`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`___________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
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`
`
`BAKER HUGHES INCORPORATED and
`BAKER HUGHES OILFIELD OPERATIONS, INC.,
`Petitioners
`
`v.
`
`PACKERS PLUS ENERGY SERVICES INC.,
`Patent Owner
`
`___________________
`
`Case IPR2016-01380 (Patent 9,303,501)
`Case IPR2016-01496 (Patent 7,134,505)
`Case IPR2016-01505 (Patent 7,543,634)
`Case IPR2016-01506 (Patent 7,861,774)
`___________________
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`Harold McGowen Declaration
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`Supplemental Expert Report of Harold E. McGowen III, PE
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`TABLE OF CONTENTS
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`2
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`3
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`4
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`Summary of Oil and Gas Experience ....................................................................................................... 1
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`Compensation ......................................................................................................................................... 2
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`Scope of Work ......................................................................................................................................... 2
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`Summary of Conclusions ......................................................................................................................... 2
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`5 Understanding of Patent Law ................................................................................................................. 3
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`6 Materials Reviewed ................................................................................................................................ 3
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`7
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`8
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`Person of Ordinary Skill in the Art (“POSITA”) ........................................................................................ 4
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`Baker Hughes’s Lane-Wells Theories Are Mistaken................................................................................ 4
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`8.1
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`8.2
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`8.3
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`Analysis of Lane-Wells. ................................................................................................................... 4
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`Analysis of Ellsworth ....................................................................................................................... 7
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`A POSITA Would Understand that Acidizing is Not Fracturing ....................................................... 8
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`9 Weatherford’s Yost Theories Are Mistaken. ......................................................................................... 11
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`9.1
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`9.2
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`9.1
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`9.2
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`9.3
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`9.4
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`9.5
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`Yost Would not Motivate a POSITA to Adopt these Design Elements ......................................... 11
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`Overview of Yost Completion ....................................................................................................... 12
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`Purpose of the Yost Experiment ................................................................................................... 12
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`Yost Economic Results Would Not Be Compelling to a POSITA .................................................... 13
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`An Experimental Apparatus Versus a Real-World Design ............................................................. 13
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`Yost Horizontal Borehole Length Not Analogous ......................................................................... 14
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`Yost Treating Pressures Are Not Representative Of Real-World Applications ............................. 14
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`9.5.1
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`Pore Pressure ........................................................................................................................ 14
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`9.5.2
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`Natural Fractures .................................................................................................................. 15
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`9.5.3
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`Yost Fracture Gradient .......................................................................................................... 15
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`9.5.4
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`Yost Differential Pressure Rating Requirements too Low..................................................... 16
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`Failure to Achieve Effective Pressure Isolation Between Horizontal Segments Teaches Away
`9.5.5
`from the ‘774 Invention ........................................................................................................................ 16
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`Subsequent DOE Experiments would have motivated the POSITA to adopt Plug and Perf
`9.5.6
`versus OHMSHF .................................................................................................................................... 18
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`10
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`11
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`Additional prior art that teaches away from the 774 Invention ....................................................... 20
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`Additional Objective Evidence of Non-Obviousness......................................................................... 22
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`11.1 Weatherford’s ZoneSelect System................................................................................................ 22
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`11.2 Baker Hughes’s Commercial Success with FracPoint .................................................................... 22
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`12
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`References ........................................................................................................................................ 29
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`Supplemental Expert Report of Harold E. McGowen III, PE
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`05/31/2016
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`Expert Report of Harold E. McGowen III, PE
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`My name is Harold E. McGowen, III. I have been a Registered Professional Engineer licensed in Texas since
`1989. By my education and experience, reflected in my CV, I am qualified to render the opinions delivered
`in this report. I have been retained by the Patent Owner in this matter.
`
`The opinions provided herein are based upon the information reviewed by me at the time of the writing of
`this report. Unless stated otherwise, the opinions contained in this report are based on a reasonable
`degree of engineering probability. If I review, receive or discover new and pertinent information related
`to the matter at hand I may augment, adjust, or change my opinions and request to file a supplemental
`expert report.
`
`This report supplements that certain “Expert Report of Harold E. McGowen III, PE” dated 12/02/2016,
`hereinafter referred to as (McGowen, 2016).
