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Energy Heating, LLC v. Heat On-The-Fly, LLC

United States District Court, Eighth Circuit

November 6, 2013

Energy Heating, LLC, and Rocky Mountain Oilfield Services, LLC, Plaintiffs,
v.
Heat On-the-Fly, LLC, and Super Heaters North Dakota, LLC; Defendants.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

RALPH R. ERICKSON, District Judge.

INTRODUCTION AND SUMMARY OF HOLDING

Before the Court are two motions for partial summary judgment brought by Plaintiffs Energy Heating, LLC ("Energy Heating") and Rocky Mountain Oilfield Services, LLC ("Rocky Mtn.") (Docs. #32, 59). Plaintiffs have filed a complaint seeking, inter alia, a declaration that they do not infringe Defendants' trademark HEAT ON-THE-FLY and cancellation of Defendants' registration for that mark. Defendants have filed counterclaims against Plaintiffs asserting direct and indirect infringement of U.S. Patent No. 8, 171, 993 ("the '993 patent"). Plaintiffs now move for summary judgment on their trademark claims and Defendants' direct infringement counterclaim.[1] Because Plaintiffs have not proven as a matter of law that the HEAT ON-THE-FLY mark is generic, Plaintiffs' motion for summary judgment on the trademark claims is DENIED. With respect to Defendants' counterclaim of direct infringement, Defendants cannot demonstrate that Plaintiffs directly infringe the method or apparatus claims disclosed in the '993 patent. Accordingly, with respect to claims 1, 13, 36, 63, and 86 of the '993 patent, Plaintiffs' motion for summary judgment on the direct infringement counterclaim is GRANTED, and the associated portions of that claim are DISMISSED. A fact question remains as to whether Plaintiffs directly infringe the system claim disclosed in the '993 patent. Plaintiffs' motion for summary judgment with respect to direct infringement of claim 26 of the '993 patent is thus DENIED.

FACTS

Defendant Heat On-The-Fly ("HOTF") is the owner of the '993 patent, entitled "Water Heating Apparatus for Continuous Heated Water Flow and Method for Use in Hydraulic Fracturing."[2] (Doc. #1-1). The '993 patent prescribes a "method and apparatus for the continuous preparation of heated water flow for use in hydraulic fracturing" or, as it is more commonly known, "fracking." ( Id. at 15). Fracking entails pumping a mixture of heated water, chemicals, and sand into a geological formation, causing the formation to fracture and release oil or gas deposits into a surrounding well. (Id.). Prior to the '993 patent, the common method of heating water for fracking projects involved pumping source water into numerous tanks and raising the temperature of each tank individually the night before commencing fracking operations. (Id.). Due to the time lapse involved, tanks generally had to be overheated to account for thermal loss. (Id.). The '993 patent addresses this shortcoming by providing continuously heated water during the fracking process. (Id.) As cool water is pumped into the mixing mechanism, a portion of the water is diverted through separate piping into a heating unit, where it is superheated and then reintroduced to the ambient water flow in the mixing mechanism. ( Id. at 15-16). The newly heated mixture is then pumped into the formation. (Id.).

HOTF refers to its patented process as heating water "on-the-fly." (See Doc. #76, p. 15). In 2010, HOTF obtained United States Trademark Registration No. 3, 811, 923 for the mark HEAT ON-THE-FLY for use in connection with oil well fracturing. (Doc. #62-2). Defendant Super Heaters North Dakota ("Super Heaters"), a company that provides heated water for fracking operations in North Dakota, is a current licensee of both the '993 patent and the HEAT ON-THE-FLY mark. (Doc. #27, p. 2-4).

