Paper No. 39
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`WEATHERFORD INTERNATIONAL, LLC;
`WEATHERFORD/LAMB, INC.;
`WEATHERFORD US, LP; and WEATHERFORD
`ARTIFICIAL LIFT SYSTEMS, LLC
`Petitioners
`
`v.
`
`PACKERS PLUS ENERGY SERVICES, INC.,
`
`Patent Owner
`
`_
`
`Inter Partes Review No. IPR2016-01517
`Patent 7,134,505
`_
`
`PETITIONERS' REPLY
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`WEATHERFORD INTERNATIONAL, LLC;
`WEATHERFORD/LAMB, INC.;
`WEATHERFORD US, LP; and WEATHERFORD
`ARTIFICIAL LIFT SYSTEMS, LLC
`Petitioners
`
`v.
`
`PACKERS PLUS ENERGY SERVICES, INC.,
`
`Patent Owner
`
`_
`
`Inter Partes Review No. IPR2016-01517
`Patent 7,134,505
`_
`
`PETITIONERS' REPLY
`
`
`
`IPR2016-01517
`Patent 7,134,505
`
`TABLE OF AUTHORITIES
`
`Brown & Williamson Tobacco Corp. v. Philip Morris, 229 F. 3d 1120 (Fed. Cir. 2000)
`
`....................................................................................................................................23
`
`ClassCo, Inc. v. Apple, Inc., 838 F. 3d 1214 (Fed. Cir. 2016).......................................19
`
`dunnhumby USA, LLC v. emnos USA Corp., 2015 WL 1542365 (N.D. Ill. Apr. 1,
`
`2015).............................................................................................................................2
`
`Galderma Labs., L.P. v. Tolmar, Inc., 737 F.3d 731 (Fed. Cir. 2013)............................8
`
`Graham v. John Deere Co. of Kansas City, 383 US 1, 36 (1966).................................17
`
`In re Applied Materials, Inc., 692 F. 3d 1289 (Fed. Cir. 2012).....................................19
`
`KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007).....................................................5, 6
`
`Leo Pharm. Products, Ltd. v. Rea, 726 F.3d 1346 (Fed. Cir. 2013)..............................22
`
`Merck & Co. v. Teva Pharms. USA, Inc., 395 F.3d 1364 (Fed. Cir. 2005)...................23
`
`MPHJ Tech. Investments, LLC v. Ricoh Americas Corp., 847 F.3d 1363 (Fed. Cir.
`
`2017).........................................................................................................................1, 2
`
`Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299 (Fed. Cir. 2006)...............................22
`
`Power-One, Inc. v. Artesyn Technologies, Inc., 599 F. 3d 1343 (Fed. Cir. 2010) ........24
`
`Ring Plus, Inc. v. Cingular Wireless, LLC, 2007 WL 5688765 (E.D. Tex. Jul 9, 2007) 2
`
`Tokai Corp. v. Easton Enters., Inc., 632 F.3d 1358 (Fed. Cir. 2011)............................18
`
`Trustees of Columbia Univ. v. Symantec Corp., 811 F.3d 1359 (Fed. Cir. 2016)...........3
`
`Vederi, LLC v. Google, Inc., 744 F.3d 1376 (Fed. Cir. 2014).....................................2, 3
`
`ii
`
`
`
`W. Union Co. v. MoneyGram Payment Sys., Inc., 626 F.3d 1361 (Fed. Cir. 2010)......18
`
`Wyers v. Master Lock Co., 616 F.3d 1231 (Fed. Cir. 2010)..........................................18
`
`IPR2016-01517
`Patent 7,134,505
`
`iii
`
`
`
`IPR2016-01517
`Patent 7,134,505
`
`TABLE OF CONTENTS
`
`I.
`
`II.
`
`INTRODUCTION ..............................................................................................1
`
`CLAIM CONSTRUCTION................................................................................1
`
`III.
`
`THE CHALLENGED CLAIMS ARE INVALID..............................................3
`
`A. PO's Admissions Establish That It Would Have Been Obvious to Use
`
`Thomson in Open-Hole.............................................................................................3
`
`B. PO's Mischaracterizations of Yost Highlight the Weakness of Its Position
`
`7
`
`C. PO's Criticisms of Ellsworth Are Irrelevant .........................................16
`
`D. Claim 9 Also Would Have Been Obvious............................................16
`
`E. PO's Secondary Indicia Evidence Fails ................................................17
`
`1. The Secondary Consideration Arguments Are Moot ........................17
`
`2. PO's Commercial Success Evidence Fails.........................................17
`
`3. PO's Commercial Success Evidence Has No Nexus to the Claims...18
`
`4. The Alleged Commercial Success Is Due to Intervening Factors
`
`Unrelated to the Claimed Methods .....................................................................20
`
`F.
