UNITED STATES PATENT AND TRADEMARK OFFICE
`___________________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
`
`Regarding U.S. Patent No. 8,657,009
`___________________
`
`BAKER HUGHES INCORPORATED and
`BAKER HUGHES OILFIELD OPERATIONS, INC.,
`Petitioners
`
`Vs.
`
`PACKERS PLUS ENERGY SERVICES INC.,
`Patent Owner
`
`___________________
`
`EXPERT REPORT OF HAROLD E. McGOWEN III, PE
`Prepared on Behalf of Patent Owner
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`Mail Stop “PATENT BOARD”
`Patent Trial and Appeal Board
`U.S. Patent and Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-14
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`Table of Contents
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`Summary of Oil and Gas Experience ....................................................................................................... 1
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`Compensation ......................................................................................................................................... 3
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`Scope of Work ......................................................................................................................................... 3
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`4 Understanding of the law ....................................................................................................................... 3
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`4.1
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`4.2
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`4.3
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`4.4
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`Person of Ordinary Skill in The Art (“POSITA”) ............................................................................... 4
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`Anticipation ..................................................................................................................................... 4
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`Obviousness .................................................................................................................................... 4
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`Priority Date .................................................................................................................................... 6
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`Background of the ’009 and ’451 patents .............................................................................................. 7
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`Perspective of Person of Ordinary Skill in the Art .................................................................................. 9
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`6.1
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`6.2
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`6.3
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`6.4
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`POSITA Background and Methodology ......................................................................................... 10
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`POSITA and Risk Analysis .............................................................................................................. 10
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`POSITA and Reliability Analysis ..................................................................................................... 10
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`POSITA and Engineering Economic Analysis ................................................................................. 11
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`Priority date analysis ............................................................................................................................. 12
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`Analysis of Petitioners’ Echols and Thomson Theory ........................................................................... 12
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`Conclusion ............................................................................................................................................. 13
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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.
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`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.
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`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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`In 2003, I started the process of building a one man consulting business into an oil and gas exploration and
`production company called Navidad Resources, Inc. (“NRI”). I was the founder, CEO and Chief Engineer of
`NRI. From 2003 until 2007, NRI took on shareholders, hired employees, and acted as a both a consulting
`engineering/operations management firm and a joint interest exploration partner with Neumin Production
`Company (Neumin). At NRI I lead a multi-disciplinary technical team that built considerable shareholder
`value through drilling, completing, and hydraulic stage fracturing of numerous natural gas wells in East
`Texas. In 2007, NRI and EnCap Investments, L.P. (“EnCap”) formed a new special purpose vehicle named
`Navidad Resources, LLC (“NRL”) designed to build and sell within three to seven years. EnCap Investments,
`LP, is one of the largest energy focused Private Equity firms in the world. At the time NRL was sponsored,
`EnCap had billions of dollars under management and 55 oil and gas companies in their portfolio.
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`As President, CEO and Chief Engineer of NRL from 2007 until October 2013 I was directly responsible for
`the planning and execution of numerous operations that resulted in the economic production of oil and
`gas. NRL was formed by combining the oil and gas properties and prospects from NRI with an initial $50MM
`capital commitment from EnCap. NRL discovered a new hydraulic stage fracturing technology driven oil
`play we named the Buda-Rose in Houston and Madison Counties, Texas. NRL et al formed a 50/50
`partnership with another operator to develop the play. At NRL, I oversaw creation of a large, mostly
`contiguous, producing property with over 200 identified drilling locations. In mid-2013, Navidad et al
`controlled more than 100,000 gross acres and gross production of over 5,500 barrels of oil equivalent per
`day from about 50 wells with an estimated gross market value of about $525MM.