`
`1 SUMMARY OF OIL AND GAS EXPERIENCE
`I have been employed in the oil and gas industry since 1983 as a Petroleum Engineer, manager, and
`executive. I am a Registered Professional Engineer in the State of Texas and I received a B.S. in Mechanical
`Engineering from Texas A&M University in 1982. I was initially cross-trained as a Petroleum Engineer over
`a four-year period at Union Pacific Resources Company and I have continued my education through self-
`study and various industry schools ever since. I am a Registered Professional Engineer in the State of Texas
`with decades of experience as a Petroleum Engineer having personally designed numerous hydraulic
`fracturing treatments and/or directed the drilling, completion and operation of numerous wells.
`
`I have considerable experience with downhole tools having started my career in the engineering
`department at an oil tool/service company and subsequently having analyzed the inner workings of
`numerous pieces of equipment over the years. I have also worked on several multi-million dollar patent
`cases as an expert witness or engineering consultant. Over the past 33 years, I have studied and gained
`considerable experience in various technologies, procedures, processes, and methods related to
`stimulation of oil and gas wells, including but not limited to acidizing and hydraulic fracturing. I have
`recently applied my training and experience to various horizontal drilling and horizontal stage fracturing
`projects where I was the engineer responsible for the completion design, economic evaluation, and
`execution; therefore, I have current knowledge concerning matters relevant to this case.
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`Supplemental Expert Report of Harold E. McGowen III, PE
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`For more information on my qualifications, see McGowen, 2016 at pages 1-3.
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`2 COMPENSATION
`I was retained by the attorneys representing the Respondent to provide my expert opinion related to these
`matters. I am currently billing counsel for the Respondent at an hourly rate of $350 per hour for my efforts
`on this project. I am also being reimbursed for reasonable expenses I incur in relation to my work on this
`proceeding. I will be compensated regardless of the outcome in the preceding.
`
`3 SCOPE OF WORK
`I have been engaged by counsel to provide engineering consulting, and expert witness services. I have
`been asked to review the 774, 505, 634, and 501 Patents and the challenges to said patents and document
`my opinions from the perspective of a person of ordinary skill in the art (hereinafter “POSITA”) as defined
`herein, having a knowledge of the pertinent art, as of November 19, 2001 (hereinafter referred to as “as
`of 2001” or “circa 2001”). This declaration supplements my previous declaration addressing these patents.
`
`4 SUMMARY OF CONCLUSIONS
`It is my opinion that the Baker Hughes has failed to prove obviousness. Neither Lane Wells nor Ellsworth
`describe fracturing through open-hole segments, which is a critical characteristic of the 774 claims. Prior
`art and convention teaches away from the 774 Patent/Invention. Lane-Wells does not provide the POSITA
`with enough information to evaluate the general concept presented, would have been interpreted by a
`POSITA as an application for inflatable packers, and teaches away from the use of SBPs in an open-hole.
`Thus, a POSITA would not have been motivated to combine the sliding sleeve components depicted in Lane-
`Wells with the SBPs in Ellsworth in an open-hole portion of a well. Moreover, the POSITA would certainly
`not have been motivated to combine Lane-wells and Ellsworth in a Hydraulic Fracturing application when
`the end result could not have been known.
`
`Similarly, it is my opinion that the Weatherford has failed to prove obviousness. Weatherford fails to show
`that a POSITA would have a reasonable expectation of success in using Yost or some modified version of
`Yost, or that a POSITA would attempt to modify Yost as Weatherford proposes. Yost describes scientific
`experiments, not the results of a commercially viable fracturing operation. And those experiments would
`lead a POSITA to believe that attempting to fracture through multiple open hole segments will fail to create
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`fractures as planned, and may even fail to create any fractures at all. Yost would actually compel a POSITA
`to stick with the conventional wisdom and employ cemented casing to control the location of fracture
`initiation points through perforations.
`
`For the reasons stated in my original declaration (and below with regard to my discussion of Ellsworth and
`acidizing), Weatherford has also failed to show that the proposed combination of Thomson and Ellsworth
`renders the claims obvious. Weatherford emphasizes some different parts of the references, but, like
`Baker Hughes, it fails to show that a POSITA would modify Thomson to remove the casing from that system
`to practice the claimed invention.