Plaintiffs Energy and Rocky Mtn. are joint venturers in the field of water delivery in North Dakota. ( Id. at 2). Defendants believe Plaintiffs' portable water heaters infringe the '993 patent. Defendants allegedly reported the suspected infringement to Plaintiffs' customers. ( Id. at 3). As a result, Plaintiffs now bring this suit, seeking (1) a declaration of invalidity regarding all or part of the '993 patent, (2) a declaration of Plaintiffs' non-infringement of the '993 patent, (3) a declaration of Plaintiffs' non-infringement of the HEAT ON-THE-FLY mark, (4) an order of cancellation of the HEAT ON-THE-FLY mark, and alleging (5) tortious interference with existing or prospective business relationships, and (6) tortious interference with contracts. ( Id. at 5-6). Defendants seek injunctive relief and money damages on their counterclaims of direct and indirect infringement of the '993 patent. (Doc. #23). Plaintiffs have moved for partial summary judgment on their trademark claims and Defendants' direct infringement counterclaim.

DISCUSSION

Summary judgment is appropriate if, viewing the evidence in the light most favorable to the non-movant, "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Warner Bros. Entm't, Inc. v. X One X Prods. , 644 F.3d 584, 591 (8th Cir. 2011); Fed.R.Civ.P. 56(a). There is no genuine issue for trial when the record as a whole "could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587 (1986). "A plaintiff may not merely point to unsupported self-serving allegations, but must substantiate allegations with sufficient probative evidence that would permit a finding in the plaintiff's favor." Davidson & Assocs. v. Jung , 422, F.3d 630, 638 (8th Cir. 2005).

I. Validity of the HEAT ON-THE-FLY mark.

"A term for which trademark protection is claimed will fall in one of four categories: (1) generic, (2) descriptive, (3) suggestive, or (4) arbitrary or fanciful." WSM, Inc. v. Hilton , 724 F.2d 1320, 1325 (8th Cir. 1984). "A generic mark refers to the common name or nature of an article, and is therefore not entitled to trademark protection." Frosty Treats, Inc. v. Sony Computer Entm't Am., Inc. , 426 F.3d 1001, 1005 (8th Cir. 2005). Plaintiffs contend the phrase "heat on the fly" is generic and, therefore, seek (1) a declaration that their use of this phrase does not infringe Defendants' trademark rights and (2) cancellation of U.S. Trademark Registration No. 3, 811, 923. Registration of a trademark, however, creates a rebuttable presumption of a mark's validity and distinctiveness. Aromatique, Inc. v. Gold Seal, Inc. , 28 F.3d 863, 869 (8th Cir. 1994); 15 U.S.C. § 1115(a). This is especially so when the USPTO registers a mark without requiring proof of secondary meaning. Accordingly, Plaintiffs must not only overcome a presumption of nongenericness, but also show there is no genuine issue of material fact as to the mark's genericness.

The Lanham Act provides "[t]he primary significance of the registered mark to the relevant public... shall be the test for determining whether the registered mark has become [generic]." 15 U.S.C. § 1064(3). Plaintiffs contend that within the oil and gas industry, the phrase "heat on the fly" describes a well-known method of heating water-also referred to as "in line, " "on demand, " or "tankless" water heating-without reference to any particular source. (Doc. #60, p. 6). In support, Plaintiffs point to allegedly generic uses of the phrase throughout Defendants' depositions and website materials, industry usage, and Plaintiffs' own depositions.

With regard to Defendants' depositions and website materials, Plaintiffs argue Defendants consistently use the phrase "heat on the fly" to refer to a process of heating water rather than as a designation of source. For example, HOTF designee Mark Hefley stated he first heard the phrase "heat on the fly" when a customer asked him to heat fluid on the fly in 2006 (before Hefley had invented the method disclosed in the '993 patent). (Doc. #62-5, p. 10). Similarly, Super Heaters' designee Ron Lyles defined "heat on the fly" as "the heating of water as it's transferred" and stated any company performing this process would be "heating on the fly." (Doc. #62-4, p. 15, 37). HOTF's website also provided the following explanation of its services in the "About Us" section:

Our engineers began to field test the idea of heating water as it flowed from the source-before it got to the frac tank. Heating water on the fly as it moved from source to fracing tank to the wellbore became the holy grail for operators in the deep gas shales.... The process of configuring the super heating units, tying in the source water directly to fracing operations on an as-needed basis ...

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