Federal Circuit Upholds Award of Attorneys’ Fees in Fracking Case

The Federal Circuit has upheld an award of attorneys’ fees against a party that tried to enforce a patent found to be invalid.

The case of ENERGY HEATING, LLC v. HEAT ON-THE-FLY, LLC involved Heat-on-the-Fly’s (HOTF’s) patent for a “method and apparatus for the continuous preparation of heated water flow for use in hydraulic fracturing” – i.e., fracking.

“More specifically, the invention relates to heating water on demand or inline during the fracking process, instead of using preheated water in large standing tanks.”

The case arose out of a patent dispute between HOTF and Energy Heating and Rocky Mountain Oilfield Services (“Energy”). The companies compete in the business of providing hot water used during fracking.

The inventor, named Hefley, who was the founder of HOTF, filed the earliest provisional patent application for his method on September 18, 2009.

Thus, noted the court, “the critical date for analyzing the on-sale and public-use bars under 35 U.S.C. § 102 is September 18, 2008, one year before the priority date.”

§ 102(a) provides:

A person shall be entitled to a patent unless—
(1)
the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

This applies unless the disclosure, sale, etc. was made one year or less before the effective filing date. This one-year window is known as the on-sale bar.

The court found that

Before the critical date, Mr. Hefley and his companies performed on-the-fly heating of water on at least 61 frac jobs using the system described in the '993 patent application. In total, Mr. Hefley's companies collected over $1.8 million for those heat-on-the-fly services. Furthermore, Mr. Hefley knew that the patent process required that he file his application within one year of the first offer for sale or public use. It is undisputed that Mr. Hefley's business partner had discussed the on-sale bar requirement with him. Nevertheless, Mr. Hefley did not disclose any of the 61 frac jobs to the Patent and Trademark Office ("PTO") during prosecution as potential on-sale or public uses of the invention that might have triggered an on-sale bar.

Back in 2018, the case went to the Federal Circuit for the first time after jury and bench verdicts in favor of Energy.

HOTF appealed the district court’s judgement of

inequitable conduct, summary judgment of obviousness, denial of judgment as a matter of law of no tortious interference, construction of disputed claim terms, and dismissal of HOTF's counterclaim of direct infringement.

Energy also appealed because it hadn’t been awarded attorneys’ fees after winning at trial.

On the second go-round, the district court DID award attorneys’ fees to Energy on the basis of 35 U.S. Code § 285, which provides that “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”

According to the US Supreme Court,

[An] “exceptional” case under § 285 is “one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

On appeal, the Federal Circuit upheld the award, finding that

the district court provided ample support for its conclusion that HOTF’s case was “substantively weak”—for example, HOTF knew “that its patent was invalid” and that “no reasonable person could expect to prevail on claims of the patent’s validity.”