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`In addition to the foregoing, I have considered the substantial body of objective evidence of non-
`obviousness and the prior art, and I conclude that none of the 774 Patent claims would have been obvious
`to a person of ordinary skill in the art at the time of the invention (see McGowen, 2016, Section 14).1
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`5 UNDERSTANDING OF PATENT LAW
`I am not an attorney. My understanding of the law is based on information provided by counsel.
`
`I understand that the Petitioners bear the burden of proof in this proceeding such that they must show
`that a claim is un-patentable by a preponderance of the evidence. I understand the preponderance of the
`evidence to require a slight advantage in weight of evidence in favor of the challenger. For more
`information on my understanding of patent law, see McGowen, 2016, Section 4, starting on page 4.
`
`6 MATERIALS REVIEWED
`I have reviewed Baker-Hughes’ and Weatherford’s Petitions for Inter Partes Review and the exhibits
`attached thereto in addition to any other materials cited herein. In forming my opinions, I have relied on
`various technical articles and documents. Before citing or discussing a document, I have considered
`whether the document is a reliable authority on the subject, I have cited it for. I have limited my opinions
`to rely only on reliable evidence.
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`1 To the extent Petitioners assert that the same art directed to the ’774 patent also renders obvious the open hole
`claims of the ’505 and ’634 patent because they would motivate a POSITA to perform open hole multi-stage fracturing,
`my opinions expressed herein apply to those claims as well.
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`7 PERSON OF ORDINARY SKILL IN THE ART (“POSITA”)
`I understand that the meaning of claim terms and a patents’ validity is to be determined from the vantage
`point of one of ordinary skill in the art at the time of the invention. In determining who would be one of
`such ordinary skill, I understand it is appropriate to consider criteria such as: (a) the type of problems
`encountered in the art; (b) prior art solutions to those problems; (c) the rapidity with which innovations
`are made; (d) the sophistication of the technology; and (e) the education level of active workers in the field.
`In my opinion, the field relevant to the claimed technology is oil and gas well completions technology,
`particularly in the context of hydraulic fracturing (see McGowen, 2016 – Section 8).
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`Dr. Daneshy has opined that a person of ordinary skill in the art as of November 19, 2001 is a person who
`earned a bachelor of science degree in mechanical, petroleum, or chemical engineering, or similar degree
`and had at least two to three years of experience with downhole completion technologies related to
`fracturing. I do not disagree with this general statement, but I do disagree that a POSITA would reach the
`conclusions promoted in Dr. Daneshy’s testimony. Moreover, Dr. Daneshy’s analysis of this subject is
`inadequate (see McGowen, 2016 – Section 8).
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`Dr. Rao has offered a similar opinion except that he characterizes the relevant field as “well drilling and
`completion operations” and he omits an explicit reference to fracturing. While Dr. Rao may believe that
`this is appropriate given his apparent familiarity with drilling technologies and his lack of familiarity with
`fracturing technologies, I do not believe that this is appropriate reason to diverge from the explanation
`provided by Dr. Daneshy and myself.
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`8 BAKER HUGHES’S LANE-WELLS THEORIES ARE MISTAKEN
`
`8.1 ANALYSIS OF LANE-WELLS.
`Baker-Hughes goes to great lengths, through a series of speculations, to fill in the blanks in favor of their
`argument as to what a POSITA would have understood based on the scant information provided by Exhibit
`1002 (Lane-Wells). The actual verbiage in the catalog is as follows:
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`Baker-Hughes has conjured up a “Lane-Wells System” out of these two sentences from an obscure
`reference published in 1955. Baker-Hughes argument as to the impact that Exhibit 1002 (Lane-Wells)
`would have had on a POSITA circa 2001 is inconsistent with the way a POSITA would interpret the prior art
`and relies on hindsight, speculation, oversimplification, distortions, and cherry picking of facts.
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`Lane-Wells only makes the claim that “Three-Zone Acidizing” is possible using the suggested configuration.
`Lane-Wells does not provide the POSITA with any evidence that the three-zone acidizing procedure, which
`is only briefly mentioned, would actually work or that it was ever implemented. A POSITA would interpret
`this to mean that matrix acidizing multiple zones in an open-hole with sliding sleeves and packers in a
`vertical hole with some type of packer was conceivable, but more than likely experimental and risky.