`
`PO's Conventional Wisdom and Surprising Results Arguments Fail...21
`
`G. PO's Industry Praise Arguments Fail....................................................23
`
`H. PO's Copying Argument Fails ..............................................................24
`iv
`
`
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`IPR2016-01517
`Patent 7,134,505
`
`Exhibit List
`
`Exhibit
`1001
`1002
`
`1003
`
`1004
`
`1005
`
`1006
`1007
`1008
`
`1011
`1012
`1013
`1014
`
`1015
`1016
`1017
`1018
`1019
`1020
`1021
`1022
`1023
`1024
`
`1025
`1026
`1027
`
`the Society of Petroleum
`
`Description
`U.S. Patent No. 7,134,505 ("the '505 Patent")
`A.B. Yost, II, et al. Production and Stimulation Analysis of
`Multiple Hydraulic Fracturing of a 2,000-ft Horizontal Well, SPE
`(Society for Petroleum Engineering) 19090 (1989) ("Yost")
`D.W. Thomson, et al., Design and Installation of a Cost-Effective
`Completion System for Horizontal Chalk Wells Where Multiple
`Zones Require Acid Stimulation, SPE (Society for Petroleum
`Engineering) 37482 (1997) ("Thomson")
`B. Ellsworth, et al., Production Control of Horizontal Wells in a
`Carbonate Reef Structure, 1999 Canadian Institute of Mining,
`Metallurgy,
`and
`Petroleum Horizontal Well Conference
`("Ellsworth")
`Declaration of Rebekah Stacha of
`Engineers
`Affidavit of Roberto Pellegrino
`Declaration of Vikram Rao
`Transcript of Continued Deposition of Daniel Jon Themig –
`01/08/2007
`Affidavit of Kevin Trahan
`Expert Report of Kevin Trahan
`First Supplemental Expert Report of Kevin Trahan
`Supplemental Engineering Report Prepared by Ronald A. Britton,
`P.E.
`U.S. Provisional Application No. 60/404,783
`U.S. Patent No. 3,062,291 to Brown
`U.S. Patent No. 2,738,013 to Lynes
`U.S. Patent No. 4,224,987 to Allen
`U.S. Patent No. 6,006,838 to Whiteley et al.
`Prosecution History of U.S. Patent No. 7,861,774
`Prosecution History of U.S. Patent No. 7,543,634
`Prosecution History of U.S. Patent No. 7,134,505
`Prosecution History of U.S. Patent No. 6,907,936
`U.S. Provisional Patent Application No. 60/331,491 filed on
`November 19, 2001.
`Hart Petroleum Volume 71, Number 6, June 1998
`Declaration of Christopher D. Hawkes, Ph.D., P.Geo.
`Declaration of Carrie Anderson
`v
`
`
`
`IPR2016-01517
`Patent 7,134,505
`
`Exhibit
`1028
`
`1029
`
`1030
`
`1031
`1032
`
`1033
`1034
`
`1035
`1036
`
`1037
`1038
`
`1039
`1040
`
`1041
`
`1042
`
`1043
`
`1044
`1045
`1046
`
`Description
`Weatherford's Expedited Motion to Stay Pending Inter Partes
`Review Proceedings in Civil Action No. 6:15-cv-724-RWS-KNM
`Redacted Joint Defense, Common Interest, and Confidentiality
`Agreement
`in Civil Action No. 6:15-cv-724-RWS-KNM (filed
`under seal)
`Email sent by Patent Owner's Counsel and Attachment (RC's First
`Set of RFAs to WFD)
`Copy of Default Protective Order
`Notice of Deposition in No. CV-44,964 in the 238th Judicial
`District Court of Midland County, Texas (Served, Not Filed)
`Second Declaration of Carrie Anderson (Served, Not Filed)
`Transcript of February 28, 2017 Deposition Testimony of Harold
`R. McGowen III
`Reply Declaration of Vikram Rao
`William K. Overbey, Jr., et al., Drilling, Completion, Stimulation,
`and Testing of Hardy HW#1 Well, Putnam County, West Virginia.
`Final Report, DOE/MC/25115-3115, DOE Contract Number
`AC21-89MC25115, March 1992 ("Overbey")
`Declaration of Richard S. Carden
`Transcript of July 26, 2017 Deposition Testimony of Harold R.