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`At NRL we performed the first slick-water stage fracs in the Buda, Georgetown, Edwards, and Glen Rose
`formations in the Ft. Trinidad field. We were the first operator to vertically stage frac (hydraulically
`fracture) and commingle the nine producing intervals over a 1,400’ vertical interval that comprise what is
`now known as the Buda-Rose play. We were also the first operator to horizontally drill and hydraulically
`stage fracture the Buda in the Ft. Trinidad field in Houston and Madison County. I dedicated many years
`to researching the application of hydraulic fracturing in low-permeability naturally fractured carbonate
`reservoirs. As Chief Engineer at Navidad I leveraged this research to personally develop the vertical and
`horizontal slick-water stage fracturing technique that unlocked the value of these overlooked formations
`in Houston and Madison Counties, Texas. These were reservoirs that either had never been hydraulically
`fractured in the area or had been unsuccessfully hydraulically fractured using conventional bi-wing fracture
`theory and viscous cross-linked gel fracturing fluids. As per our business plan, NRL sold its assets for a profit
`in 2013 and ceased operations.
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`I led the effort that resulted in the Buda-Rose play, which grew to cover an estimated 300,000 gross acres
`as numerous new operators came into the area and surrounded our position. In 2013 I was selected by
`the Texas Independent Producers and Royalty Owners Association as one of the top 15 CEOs of a medium
`sized exploration and production company. In 2012 Navidad was honored by the Aggie100 program at
`Texas A&M as the fastest growing Texas A&M University graduate run company. In 2013 Aggie100 honored
`Navidad as the 4th fastest growing Aggie run company and in 2014 NRI was honored as the 3rd fastest
`growing Aggie run company.
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`Since 2013, through Navidad Energy Partners, LLC and Navidad Energy Advisors, LLC, I have been pursuing
`various business opportunities and providing management and engineering services. Over the past three
`years I have provided expert witness services on numerous cases related to oil and gas operations,
`intellectual property, and oil and gas related patents.
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`2 COMPENSATION
`
`I was retained by the attorneys representing the patent owner to provide my expert opinion related to
`these matters. I am currently billing counsel for the patent owner 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.
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`3 SCOPE OF WORK
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`I have been engaged by counsel for the exclusive licensee of U.S. Patent No. 8,657,009 and U.S. Patent No.
`9,074451 (hereinafter referred to as the “’009 Patent” or the “’009 Patent/Invention”) to provide
`engineering consulting, and expert witness services as required. I have been asked to review Baker-Hughes
`challenges to the ’009 Patent and respond.
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`4 UNDERSTANDING OF THE LAW
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`I am not an attorney. My understanding of the law is based on information provided by counsel for the
`patent owner. I have been advised by counsel for the patent owner of the following general principles of
`patent law to be used in formulating my opinions presented in this Declaration.
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`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.
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`4.1 PERSON OF ORDINARY SKILL IN THE ART (“POSITA”)
`I understand that in determining whether a patent claim is valid the claim must be evaluated from the
`perspective of a person of ordinary skill in the art at the time of the purported invention. I understand that
`this proceeding is an inter partes review and that an inter partes review is a trial proceeding conducted at
`the Board to review the patentability of one or more claims in a patent. I understand that in the context
`of an inter partes review proceeding, claim terms are given their broadest reasonable interpretation in
`view of the specification and file history. I also understand that in a district court litigation, claim terms are
`given their plain and ordinary meaning in view of the specification and file history. For purposes of this
`proceeding I have applied the broadest reasonable interpretation standard.
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`4.2 ANTICIPATION
`I understand that a claim is anticipated under 35 U.S.C. § 102 when a single prior art reference discloses,
`expressly or inherently, every limitation of the claimed invention as arranged in the claim. Information is
`expressly disclosed if it is actually disclosed in a reference as would be understood by a person of ordinary
`skill in the art. Information is inherently disclosed in a reference if it is necessarily present in the subject
`matter disclosed and would be understood to be so by those of ordinary skill in the art. I understand that
`the fact that a certain result or characteristic may occur or might be present in the prior art is not sufficient
`to establish the inherency of that result or characteristic.