`
`Lane-Wells Formation Packers are apparently similar to what we would call External Casing Packers today;
`see Exhibit 1002 (Lane-Wells) at 2853. The Lane-Wells Series 3 “Formation Packer” was apparently
`specifically designed for “low fluid head” situations, which equates to a low-pressure differential situation.
`Lane-Wells Series 4 Formation Packers were specifically designed “to obtain a positive pack-off between
`open hole and tubing or drill pipe in fluid laden wells”. Lane-Wells indicates that these Formation Packers
`are to be used for:
`
`Improving Natural Flow Efficiency
`1.
`Improving Gas-Oil Ratios
`2.
`Packing-off Water
`3.
`Protecting Casing
`4.
`Testing Formation Content, Single Zone
`5.
`Acidizing, Single Zone [emphasis added by author]
`6.
`Inducing Tubing Flow with Side Door Chokes, Tubing Perforations or Gas Lift Valves
`7.
`Improving Volumetric Efficiency of Plunger Pumps, Separating Zones, Reducing Heading, etc., in
`8.
` Pumping Wells
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`Fracturing is specifically excluded from this list and the applications listed do not involve the magnitude of
`pressure differentials and stresses experienced by packers deployed in a hydraulic fracturing environment.
`A POSITA would be left to assume that these Lane-Wells Formation Packers were not appropriate for multi-
`zone acidizing and/or fracturing. In summary, Lane-Wells does not recommend the use of their own SBPs
`for fracturing or for multi-zone acidizing in an open-hole environment.
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`In fact, Exhibit 1002 (Lane-Wells) at 2853, teaches a POSITA that packer isolation during hydraulic fracturing
`requires setting the packer inside casing. The packer that Lane-Wells recommends for “fracturing
`operations” is the TOP (Tension Operated Packer), which can be used in conjunction with the Hydraulic
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`Hold-Down Tool. The Hydraulic Hold-Down Tool option brings the pressure differential rating up to 6,000
`PSI, which is more in line with the type of differential pressure rating required for isolation during hydraulic
`fracturing circa 2001. Both the TOP and the Hydraulic Hold Down Tool are specifically designed for use
`inside casing as their pressure rating and performance depend upon affixing the packer to the casing wall
`using slips and/or pistons that contact the casing wall. Note that Lane-Wells identifies specific equipment
`for “acidizing” and other equipment for “fracturing.”
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`Exhibit 1002 (Lane-Wells) does not specifically teach the POSITA with what type of packer should or could
`be used in an open-hole in a possible three-zone acidizing procedure. This omission in and of itself would,
`more likely than not, cause the POSITA to not rely on Lane-Wells as the reference does not provide enough
`information for a POSITA to make an evaluation of the suggestion.
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`If the POSITA considered the Lane-Wells text at all, the POSITA would rely upon the conventions present at
`the time the information was published (circa 1955) to determine what type of packer the authors were
`thinking of using in the suggested application. Baker-Hughes own exhibits illustrates prior art that would
`cause a POSITA to assume that Exhibit 1002 (Lane-Wells) refers to the use of inflatable packers not SBPs
`and in fact these references teach away from the use of SBPs in an open hole. See, e.g., Ex. 1009 at 1:43-
`44 (“Inflatable packers are preferred for use in sealing an uncased well bore.”); Ex. 1017 at 912 (discussing
`the use of external casing packers (ECPs), which are inflatable packers, in an open hole under “ECP AND
`SLIDING SLEEVES, IN OPEN HOLE”).2
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`Exhibit 1002 (Lane-Wells) makes reference to a multi-packer system that could possibly be used in an open
`hole for acidizing in a vertical well, not a horizontal well. The Lane-Wells reference pre-dates bent-sub
`motors, measurement while drilling, and a host of other horizontal drilling technologies that affect the
`environment in which a horizontal completion system is run. Therefore, when Exhibit 1002 (Lane-Wells)
`at 2854 (circa 1955) refers to “three zone acidizing” it must refer to acidizing three different producing
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`2 Coon also teaches away from Petitioners’ interpretation as follows: “The next evolutionary step of the
`ECP and sliding sleeve completion is the addition of a cased and cemented hole. (Fig. 2) This is required
`where zonal isolation is necessary. The cement prevents the formation from leaking around the ECPs .”
`Ex. 1017 at 13.