`McGowen III
`Reserved
`W.K. Overbey, et al., Inducing Multiple Hydraulic Fractures From
`a Horizontal Wellbore, SPE (Society for Petroleum Engineering)
`18249 (1988)
`Errata Sheet for Transcript of February 28, 2017 Deposition
`Testimony of Harold R. McGowen III (Ex. 1034)
`Patrick J. McLellan, et al., A multiple-zone acid stimulation
`treatment of a horizontal well, Midale, Saskatchewan, THE
`JOURNAL OF CANADIAN PETROLEUM TECHNOLOGY, Vol. 31, No. 4,
`April 1992, at 71-82 ("McLellan")
`C.M. Kim & H.H. Abass, Hydraulic facture initiation from
`horizontal wellbores:
`Laboratory
`experiments,
`in ROCK
`MECHANICS AS A MULTIDISCIPLINARY SCIENCE: PROCEEDINGS OF
`THE 32ND US SYMPOSIUM ON ROCK MECHANICS, at 231-240 (Jean-
`Claude Roegiers ed., CRC Press 1991) ("Kim and Abass")
`U.S. Patent No. 9,303,501 to Fehr et al.
`U.S. Patent No. 7,832,472 to Themig
`U.S. Patent No. 7,571,765 to Themig
`vi
`
`
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`IPR2016-01517
`Patent 7,134,505
`
`I.
`
`INTRODUCTION
`
`The crux of Patent Owner's ("PO") Response ("POR") is that cemented casing
`
`was required in 2001 for multistage fracturing because a POSITA would have been
`
`fearful of open-hole fracturing due to the possibility of "complex fracture geometries"
`
`spreading across multiple zones. POR at 14-15. PO's position is untenable. Yost and
`
`other references document that multi-stage open-hole fracturing was prevalent by
`
`2001, and Yost expressly states fracturing across multiple zones is beneficial.
`
`Additionally, PO's secondary indicia evidence is weak, at best, and cannot overcome
`
`the strong prima facie case of obviousness.
`
`II. CLAIM CONSTRUCTION
`
`The broadest reasonable interpretation of "solid body packer" ("SBP") is the
`
`definition in PO's Provisional Application No. 60/404,783 to which the '505 patent
`
`claims priority. Ex. 1001 at 1; Ex. 1015 at 4. Contrary to PO's position, the
`
`provisional application is, by definition, intrinsic evidence by virtue of the priority
`
`claim. It is nonsensical to argue that the provisional subject matter supports a filing
`
`date but is not part of the intrinsic record.
`
`PO places undue weight on the provisional not being incorporated by
`
`reference, citing MPHJ Tech. Investments, LLC v. Ricoh Americas Corp., 847 F.3d
`
`1
`
`
`
`IPR2016-01517
`Patent 7,134,505
`1363 (Fed. Cir. 2017) ("MPHJ").1 The patent-in-suit in MPHJ stated that an
`
`operation could "optionally" be a single-step operation, while the provisional
`
`"required" it to be single-step. Id. at 1368. The Federal Circuit held that the patent-
`
`in-suit's omission of the provisional's "required" statements was merely a factor
`
`which, in combination with the patent specification's statements contradicting the
`
`omitted statements, meant
`
`that
`
`the claim construction was not
`
`limited by the
`
`provisional's statements. Id. at 1369. Unlike MPHJ, the provisional's SBP definition
`
`is entirely consistent with the use of that term in the '505 patent, which describes
`
`SBPs according to the provisional's definition. See, e.g., Ex. 1001 8:40-9:15; and
`
`Fig. 2.
`
`Furthermore,
`
`the provisional was incorporated by reference in several
`
`"continuation" patents that are members of the '505 family. See, e.g., Exs. 1044,
`
`1045, and 1046. There can be no dispute that the provisional's definition governs the
`
`SBP construction in these related patents.
`
`See, e.g., Vederi, 744 F.3d at 1383
`
`1 PO also misconstrues Vederi, LLC v. Google, Inc., 744 F.3d 1376, 1383
`
`(Fed. Cir. 2014) and Ring Plus, Inc. v. Cingular Wireless, LLC, 2007 WL 5688765
`
`(E.D. Tex. Jul 9, 2007): neither court concluded that a provisional is only intrinsic
`
`evidence when incorporated by reference. PO further cites dunnhumby USA, LLC v.
`
`emnos USA Corp., 2015 WL 1542365 (N.D. Ill. Apr. 1, 2015), which erroneously
`
`interpreted Vederi.