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`4.3 OBVIOUSNESS
`I understand that a claim would have been obvious under 35 U.S.C. § 103 if one or more prior art references
`in combination with the knowledge of one of ordinary skill in the art disclose, expressly or inherently, every
`claim limitation so as to render the claim, as a whole, obvious to a person of ordinary skill in the art at the
`time the purported invention was made. The relevant standard for obviousness is as follows:
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`A patent may not be obtained, though the invention is not identically disclosed or described as set forth in
`section 102 of this title, if the differences between the subject matter sought to be patented and the prior
`art are such that the subject matter as a whole would have been obvious at the time the invention was
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`made to a person having ordinary skill in the art to which said subject matter pertains. Patentability shall
`not be negatived by the manner in which the invention was made. (35 U.S.C. § 103)
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`In determining whether or not a patented invention would have been obvious, the following factors must
`be considered: (a) the scope and content of the prior art; (b) the differences between the prior art and the
`claims at issue; (c) the level of ordinary skill in the art; and (d) objective evidence of non-obviousness.
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`I understand that that the existence of each and every element of the claimed invention in the prior art
`does not necessarily prove obviousness. Most, if not all, inventions rely on building blocks of prior art. In
`evaluating whether a claim is obvious, I have considered whether there was a reason that would have
`prompted a person having ordinary skill in the art to combine the known elements in a way the claimed
`invention does, taking into account such factors as (1) whether the claimed invention was merely the
`predictable result of using prior art elements according to their known function(s); (2) whether the claimed
`invention provides an obvious solution to a known problem in the relevant field; (3) whether the prior art
`teaches or suggests the desirability of combining elements claimed in the invention; (4) whether the prior
`art teaches away from combining elements in the claimed invention; (5) whether it would have been
`obvious to try the combinations of elements, such as when there is a design need or market pressure to
`solve a problem and there are a finite number of identified, predictable solutions; and (6) whether the
`change resulted more from design incentives or other market forces. I understand that for a claimed
`invention to be obvious, the prior art must provide a reasonable expectation of success.
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`I also understand that when the prior art “teaches away” from combining prior art references or certain
`known elements, discovery of a successful means of combining them is more likely to be non-obvious. A
`prior art reference may be said to “teach away” from a patent when a person of ordinary skill, upon reading
`the reference, would be discouraged from following the path set out in the patent or would be led in a
`direction divergent from the path that was taken by the patent. Additionally, a prior art reference may
`“teach away” from a claimed invention when substituting an element within that prior art reference for a
`claim element would render the claimed invention inoperable.
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`I also understand that it is not permissible to use hindsight in assessing whether a claimed invention is
`obvious. Rather, I understand that, to assess obviousness, you must place yourself in the shoes of a person
`having ordinary skill in the relevant field of technology at the time the inventions were made who is trying
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`to address the issues or solve the problems faced by the inventor and ignore the knowledge you currently
`now have of the inventions.
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`I understand that certain “objective evidence” (also known as “secondary considerations”) may be relevant
`in determining whether or not an invention would have been obvious. This evidence may be particularly
`important to avoid relying on hindsight. This evidence includes: (1) Whether the invention was
`commercially successful as a result of the merits of the claimed invention (there must be a nexus between
`the commercial success and the claimed invention); (2) Whether the invention satisfied a long-felt need;
`(3) Whether others had tried and failed to make the invention; (4) Whether others invented the invention
`at roughly the same time; (5) Whether others copied the invention; (6) Whether there were changes or
`related technologies or market needs contemporaneous with the invention; (7) Whether the invention
`achieved unexpected results; (8) Whether others in the field praised the invention; (9) Whether persons
`having ordinary skill in the art of the invention expressed surprise or disbelief regarding the invention; (10)
`Whether others sought or obtained rights to the patent from the patent holder; and (11) Whether the
`inventor proceeded contrary to accepted wisdom in the field.
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`4.4 PRIORITY DATE
`I understand that in assessing whether or not a document is deemed prior art to a patent claim, one must
`determine the priority date of the claim. A claim may be entitled to a priority date earlier than the filing
`date of a patent if the inventors provided a written description of the claim in an earlier application.
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`The purpose of the “written description” requirement is to “convey with reasonable clarity to those skilled
`in the art that, as of the filing date sought, he or she was in possession of the invention.” In assessing this
`requirement, one must consider “the existing knowledge in the particular field, the extent and content of
`the prior art, the maturity of the science or technology, [and] the predictability of the aspect at issue.”