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`horizons in a vertical well drilled with the typical vertical well drilling assembly of the day. This
`documentation is not referring to acidizing in a horizontal well of the type drilled in 2001. Moreover, a
`POSITA would know that the term “Acidizing” in the context of this 1955 reference does not equate to
`“Fracturing”. Therefore, Exhibit 1002 (Lane-Wells) does not provide the POSITA with any information
`regarding the reliability, risk level, or efficacy of running such an equipment configuration in a horizontal
`well for a very different application, in a much more challenging environment, with much higher-pressure
`requirements, such as pumping fracturing fluid into an open-hole annular segment to fracture a formation,
`as in the 774 Patent/Invention.
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`8.2 ANALYSIS OF ELLSWORTH
`Ellsworth does not teach pumping fracturing fluid into an open-hole annular segment to fracture a
`formation, a key element of the 774 Patent/Invention. The purpose of the Ellsworth completion design
`was to establish long-term isolation between zones along a horizontal drain-hole in order to maximize the
`production of un-swept oil (oil that the injection front bypassed) without excessive gas or water
`breakthrough (see McGowen, 2016 at Section 12).
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`Ellsworth does not teach, suggest, or motivate the POSITA to use the design elements discussed therein in
`a hydraulic fracturing application. The completion elements in Ellsworth are performing a very different
`function than the 774 Patent/Invention. Ellsworth does not provide any information that would have
`motivated a POSITA to reject the industry accepted, economically successful, rigorously tested,
`conventional method of using casing, cement, and precisely placed perforations (Plug and Perf) to control
`initiation of a frac. Therefore, Ellsworth would not induce a POSITA to consider going against conventional
`wisdom and perform hydraulic fracturing on multiple open-hole segments such that the fluid initiates
`fractures at the weak spots in the horizontal borehole wall, as is the case in the 774 Patent/Invention.
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`The information provided in Ellsworth does nothing to help the POSITA assess the risk and reliability of the
`using the design elements found in the 774 Patent/Invention in a hydraulic fracturing application because
`the open-hole conditions and pressure differentials required are far below the performance standards that
`would be required in a hydraulic fracturing application. In conclusion, Ellsworth does not teach, suggest,
`or motivate the POSITA to include the elements found in Ellsworth in a horizontal hydraulic stage fracturing
`completion design (McGowen, 2016 at Page 38, Lines 7-12).
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`8.3 A POSITA WOULD UNDERSTAND THAT ACIDIZING IS NOT FRACTURING
`A POSITA would have understood that acidizing and fracturing are not considered to be the same thing,
`even when acid is used as a fracturing fluid. Although a POSITA would know that both techniques are
`applied with the goal of increasing production, a POSITA would also know that acidizing and fracturing are
`applied to solve two radically different problems.
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`Acidizing is designed for treating rock very near the wellbore. Acidizing is typically applied to remove
`formation damage or “skin damage” caused by operations done to the wellbore throughout its life such as
`drilling, cementing, perforating, completion, workover, and production or from fines migration from the
`formation into the wellbore. Skin damage is a reduction in the permeability of the reservoir rock very near
`the wellbore that is typically caused by the invasion solids into the pore throats of the rock. Acidizing is
`used to increase the permeability within a few inches, or at most, a few feet, from the wellbore by removing
`particles blocking the pore throats in the rock and possibly by increasing the size of the pore throats.
`
`Fracturing, on the other hand, is used to overcome the low permeability that occurs naturally in reservoir
`rocks at some distance from the wellbore where the pore throats are small or clogged up by contaminants
`like clay. Hydraulic fracturing creates a “super-highway” that typically reaches very far into the very low
`permeability formation and creates a pathway for hydrocarbons trapped in the reservoir rock to move
`quickly to the wellbore.
`
`A POSITA would understand that acidizing
`normally refers to pumping acid into the wellbore
`at low rates in order to generate a bottom hole
`treating pressure that is below the formation
`fracture pressure. This operation is sometimes
`referred to as “matrix acidizing” or more
`commonly “acidizing.” Matrix acidizing works at
`the granular level by slowly forcing acid into the
`pore spaces of the rock (i.e., the matrix) to eat
`away material that is plugging or blocking the
`pore throats and/or interstitial space between the grains of the rock that make up the geologic formation
`at or near the wellbore to remove what is known as “skin damage.” Skin damage is typically caused by
`solid particles within a fluid system infiltrating the pore throats of the rock near the wellbore or fines from
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`Figure 1 - Matrix Acidizing Works at Pore Throat Level
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`within the formation accumulating in the pore throats as production from the well moves particles in the
`formation from far away from the wellbore (the “far-field”) to the area near the wellbore (the “near-field”).