`
`2
`
`
`
`IPR2016-01517
`Patent 7,134,505
`(incorporated provisional is intrinsic evidence). And because the related patents and
`
`the '505 derive from the same provisional and use the same SBP claim term, that
`
`term should be construed the same—in accordance with the provisional's express
`
`definition—across the entire patent family. Trustees of Columbia Univ. v. Symantec
`
`Corp., 811 F.3d 1359, 1369 (Fed. Cir. 2016).
`
`Moreover,
`
`the related applications' "continuation" status means that
`
`the
`
`applicant was representing to the PTO and public that the content of the applications
`
`had not changed from the '505 specification. PO's argument that the scope of SBP is
`
`materially different
`
`from one application to a continuation contradicts this
`
`representation.
`
`Therefore, pursuant to the provisional's definition, "A solid body packer is
`
`defined as a tool to create a seal between tubing and casing or the borehole wall
`
`using a packing element which is mechanically extruded, using either mechanically
`
`or hydraulically applied force." According to Dr. Rao, this construction (or even
`
`PO's proposed construction) does not cover swellable packers with packing elements
`
`that expand by exposure to fluids, instead of being extruded. Ex. 1035 ¶¶ 21-23.
`
`III. THE CLAIMS ARE INVALID
`
`A.
`
`PO's Admissions Establish the Obviousness of Using Thomson in
`Open-Hole
`
`Ground 1 asserts the obviousness of claims 23 and 27 based on Thomson in
`
`3
`
`
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`IPR2016-01517
`Patent 7,134,505
`view of Ellsworth and further in view of Yost. The Petition establishes and PO
`
`concedes that Thomson's multistage horizontal fracturing system and method is
`
`identical to the claimed features with one exception: Thomson was run in cased-hole
`
`instead of the claimed open-hole application. Petition at 27-58; Ex. 1034 at 65:5-9,
`
`17-25. The Petition cites evidence providing reasons and motivations to use
`
`Thomson's system in open-hole, including the saved time and expense described in
`
`Thomson, the reduced cost of not casing and cementing described in Ellsworth and
`
`Yost's teaching that open-hole stimulations avoid formation damage and eliminate
`
`the need to perforate the casing. Petition at 54-57. Such a substitution would have
`
`been obvious to try and would have yielded nothing more than predictable results,
`
`particularly in light of Ellsworth's teaching that SBPs provide zonal isolation for
`
`stimulation procedures in open-hole wells.
`
`See, e.g., Ex. 1004 at 5. Such a
`
`substitution had a more than reasonable expectation of success given the successes of
`
`both Ellsworth and Yost. Id.; see also Ex. 1002 at 1.
`
`PO concedes as much because the only part of Thomson's system that knows
`
`whether it is in an open-hole well is the packer. Ex. 1007 ¶ 56. But, as the Petition
`
`notes, PO's prior expert offered the stunning admission that (i) "[t]he open hole
`
`application of tools [e.g., packers] that were originally designed for cased hole has
`
`been commonplace in the industry since" 1992 and (ii) "[t]here is nothing novel or
`
`nonobvious about such an application." Ex. 1012 at 10-11. Rather than refute this
`
`4
`
`
`
`IPR2016-01517
`Patent 7,134,505
`admission, PO's Response confirms it: "It is entirely unremarkable that a POSITA
`
`would recognize that a mechanical device like a packer can operate when placed in a
`
`cylindrical casing hole or a bore hole." POR at 18. PO then asserts that its own
`
`admissions "merely show that it might have been obvious to use a solid body packer
`
`for some purposes and in some wells, depending upon the specific proposed
`
`application." Id. at 20. But if it would have been obvious to use Thomson's system,
`
`with its SBPs, in any open-hole well, the challenged claims are invalid. KSR Int'l
`
`Co. v. Teleflex Inc., 550 U.S. 398, 419 (2007) ("If the claim extends to what is
`
`obvious, it is invalid under § 103.").
`
`PO attempts to overcome this predicament by framing the "key issue" as
`
`"whether it was obvious to use solid body packers in combination with ball-activated
`
`sliding sleeves to perform the patented method of open hole multi-stage fracturing."
`
`POR at 21. Again, the only part of that "key issue" that Thomson does not disclose
`
`is "open hole." When PO concedes that it would have been obvious to use a SBP in
`
`open-hole "for some purposes and in some wells," that is sufficient to establish
`
`obviousness. Thomson teaches the "purpose" of using its multistage fracturing
`
`system, which is to save time in fracturing. Ex. 1003 at 1. Yost teaches open-hole,
`
`multistage fracturing. Ex. 1002 at 1. Additionally, Ellsworth teaches using SBPs for
`
`zonal isolation in open-hole to save the time and expense of cementing casing. Ex.
