore, but due to the packers, water (blue) is isolated and is
`
`shut off from entering the wellbore.
`
`B. Hydraulic fracturing completion is very different from a water
`shut-off completion.
`
`Compared to water shut-off completion, hydraulic fracturing is more
`
`complicated. Hydraulic fracturing “stimulates” a well so that it produces more oil
`
`
`
`
`
`- 7 -
`
`
`
`
`and gas than would be produced merely by drilling into a formation. (See Ex. 1006,
`
`Case IPR2016-00598
`Patent 7,861,774
`
`Van Dyke, p. 162 (discussing well stimulation).) Although hydraulic fracturing
`
`was first introduced in the 1940’s, improvements to the process over the last
`
`twenty years have led to an incredible increase in oil and gas production in the
`
`United States and Canada.
`
`To hydraulically fracture a formation, fluid is pumped down a wellbore at a
`
`high enough pressure to actually fracture the formation and open up channels for
`
`fluid to enter the rock. (See Ex. 1006, Van Dyke, p. 162 (discussing hydraulic
`
`fracturing).) A typical horizontal well may call for multiple fracture treatments.
`
`Each treatment can significantly increase the amount of oil and gas that enters the
`
`wellbore. To perform multiple fracture treatments in a single wellbore, portions of
`
`the wellbore must be isolated into different “zones” or “stages” that can be
`
`fractured separately. At the time of the invention, the leading technique for
`
`accomplishing this sort of “multistage” fracturing was a completion operation
`
`called “plug-and-perf.”
`
`To perform a plug-and-perf completion, casing is first cemented in place
`
`throughout the horizontal wellbore portion. (See, e.g., Ex. 2003, D. Lohoefer,
`
`Comparative Study of Cemented versus Uncemented Multi-Stage Fractured Wells
`
`in the Barnett Shale, SPE 135386, Society of Petroleum Engineers, p. 2 (2010)
`
`(describing plug-and-perf completions (i.e., “Cemented liner, multistage fracturing
`
`
`
`- 8 -
`
`
`
`
`method”).) A perforating gun is then placed at a desired location in the cased
`
`Case IPR2016-00598
`Patent 7,861,774
`
`wellbore to create small perforations in the cement and casing so that fluid in the
`
`wellbore can access the formation adjacent the perforations. Fluid is then pumped
`
`into the wellbore. Because the only exit points for this fluid are the perforations
`
`through the casing, the fluid pressure eventually builds and causes fractures to
`
`form beginning from those perforations. In this way, the precise placement of
`
`fractures can be controlled. (See, e.g., Ex. 2001, A. Casero, Open Hole Multi-Stage
`
`Completion System in Unconventional Plays: Efficiency, Effectiveness and
`
`Economics, SPE 164009, at 5 (2013) (identifying “[c]ontrol location of Fracture
`
`Initiation” as one advantage of plug-and-perf completion).) Next, the operator
`
`installs a “frac plug” to seal off the downhole fractured portion of the cased
`
`wellbore. The operator then repeats the perforating and pumping steps uphole from
`
`the frac plug to create a second set of fractures. This process can be repeated
`
`multiple times. (See id.) Once the plug-and-perf operation is completed, the frac
`
`plugs are drilled out to allow production from all fractured zones through the
`
`tubing string. (See id.)
`
`Cementing thousands of feet of casing into the horizontal wellbore section is
`
`no small feat. As noted by Petitioners, “any time a formation is stable enough to
`
`complete a well without casing, there is an inherent motivation for a POSITA to
`
`not case the well.” (Petition, p. 27.) But while cemented casing is not necessary for
`
`
`
`- 9 -
`
`
`
`
`all wells (e.g., open hole, slotted liner, and water shut-off wells), cemented casing
`
`Case IPR2016-00598
`Patent 7,861,774
`
`was believed to be a critical component for multistage fracturing completions at
`
`the time of the invention. Indeed, as late as 2007, the Encyclopedia of
`
`Hydrocarbons declared that “whenever completion operations require hydraulic
`
`fracturing, the horizontal holes are in fact cased, cemented, and perforated to
`
`facilitate effective fracturing.” (Ex. 2002, Encyclopedia of Hydrocarbons, Chapter
`
`3.1: Upstream technologies. Novel well and production architecture, (Istituto Della
`
`Enciclopedia Italiana Fondata Da Giovanni Treccani S.p.A. 2007).) Wellbores are
`
`cased during fracturing because the cemented casing ensures that fracturing fluid
`
`only contacts the formation through the narrow perforations in the casing, and thus
`
`fractures only initiate from those pre-selected locations. (See A. Casero, SPE
`
`164009 at 5 (listing fracture initiation as an advantage of plug-and-perf
`
`completions and stating that “[s]ome of the features of the OHMS approach are
`
`often depicted as disadvantages, such as the inferred inability to control the
`
`initiation point of the fractures”).)
`
`C. The ’774 patent technology is a nonobvious multistage fracturing
`approach that is an alternative to cased-hole plug-and-perf
`fracturing.
