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From Intellectual Property Law Daily, September 28, 2017

Energy companies infringed patents for system of blending butane and gasoline

By Thomas Long, J.D.

Energy products companies U.S. Venture and U.S. Oil (together, "Venture") infringed patents held by Sunoco Partners Marketing & Terminals L.P., related to a system for blending butane into gasoline immediately before it was distributed to retail gas stations, the federal district court in Chicago has decided. Sunoco’s rights in the patents were not "exhausted" as a result of a settlement agreement between Sunoco and Technics, Inc.—from whom Venture obtained the challenged system—because that agreement did not retroactively authorize Technics’ sale of the system to Venture, which took place prior to the settlement. Although Venture argued that its system was not being used in an infringing manner, the patents were infringed when the system was "made," according to the court (Sunoco Partners Marketing & Terminals L.P. v. U.S. Venture, Inc., September 27, 2017, Pallmeyer, R.).

Sunoco held several patents on systems that blended butane into gasoline. At issue were two Sunoco patents: U.S. Patent Nos. 6,679,302 and 7,032,629. The patented systems allowed the blending of butane into gasoline at the last point of distribution before the gas is taken by tanker trucks to retail gas stations. Venture retained Technics, Inc. (which initially was a defendant in the suit, but with whom Sunoco had settled) to install a butane blending system in or around 2012 at three of Venture’s terminals in Wisconsin. Venture also owned three other accused blending systems at different locations, which Venture developed internally and installed after the Technics systems were installed. As part of the settlement with Technics, Sunoco agreed not to sue Technics for infringing activities that occurred prior to the date of the settlement agreement. The agreement specified, however, that it was not a license that pertained to future use by Technics or Technics’ customers. Sunoco moved for partial summary judgment against Venture, contending that there was no factual dispute regarding the equipment involved in the systems at Venture’s Green Bay and Madison South facilities.

Patent exhaustion. Venture argued that Sunoco had exhausted its patent rights with respect to the Madison, Green Bay, and Milwaukee Central systems. The doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item. According to Venture, Sunoco’s covenant not to sue Technics for infringing activities prior to the Sunoco-Technics settlement was a retroactive authorization of the sale of patented systems (or at least part of those systems) from Technics to Venture. Sunoco responded by arguing that patent exhaustion required that the sale of a patented system be authorized when the sale occurred.

The court declined to find that Sunoco’s patent rights were exhausted. It was the sale of the "freedom from suit" property right that triggered the patent exhaustion doctrine. At the time Technics sold the systems to Venture, it conveyed only the system components. It did not convey "freedom from suit," and could not have done so, because Technics did not hold the patent to the technology or a license. Sunoco’s subsequent settlement with Technics did not retroactively alter the sale, making it an authorized sale by the patentees, the court said. Technics could only convey to Venture what it possessed, and it did not possess the "freedom from suit" required for patent exhaustion. Therefore, Venture was not immunized from liability for its use of the system; nor was it immunized from liability for its continued use of the system after Technics settled with Sunoco. Technics had sold the system to Venture just once—before the settlement. Venture’s motion for summary judgment on the ground of patent exhaustion was denied.

Infringement—pipeline configuration. Sunoco presented extensive argument explaining how Venture’s Madison South and Green Bay terminals infringed each element of the claims at issue. Venture argued that the accused system did not meet one of the limitations common to all the claims: the requirement of a gasoline tank (and, by extension, a blending unit "downstream and in fluid connection" with the gasoline tank). Venture admitted that the system could be configured to use a gasoline tank, but it essentially argued that it did not use the system in an infringing manner. However, in the court’s view, there was no genuine dispute that Venture infringed seven of the patent claims. There was no dispute that Venture made and/or used systems that blended from a gasoline tank, and Venture did not contest that the systems met the other elements of the seven claims at issue. Venture sometimes used its system in a way that did not infringe these claims—that is, when it blended from a pipeline instead of a gas tank. This fact was relevant for damages, but it did not warrant a finding of "infringement sometimes and non-infringement other times." Patent infringement did not depend on the use of the accused device; a patent was infringed when a defendant "made" a patented system or method, the court explained. Venture was liable for infringement for having made an infringing system.

Infringement—claim 3 of ’629 patent. Claim 3 of the ’629 patent required, in relevant part, "a butane vapor pressure sensor operable for measuring the vapor pressure of butane upstream of the blending unit." Venture argued that its system, as it is currently designed, did not have the ability to test butane upstream. The issue, however, was whether Venture had ever made, used, or sold an infringing system, the court said. If Venture had at one time made, used, or sold an infringing system, but later stopped making, using, or selling an infringing system, that choice was relevant only to damages. Sunoco took the position that the Green Bay and Madison South terminals, at least initially, had operable butane vapor pressure sensors. However, the court determined that factual questions precluded summary judgment on this issue. First, there was an open question about which entity was responsible for the infringing system during the installation and testing phase because there was a dispute as to whether the system was "made" by Venture or by Technics. Second, it was not clear whether source code created by Technics had the ability to control the part of the system that enabled butane sampling. Therefore, both parties’ summary judgment motions on claim 3 were denied.

The case is No. 15 C 8178.

Attorneys: George Carter Lombardi (Winston & Strawn LLP) for Sunoco Partners Marketing & Terminals L.P. Andrew Michael Gross (Foley & Lardner LLP) for U.S. Venture, Inc. and U.S. Oil Co., Inc. Neil A. Benchell (Bishop Diehl & Lee, Ltd.) for Technics, Inc.

Companies: U.S. Oil Co., Inc.; Technics, Inc.; U.S. Venture, Inc.; Sunoco Partners Marketing & Terminals LP

MainStory: TopStory Patent IllinoisNews

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