`
`1004 at 5. If a POSITA in 2001 would have known that SBPs work (i.e., will seal)
`
`5
`
`
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`IPR2016-01517
`Patent 7,134,505
`in some open-hole wells, as taught by Ellsworth (and as PO now concedes), then it
`
`would have been obvious to use Thomson's system in at least some of those wells.
`
`Additionally, PO's contention that fracturing in open-hole raised various
`
`concerns is contradicted by Yost, as detailed below. When multistage fracturing
`
`with packers involved the choice between cased-hole and open-hole fracturing,
`
`choosing either option would have been obvious. KSR, 550 U.S. at 421 ("When
`
`there is a design need or market pressure to solve a problem and there are a finite
`
`number of identified, predictable solutions, a person of ordinary skill has good
`
`reason to pursue the known options within his or her
`
`technical grasp.").
`
`Furthermore, the challenged '505 claims don’t require fracturing, and Petitioner has
`
`pointed out that it would have been obvious to use Thomson’s system “in multistage
`
`fracturing or any other fluid treatment in an open hole well,” a position which has not
`
`been rebutted by PO. Petition at 27-28, 37, 55-56.
`
`PO further asserts that a POSITA would find the problems Thomson identified
`
`"alarming," relying on its expert. POR at 51-53. But when asked why a service
`
`company,
`
`like Halliburton, would publish SPE papers, Mr. McGowen stated,
`
`"Increase sales." Ex. 1038 at 31:6-9. It is not credible that Halliburton would tarnish
`
`its reputation by publishing three different papers (OTC 8472, SPE 37482, SPE
`
`51177), including one peer-reviewed publication in the SPE Drilling & Completion
`
`journal, and presenting those papers at conferences,
`
`if
`
`the papers described
`
`6
`
`
`
`IPR2016-01517
`Patent 7,134,505
`something "alarming" to a POSITA. In PO's own words, "After all, the authors were
`
`from Halliburton and Philips are [sic] two of the most highly-regarded and
`
`technically savvy organizations in the oil and gas industry." POR at 51.
`
`The evidence, including PO's admissions, shows that although risks exist in
`
`any completion system, a POSITA would have understood that using Thomson's
`
`system in open-hole was likely to be successful in at least "some wells." For the
`
`very few problems Thomson reported, Thomson reported solutions. Ex. 1035 ¶¶ 3-5.
`
`Indeed, Thomson emphasized both the success of the system and the cost savings
`
`due to reduced fracturing time. Ex. 1003 at 1, 5. There is nothing "alarming" in
`
`Thomson.
`
`B.
`
`PO's Mischaracterizations of Yost Highlight the Weakness of Its
`Position
`
`PO's attempts to overcome Ground 1 by arguing against Yost fare no better.
`
`Yost discloses a successful open-hole multistage fracturing system and method using
`
`packers and sliding sleeves, as the Board acknowledged. Paper 23 at 25 ("Yost
`
`suggests some degree of success in using open hole fracturing to boost production.").
`
`PO's expert admitted these points in his deposition and declaration. Ex. 1038 at
`
`48:5-51:15, 54:19-55:2; Ex. 2081 at 16 (observing that "the outcome of Yost is
`
`increased production").
`
`PO's expert further admitted that the simple substitution of SBPs and ball-drop
`
`sliding sleeves for the inflatable packers and sliding sleeves in the Yost method
`7
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`IPR2016-01517
`Patent 7,134,505
`would yield the claimed inventions of U.S. Patent No. 7,861,774 ("the '774 Patent"),
`
`which are narrower than the '505 claimed inventions. Ex. 1038 at 54:19-55:2. PO's
`
`primary argument in the face of these admissions is that Yost was merely an
`
`experiment
`
`that would not have motivated a POSITA to use the system in a
`
`commercial well. POR at 45-46. But the law contradicts PO's position; it matters
`
`not whether the art discloses a commercial or non-commercial system. Galderma
`
`Labs., L.P. v. Tolmar, Inc., 737 F.3d 731, 737 (Fed. Cir. 2013) ("Nothing in the
`
`statute or our case law required Tolmar to prove obviousness by starting with a prior
`
`art commercial embodiment and then providing motivation to alter that commercial
`
`embodiment.").
`
`Ignoring this law further, PO contends that "the Yost well differs sharply from
`
`a well a POSITA would actually work on for a commercial application," citing the
`
`Devonian shale reservoir's "low pressure." POR at 45. But PO's expert conceded
`
`that he does not know whether commercial wells in the Devonian shale were drilled
`
`after Yost. Ex. 1038 at 76:1-12.