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`I also understand that a claim may cover more than one “species.” An earlier application supports a genus
`claim if it discloses species that are “representative of the full variety or scope of the genus.” A specification
`discloses a “representative number” of species if “one of skill in the art would recognize that the applicant
`was in possession of the necessary common attributes or features possessed by the members of the genus
`in view of the species disclosed.” a specification fails to disclose representative species if “ordinary artisans
`could not predict the operability in the invention of any species other than the one disclosed.”
`Alternatively, a specification may support a claim where there is “a reasonable structure-function
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`correlation.” Such a correlation may be established “by the inventor as described in the specification,” or
`they may be “known in the art at the time of the filing date.” I also understand that a claim that omits an
`element that is an essential or critical feature of the invention lacks adequate written description.
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`The ’009 patent provides a technique for pumping stimulation fluid throughout a section of a wellbore. It
`also provides a way to customize stimulation treatments based on the specific characteristics of a
`formation. Prior to this invention, operators could lower a pre-perforated liner into a wellbore and then
`pump fluid into the liner to stimulate the sections of the wellbore adjacent to the perforations. ’009 patent
`at 2:10-18.
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`5 BACKGROUND OF THE ’009 AND ’451 PATENTS1
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`The patented technology is depicted in figure 7, which shows a tubing string divided into multiple zones.
`This tubing string is run down hole with the ports in all of the zones closed. Id. at 10:48-57. Once the tubing
`string is set in place, the stimulation operation can begin. As shown in Figure 7a, a first plug is pumped
`downhole until it reaches zone 316d. This plug passes through the upper zones without opening any ports.
`Once it reaches zone 316d, it opens all the ports in that zone allowing stimulation fluid to enter the
`formation adjacent to those ports:
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`1 Citations throughout this declaration are to the ’009 patent.
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`After that zone is stimulated, the operator may drop a larger plug to open the port in zone 16c. This plug
`also prevents fluid from flowing through the tubing string into zone 316d. This ensures that the stimulation
`fluid is only applied in zone 16c as shown in figure 7b:
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`The patent provides several examples of plug and port closure mechanisms that can be used to practice
`the invention. For example, it depicts a ball and cutter sleeve that can be used to shear port caps as shown
`in figure 5:
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`It also depicts a dart-shaped plug and locking dog sleeve that can be used to open port closing sleeves:
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`It also describes a plug that seats in a ball seat of a pressure shifted sleeve that is already adjacent a port.
`’009 patent at 11:15-21. However, the specification makes clear that these embodiments are just examples
`of port opening mechanisms. See ’009 patent at 8:61-63 (“The sleeves 222a and 222b can be formed in
`various ways to cooperate with ports 217 to open those ports as they pass through the tubing string.”).
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`6 PERSPECTIVE OF PERSON OF ORDINARY SKILL IN THE ART
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`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.
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`Dr. Daneshy has opined that a person of ordinary skill in the art 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.
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`6.1 POSITA BACKGROUND AND METHODOLOGY
`A POSITA would have some training and experience consistent with that of a Completion or Sub-surface
`Engineer. Well Completion or Sub-Surface Engineering is system engineering that is a combination of
`drilling engineering, reservoir engineering and production engineering. Completion Engineers must also
`be familiar with the characteristics of petroleum reservoirs including but not limited to basic petroleum
`geology and the fluid flow characteristics of oil and gas reservoirs. On a practical basis, Completion
`Engineers must be familiar with well design, well cementing, downhole completion equipment, completion
`procedures, perforating, and reservoir stimulation (including hydraulic fracturing).
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`I have approached my analysis from the viewpoint of the POSITA at the time. The completion engineer of
`ordinary skill in the art (POSITA) would start with the characteristics of the reservoir and then design a
`“completion” with the objective of safely and economically maximizing production while preserving the
`reservoir in order to obtain maximum economic recovery of hydrocarbons over the life of the well. The
`POSITA would consider many different well configurations, reservoir types, stimulation methods,
`downhole operations, and other factors.