`
`To selectively control fluid treatment along the wellbore, segments of the
`
`wellbore can be isolated with packers and individually treated. (Ex. 1001, ’774
`
`patent, 1:40–43; 6:18–27.) The ’774 patent discloses one such multistage
`
`
`
`- 10 -
`
`
`
`
`fracturing method that uses a tubing string 14 having a plurality of ports 17. (Id. at
`
`Case IPR2016-00598
`Patent 7,861,774
`
`6:6–12.) Tubing string 14 can also include a plurality of packers 20 that seal the
`
`annulus between tubing string 14 and the wellbore wall, and divide the wellbore
`
`into isolated segments wherein fluid can be applied to one segment of the well. (Id.
`
`at 6:13–27.) Packers 20 can be solid body packers. (Id. at 6:29–30.) Tubing string
`
`14 can further include a plurality of sliding sleeves 22 that control the opening of
`
`ports 17. (Id. at 6:37–49.) And the inventors of the ’774 patent recognized that, in
`
`open hole applications, a tubing string using solid body packers are particularly
`
`useful. (Id. at 6:31–34.)
`
`The owner of the ’774 patent, Packers Plus,1 first commercialized this
`
`technology under the name StackFRAC and has used it to fracture wells
`
`throughout the world. (Ex. 2013,“Proven Performance: Read how Packers Plus
`
`systems and solutions have delivered results around the world,” Packers Plus
`
`Energy Services Inc., accessed May 24, 2016, http://packersplus.com/proven-
`
`performance/?type=case-study&system=stackfrac-hd-system&pag=3%20#p3.)
`
`One stage of Packer Plus’s StackFRAC system is shown below.
`
`
`1 Respondent, Rapid Completions LLC, is the exclusive licensee and the entity in
`
`charge of enforcing the patents.
`
`
`
`- 11 -
`
`
`
`
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`
`
`The Packer Plus’s StackFRAC system is an open hole multistage fracturing system
`
`that includes a tubing string, a plurality of sliding sleeve subassemblies each
`
`having a port, and a plurality of solid body packers.
`
`The ’774 patent technology is very different from plug-and-perf fracturing.
`
`(See, e.g., A. Casero, SPE 164009 at 1 (“This efficiency has been accomplished by
`
`using two very distinct completion approaches: the Plug and Perf. method and
`
`the Open Hole Multi Stage (OHMS) completion system (typically ball activated
`
`fracturing ports).”) (emphasis added).) Instead of generating fractures through
`
`narrow perforations in a cemented casing, the ’774 patent technology exposes an
`
`entire zone of the wellbore to increased fluid pressure. Specifically, fracturing fluid
`
`pumped out of a tubing string port fills the entire annular space of each zone
`
`defined by the packers, the tubing string, and the wellbore wall. This annular space
`
`
`
`- 12 -
`
`
`
`
`is referred to as an “annular segment.” As shown in the image below, fluid pumped
`
`Case IPR2016-00598
`Patent 7,861,774
`
`into an annular segment does not necessarily create a fracture directly adjacent the
`
`port through which the fluid enters the annular segment. Instead, the fracture tends
`
`to form at the natural weak point in the wellbore wall, which may or may not be
`
`adjacent the port.
`
`Allowing fractures to form anywhere within an annular segment is heresy to
`
`a plug-and-perf traditionalist. For example, some argue that open hole multistage
`
`fracturing creates fractures at random locations. (See A. Casero, SPE 164009 at 5
`
`(listing fracture initiation as an advantage of plug-and-perf completions and
`
`
`
`
`
`- 13 -
`
`
`
`
`stating, “Some of the features of the OHMS approach are often depicted as
`
`Case IPR2016-00598
`Patent 7,861,774
`
`disadvantages, such as the inferred inability to control the initiation point of the
`
`fractures . . . .”).) As a result, the supposed disadvantage is that fractures can
`
`propagate between adjacent zones as shown below.
`
`
`
`Despite facing this initial industry skepticism, the ’774 patent technology
`
`has gained acceptance and widespread acclaim. In fact, a number of studies have
`
`shown that, in some of the most important formations in the United States and
`
`Canada, the ’774 patent technology actually creates more effective, better
`
`producing fractures. (Seale, p. 3 (“Although the time and cost savings were
`
`significant, the true reward was the greater than fivefold average production
`
`increase [relative to a cemented plug-and-perf completion] that was realized by
`
`using the [open hole multistage fracturing] system.”); Lohoefer, p. 3–4 (finding
`
`
`
`- 14 -
`
`
`
`
`that open hole multistage fracturing completions outperformed cemented plug-and-
`
`Case IPR2016-00598
`Patent 7,861,774
`
`perf completions).)
`
`D. The ’774 patent technology has been praised as “revolutionary”
`and “game-changing.”
`
`The Patent Owner’s StackFRAC system, which the ’774 patent covers, has
`
`been used to fracture thousands of wells throughout the world. And this technology
`
`has raised the industry’s praise and recognition:
`
`•
`
`In 2009, Ernst & Young awarded Packers Plus and Dan Themig its
`
`entrepreneur of the year award and highlighted Packers Plus’s StackFRAC
`
`system. (Ex. 2007, J. Pachner, Entrepreneur of the Year: National Winner,
`
`Financial Post Magazine, at 42 (Dec. 2009) (noting that “[w]ith Packers
`
`Plus technology, the Bakken oilfield went from producing 100 barrels of oil
`
`a day in 2006 to 60,000 now”).)