`
`In fact, there has been and continues to be
`
`commercial drilling activity in the alleged "low pressure" Devonian shale,
`
`completely undermining PO's argument. Ex. 1035 ¶¶ 19-20. Similarly, PO's expert
`
`admitted that he has no evidentiary support for PO's argument that Yost's well
`
`contained a "very short horizontal portion compared to commercial wells drilled in
`
`2001." POR at 46; Ex. 1038 at 74:7-10.
`
`8
`
`
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`IPR2016-01517
`Patent 7,134,505
`PO also criticizes Yost, without support, as "not even report[ing] a successful
`
`multi-stage fracturing job." POR at 46. First, the challenged '505 claims only recite
`
`"fluid treatments" and "wellbore treatments," not fracturing. Ex. 1001 at 15:46-
`
`17:20. There is no question Yost provides a successful "fluid/wellbore treatment" of
`
`the open-hole well bores described in the reference. Second, Yost unequivocally
`
`states that "the horizontal well produced at a rate 7 times greater than the field
`
`current average of 13 mcfd for stimulated vertical wells." Ex. 1002 at 1. PO's expert
`
`conceded that "none of the papers describing the RET No. 1 well said that Yost's
`
`system [ ] was not commercially viable . . . ." Ex. 1038 at 109:1-4.
`
`PO also concocts the theory that Yost sought to avoid propagating fractures
`
`across zones and "failed spectacularly." POR at 46-49. Even if this were Yost's
`
`intention (which it was not), fracturing across arbitrarily designated zones would not
`
`be a "failure." Indeed, PO's expert testified that an extensive fracture network "can
`
`be beneficial because it improves permeability," which "can improve oil and gas
`
`production."
`
`Ex. 1038 at 92:8-18, 92:19-25. Moreover, he agreed that
`
`communication of fracturing fluid "through the formation to another zone" does not
`
`remove a method from the scope of the '774 claims, which are narrower than the
`
`challenged '505 claims. Id. at 93:21-94:6.
`
`For the false proposition that Yost sought to avoid fracturing across zones, PO
`
`cites Ex. 2075 (SPE 17759) (another Yost publication about RET#1) and testimony
`
`9
`
`
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`IPR2016-01517
`Patent 7,134,505
`of Petitioners' expert, Dr. Rao. None of this evidence supports PO's theory. The
`
`very page that PO cites (Ex. 2075 at 2) describes the "overall stimulation rationale"
`
`as follows:
`
`1) Primary design was to propagate natural fractures with a slight
`difference in orientation from principal stress orientation.
`2) Injection at low rates allows fluid to select pre-existing natural
`fractures to be propagated.
`3) Injection at pressures which will keep the fracture(s) from growing
`out of zone.
`4) By starting off at low rates and not exceeding 200 psi above closure
`pressure with average BHTP natural fractures would be propagated.
`5) By increasing injection rates additional fractures would be induced
`which would likely create a network of interconnected fractures
`with orientations of N37ºE, N52ºE, and N67ºE.
`
`Ex. 2075 at 2 (emphases added).
`
`PO presumably relies on the above-quoted third item. But Item 3 cannot be
`
`viewed alone because it is only a part of the overall stimulation rationale. For
`
`example, contrast Item 2 (injection at low rates) with Item 5 (increasing injection
`
`rates).
`
`In fact, Item 5 says that increasing injection rates "would likely create a
`
`network of interconnected fractures." Thus, the stimulation rationale contemplates
`
`starting with low rates and pressures to propagate natural fractures without extending
`
`out of zone and (contrary to PO's theory) later increasing those rates (which will
`
`necessarily increase pressures) to induce additional fractures and create a network of
`10
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`IPR2016-01517
`Patent 7,134,505
`
`interconnected fractures without regard to zones.
`
`Even more telling is that PO and its expert intentionally failed to cite SPE
`
`18249, which the expert admitted that he had read. Ex. 1038 at 60:7-22. It states:
`
`Pressure testing and gas sampling of the isolated zones confirm
`that fracture communication was accomplished along nearly 1000 feet
`of borehole by stimulation of one 400 foot long section. A technique
`for inducing multiple hydraulic fractures with multiple orientations was
`demonstrated.
`
`Ex. 1040 at 1 (emphasis added). Here, the authors reference fracturing across zones
`
`as an accomplishment, not a failure as PO contends. PO's expert conceded that
`
`Figure 8 in SPE 18249 shows the fracture network (including interconnecting
`
`multiple fractures) Yost expected to induce. Ex. 1040 at 3, 10; Ex. 1038 at 100:22-
`
`102:11.