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`6.2 POSITA AND RISK ANALYSIS
`A POSITA, and any team advising the POSITA, would realize that technical personnel in the upstream oil
`and gas industry must simultaneously consider economic, technical, mechanical, safety, and environmental
`risk. A POSITA would be keenly aware of risks faced by an oil and gas operator and any service company
`providing completion equipment to an oil and gas operator. POSITA would realize that minimizing costs
`often maximizes risk, which has the potential to result in a massive and unacceptable increase in cost. A
`POSITA in the art is a person of ordinary innovativeness with a normal tolerance for risk. A POSITA would
`be relatively risk averse and would tend to rely upon industry standards, conventional wisdom, and proven
`practices as part of his/her design process.
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`6.3 POSITA AND RELIABILITY ANALYSIS
`When considering a particular completion design or idea, the POSITA would necessarily consider the
`reliability of a design or idea, taking particular care to evaluate the mechanical and resulting economic risk
`of each element of the design. Therefore, when reviewing the Prior Art references a POSITA would not
`only consider the potential benefits of a new design/idea, but also the potential risk factors that could
`negatively affect reliability. Prior art that suggests numerous risk factors and conveys negative reliability
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`data would tend to dissuade a POSITA from considering a design element or idea as viable, which in turn
`would cause them to reject risky design elements and ideas early in the design process. The safest and
`most likely path for the POSITA is to avoid considering ideas that deviate from industry norms. The bias of
`the POSITA is to avoid elements that might reduce reliability (increase the rate of failure). Singular
`examples of unusual projects where various elements of a possible design are used independently of one
`another, in combinations and situations that are not analogous to the environment at hand, provides no
`positive data to the POSITA in terms of reliability analysis. However, examples where individual design
`elements have failed in various ways contributes to the POSITAs skepticism about those design elements.
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`6.4 POSITA AND ENGINEERING ECONOMIC ANALYSIS
`When considering a completion design a POSITA must necessarily take into account economic realities and
`act in a rational manner. The same is true for a POSITA reviewing prior art. The utility, efficiency, efficacy,
`reliability, risks, and rewards of various design elements would be considered by a POSITA when reviewing
`prior art. Experimental work done that reveals design elements that resulted in an economic failure or
`even marginal economics would discourage a POSITA incorporating those design elements into a
`completion design.
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`7 PRIORITY DATE ANALYSIS
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`The claims at issue in this proceeding cover tubing strings with one or more port sleeve closures that can
`be actuated by a plug and that allow the plug to pass downhole after being actuated. In my opinion, the
`inventors were in possession of this invention as of August 19, 2003, when they filed the application that
`became U.S. Patent No. 7,108,067.
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`A POSITA would recognize that various design changes could be made to the embodiments described in
`the patent by applying predictable engineering principles. For example, a POSITA would recognize that the
`shifting sleeve of figure 6 could be mounted in the first sleeve closure rather than above it. A POSITA would
`also understand that locking dogs could be replaced by other components that provide the same function
`of providing compressive spring force such as C-rings. Or instead of mounting locking dogs on the outside
`of a sleeve, it would be a straightforward task to mount them on the inside of a sleeve to catch a drop ball.
`Drop balls, ball seats, locking dogs, and C-rings are all simple mechanisms well understood by a POSITA,
`and a POSITA would understand that balls and seats come in a variety of shapes and sizes.
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`8 ANALYSIS OF PETITIONERS’ ECHOLS AND THOMSON THEORY
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`Petitioners have proposed that it would have been obvious for a POSITA to combine Thomson and Echols
`as shown below:
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`A POSITA would do no such thing. Thomson describes fracturing through perforations in cemented casing.
`Thus, regardless of the number of sleeves placed in a zone, all of the fluid injected through those sleeves
`can only reach the formation through the perforations in the casing.
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`It would be immediately clear to a POSITA the use of multiple Echols sleeves in a Thomson zone would not
`provide additional injection points into the formation. The only injection points into the casing are through
`perforations. If a POSITA wanted to modify Thomson to add additional injection points, he or she could
`add additional perforations in the casing, but there would be no reason to add additional sliding sleeves in
`a particular zone.
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`The Echols/Thompson treatment method described by Dr. Daneshy provides no additional utility or
`stimulation efficacy, however, it does add significant complexity. A design comprised of key elements that
`increase complexity, and as a result risk, but provides no significant benefits, would not teach, suggest, or
`motivate a POSITA to adopt those design elements in the fashion suggested