`
`•
`
`In 2010, the Oil Patch Report stated that “Packers Plus technology [is]
`
`becoming the industry standard.” (Ex. 2009, J. Chury, The Oil Patch Report:
`
`Packers Plus Technology Becoming the Industry Standard, Resource World
`
`Magazine, at 74 (Dec. 2010/Jan. 2011) (“After 10 years of marketing their
`
`innovative StackFRAC system, Packers Plus has become the darling of the
`
`oil and gas sector, not just in North America, but worldwide.”) (emphasis
`
`added).)
`
`
`
`- 15 -
`
`
`
`
`•
`
`Case IPR2016-00598
`Patent 7,861,774
`
`In 2011 NewTech Magazine reported that the “open-hole ball drop system is
`
`typically associated with Calgary-based Packers Plus Energy Services Inc.”
`
`(Ex. 2010, P. Roche, Open-Hole or Cased and Cemented, New Technology
`
`Magazine (Nov. 2011) (emphasis added).)
`
`•
`
`In 2011, Qittitut Consulting released an extensive study of the “two most
`
`popular multistage completion methods” in the United States: traditional
`
`cased hole plug-and-perf fracturing systems, and open hole multistage
`
`fracturing systems. (Ex. 2011, R. Ghiselin, Qittitut Consulting, Sleeves vs.
`
`Shots—The Debate Rages (Aug. 2011).)
`
`•
`
`In 2012, Canadian OilPatch Technology Guidebook profiled Packers Plus
`
`and its StackFRAC technology, labeling Packers Plus a “[m]ultistage
`
`fracking pioneer” and stating: “When the history of all the business success
`
`stories emerging from the development of the tight oil and gas reservoirs in
`
`western Canada and the western United States is chronicled, the story of a
`
`12-year-old Calgary-based company that specializes in an area of oilfield
`
`technology unheard of until the last few years might be the most
`
`remarkable.” (Ex. 2006, J. Bentein, Leading the Way: Multistage fracking
`
`pioneer Packers Plus plays major role in cracking the tight oil code,
`
`Canadian OilPatch Technology Guidebook, at 39, vol. 4 (2012) (emphasis
`
`added).) This article explained that the “StackFRAC technology . . .
`
`
`
`- 16 -
`
`
`
`
`
`Case IPR2016-00598
`Patent 7,861,774
`
`revolutionized the completions sector by introducing multistage fracturing
`
`systems in horizontal wells, [and is] credited with unlocking the potential of
`
`tight and shale oil and natural gas.” (Id. (emphasis added).)
`
`•
`
`In 2014, the Calgary Herald reported: “Perhaps one of the greatest
`
`demonstrations of game-changing innovation developed in Calgary is that
`
`of Packers Plus. Creators of the StackFRAC system, the first ball drop
`
`system used to complete horizontal wells in multiple stages, the company
`
`has truly revolutionized the oil and gas industry.” (Ex. 2008, Innovation—
`
`Groundbreaking Innovation in Calgary, Calgary Herald (Feb. 12, 1014)
`
`(emphasis added).)
`
`•
`
`In 2015, Alberta Oil Magazine explained: “StackFRAC, the company’s
`
`prize product and primary innovation, is an open hole ball drop completion
`
`system that’s widely credited with unlocking old resource plays that were
`
`thought to be too expensive or too technically challenging to tap.” (Ex.
`
`2005, Canada’s Top Energy Innovators 2015: Exploration and
`
`Development, Alberta Oil Magazine (Mar. 2015) (emphasis added).)
`
`In sum, by providing an effective technique for open hole multistage
`
`fracturing by pumping fluid into open hole annular segments instead of through
`
`cemented perforations, the inventors made a significant and lasting contribution to
`
`
`
`- 17 -
`
`
`
`
`the industry. While this technology has not displaced plug-and-perf completions,
`
`Case IPR2016-00598
`Patent 7,861,774
`
`open hole multistage fracturing is recognized as an important alternative.
`
`E.
`
`The asserted prior art describes a modified plug-and-perf
`completion and a water shut-off completion, not open hole
`multistage fracturing.
`
`Each proposed ground of patentability relies on both Thomson and
`
`Ellsworth. (Petition, p. 4.) But neither reference is directed to open hole multistage
`
`fracturing.
`
`1.
`
`Thomson is directed to a variation of a plug-and-perf
`completion.
`
`Petitioners’ primary reference, Thomson, describes a modified type of plug-
`
`and-perf completion. Thomson’s completion plan involved cementing casing in a
`
`wellbore, perforating the cemented casing at precise location, and plugging each
`
`perforated stage, as in traditional plug-and-perf completions. The purported
`
`novelty in their approach was to use multistage acid frac (MSAF) tools with ball-
`
`and-seat configurations to sequentially pump fluid through the perforations in each
`
`stage. (