`
`Nevertheless, PO's expert opines
`
`that
`
`the authors hoped that
`
`those
`
`interconnections would stop at packer locations that would arbitrarily create zone
`
`lines in the formation. This theory is pure fantasy. In fact, in conclusion, the authors
`
`of SPE 18249 state, "As more experience is gained [ ], it may be possible to
`
`interconnect fractures all along the wellbore by stimulating only specific intervals
`
`with tailored rates and pressures." Ex. 1040 at 5. In other words, it may be possible
`
`to fracture an entire horizontal wellbore by only injecting fracturing fluid in a few
`
`zones, which would be an accomplishment. Id. at 3 (hypothesizing that "extension
`
`11
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`IPR2016-01517
`Patent 7,134,505
`of natural fractures with multiple orientations will produce a complex interconnected
`
`fracture network which will be a much more efficient drainage system for low
`
`permeable shale and siltstone"), 5 (concluding that
`
`this hypothesis had been
`
`confirmed). Thus, SPE 18249, which PO's expert read but omitted, expressly
`
`contradicts his opinion that Yost failed because the fractures propagated across
`
`zones.
`
`PO finally relies on Dr. Rao's testimony for the proposition that Yost sought to
`
`fracture only within formation zones. POR at 46-47. But in the cited passage (Ex.
`
`2044 at 63:6-10), the "zonal isolation" that Dr. Rao is describing is that the packers
`
`isolated the fracturing fluid in the wellbore annulus between those packers—this has
`
`nothing to do with formation zones. Dr. Rao never agreed that Yost sought to
`
`contain fractures within a formation zone after the fracturing fluid entered the
`
`formation. In fact, he testified that Yost "hypothesized that some fluid would travel
`
`along natural fractures, and to the extent that those natural fractures intersected
`
`another zone, some modicum of fluid would then go into that zone . . . ." Id. at 64:2-
`
`15.
`
`PO's next mischaracterization of Yost relies on SPE 18255 for the proposition
`
`that "[a]ctual breakdown of the shale may not have occurred." POR at 48 (quoting
`
`Ex. 2076 (SPE 18255) at 726). PO omits the rest of the passage, which goes on to
`
`state "but fluid leak-off and subsequent expansion of the existing fracture system
`
`12
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`IPR2016-01517
`Patent 7,134,505
`took place." Ex. 2076 at 2. PO's theory is that Yost expanded natural fractures, but
`
`did not induce new fractures. First, as admitted by PO's expert, SPE 18255 is only
`
`discussing a few stimulations performed on zone 1 in the RET#1 well. Ex. 1038 at
`
`81:3-84:7. Thus, SPE 18255 cannot be used to characterize the other zones. Second,
`
`both expansion of natural fractures and inducing new fractures satisfy the claims.
`
`PO's expert conceded that "open[ing] a natural fracture" "would still be considered a
`
`– a frac" within '774 claim 1, which is narrower than the challenged '505 claims (Ex.
`
`1038 at 91:24-92:5), and therefore, a "fluid treatment" or "wellbore treatment" within
`
`the challenged '505 claims.
`
`Third, Yost induced new fractures as plainly stated in various Yost papers.
`
`For example, SPE 19090 references "multiple hydraulic fracturing treatments." Ex.
`
`1002 at 1. Similarly, SPE 18249 (intentionally omitted by PO's expert) references
`
`the "conclusive evidence that multiple hydraulic fractures were induced during each
`
`pumping event." Ex. 1040 at 5; see also id. at 2 (describing "induced fractures along
`
`a third direction"). PO's expert admitted that the authors of SPE 18249 reported that
`
`they induced new fractures on RET#1. Ex. 1038 at 89:23-90:9. He was also
`
`unwilling to testify that a POSITA reading the Yost papers would believe that new
`
`fractures were not induced. Id. at 90:2-6.
`
`Finally, citing SPE 21264 (Ex. 2077) and SPE 37354 (Ex. 2100), PO offers the
`
`false assertion that Mr. Yost and the Department of Energy elected cased-hole
`
`13
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`IPR2016-01517
`Patent 7,134,505
`fracturing after Yost's publication. POR at 49-51. Although SPE 21264 cites several
`
`articles describing Yost (Ex. 2077 at 7 (notes 5, 6, and 7)), it never criticizes open-
`
`hole, multistage fracturing and never suggests cemented casing is preferred over
`
`open-hole. Ex. 1038 at 107:17-108:15.