`See Figure 1.
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`In sandstone formations, where the fines clogging the pore throats are comprised of silicate material, mud
`acid containing HF acid and HCl acid dissolves the silicate material. In a carbonate formation, such as
`Limestone, matrix acidizing with HCl will also dissolve the rock itself thereby increasing the size of the pore
`throats, which not only removes skin damage but also increases the near wellbore permeability. Acidizing
`an open hole is a soaking process that seeks to evenly distribute the acid along the borehole. This type of
`operation is deliberately done at very low injection rates in order to stay below fracture initiation pressure
`in order to avoid fracturing the formation.
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`If the operator exceeds the fracture gradient and fractures the formation, the acid will be forced into the
`fracture where it is quickly transferred away from the wellbore and spends on the face of the fracture. This
`would defeat the purpose of the matrix acidizing, which is to cause acid to remove reservoir damage in the
`formation near the wellbore (the “near-field”). In contrast, acid fracturing involves pumping acid to exceed
`the fracture initiation pressure of the formation. For this type of operation, the goal is to pump the acid
`far from the wellbore (the “far-field”) to create a large and permeable pathway that connects the reservoir
`with the wellbore. The character of the far-field fracture network generated and/or interconnected by
`hydraulic fracturing can be controlled by many factors, including mode of fracture initiation (see Figure 2).
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`Figure 2 – Bird’s Eye View of Hydraulic Fracturing Propagation Models
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`Baker-Hughes own exhibits make a clear distinction between acidizing and fracturing. For example, Exhibit
`1006, Page 162 Paragraph 1, lists three (3) separate and different ways to Stimulate:
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`1.
`2.
`3.
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`Explosive Fracturing
`Acid Stimulation or Acidizing (1930’s)
`Hydraulic Fracturing (1948)
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`Exhibit 1006, Page 162 Paragraph 2 states that “certain kinds of tight formations do not respond readily to
`either acidizing or hydraulic fracturing” and “currently fracturing and acidizing are the most effective well
`stimulation methods”. A POSITA would interpret this sentence to mean that one can EITHER acidize a well
`OR hydraulically fracture a well, and obviously, these are two completely different activities.
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`Exhibit 1006, Page 163, Para 4 defines and describes Fracturing Fluids. Acid is not specifically listed as a
`Fracturing Fluid in this definition. This reference would also lead a POSITA to differentiate between
`Acidizing proper and Fracturing.
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`Dr. Daneshy, Petitioners’ own expert, used the term acidizing to distinguish between stimulating with acid
`and actually pumping fluid to fracture a formation. See Ex 1002 at 202 (explaining that “well stimulation”
`“consists of both fracturing and acidizing”). In his declaration, Dr. Daneshy occasionally uses the word
`“acidizing” to distinguish from actual fracturing. Ex. 1005 at 46 (“After simulating a well (e.g., via acidizing
`or hydraulic fracturing)…”). In his deposition, Dr. Daneshy confirmed that when an author distinguishes
`between “acid stimulation” and “fracturing,” it indicates that the acid stimulation does not involve
`fracturing.
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`A POSITA would also be able to look at an application in the prior art and, based on the context,
`differentiate between acidizing and acid fracturing. For example, because Exhibit 1003 (Ellsworth) takes
`place in a highly porous and permeable formation, a POSITA would expect that the term acidizing refers
`only to matrix acidizing as the formation at hand was porous and permeable enough not to require
`fracturing. Given that Lane-Wells was published in 1955, when the vast majority of formations being
`explored were high permeability and porosity not requiring hydraulic fracturing, more likely than not, a
`POSITA would naturally assume that any mention of acidizing in Lane-Wells was referring to matrix
`acidizing, not fracturing.
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`Moreover, a POSITA in 2001 would have expected that the large volume of acid pumped at extremely high
`pressure required in Acid Fracturing could attack, dissolve, and destabilize the formation rock at an
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`interface between a packing element and the borehole wall, causing a loss of the required pressure
`isolation. A POSITA would realize that a loss of pressure isolation would c