`
`Instead, SPE 21264 describes a cemented
`
`well stimulation that was deemed uneconomical. Ex. 2077 at 6; Ex. 1038 at 108:16-
`
`108:25.
`
`In contrast, PO's expert admitted that "none of the papers describing the
`
`RET No. 1 well said that Yost's system described there was not commercially
`
`viable." Ex. 1038 at 109:1-4. Thus, SPE 21264 would not convince a POSITA that
`
`cased-hole fracturing is preferred over open-hole fracturing.
`
`The same is true of SPE 37354, which concluded that cased horizontal wells
`
`cannot be economically drilled in the Clinton sandstone. Ex. 2100 at 1; Ex. 1038 at
`
`139:4-16. Moreover, the authors explain that a nearby well (CW#7) experienced
`
`hole collapse, resulting in the use of intermediate cemented casing on the CW#14
`
`well described in the paper. Ex. 2100 at 2-3. Based in part on these observations,
`
`PO's expert agreed that it is "not surprising that they would case [and] cement CW
`
`No. 14 given the experience in this formation." Ex. 1038 at 141:2-4, 141:24-142:2.
`
`SPE 37354 never criticizes open-hole multistage fracturing or says that cemented
`
`casing is necessary for multistage fracturing.
`
`But it gets worse for PO. DOE's work after Yost included a 1992 publication
`
`authored by William K. Overbey, Jr., one of the coauthors of Yost (SPE 19090). Ex.
`
`14
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`
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`IPR2016-01517
`Patent 7,134,505
`1036 at 1; Ex. 1037 at 1. Overbey explains why open-hole, multistage fracturing
`
`was selected for the HW#1 well that the paper describes:
`
`[ ] Options considered for isolating the individual zones included
`conventional cementing of the casing with perforations to access the
`individual zones, use of inflatable casing packers in the casing string
`with port collars to access the zones as was done in the BDM/RET#1
`(Reference 1) well, [and] a combination of these two techniques.
`the
`Because of
`the
`relatively
`successful
`completion of
`BDM/RET#1 well, the casing packer – port collar option was selected
`for completing the Hardy HW#1.
`[ ] The original completion plan
`called for 5 TAM International, Inc. port collars to be placed in the
`casing string with one of the port collars fitted with a "bull plug" for
`opening with applied pressure and another fitted with a "baffle" for
`opening by dropping a ball and applying pressure. This design should
`have allowed the farthest two zones to be accessed and stimulated with
`a conventional ball-and-baffle technique and without having to use an
`"opening tool" to open the port collars.
`
`Ex. 1036 at 48 (emphases added).
`
`On this post-RET#1 well, the DOE rejected cemented casing in favor of open-
`
`hole, multistage fracturing as described in Yost SPE 19090. Overbey even describes
`
`the RET#1 completion as "relatively successful." Moreover, Overbey describes
`
`using the claimed ball-drop sliding sleeves, which he regards as "conventional," in
`
`the method of Yost. This further supports Petitioners' overwhelming evidence that a
`
`POSITA would readily substitute ball-drop sliding sleeves in the method of Yost.
`15
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`IPR2016-01517
`Patent 7,134,505
`Although Overbey ultimately did not use the ball-drop sliding sleeve because they
`
`decided not to stimulate those portions of the well, Overbey stated, "This would
`
`certainly be an option that should be given consideration in future horizontal
`
`holes . . . ." Id. at 99-102. Thus, the evidence shows that not only did the DOE not
`
`abandon Yost's open-hole fracturing, they used it again on a subsequent well because
`
`they regarded it as "relatively successful."
`
`C.
`
`PO's Criticisms of Ellsworth Are Irrelevant
`
`PO's detailed discussions of how Ellsworth allegedly fails to teach fracturing
`
`and forcing fluid out of a tubing string port (POR at 53-55, 57) is irrelevant as
`
`Ellsworth has not been relied upon for these features. See, e.g., Petition at 36-39, 54-
`
`58. Ellsworth is relied upon to show that SBPs were an obvious alternative to Yost's
`
`inflatable packers and to show modifying Thomson's system to provide zonal
`
`isolation in an open-hole wellbore was obvious. Id. It is undeniable that Ellsworth
`
`teaches zonal isolation for the stimulation (e.g., acidizing) of open-hole wellbores
`
`using SBPs, and teaches that such packers are a known alternative to inflatables.
`
`See, e.g., Ex. 1004 at 5-8; Petition at 11-13. Furthermore, the challenged '505
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