DCT

1:22-cv-02142

Crusoe Energy Systems LLC v. Alkane Midstream LLC

I. Executive Summary and Procedural Information

Parties & Counsel:
- Plaintiff: Crusoe Energy Systems LLC (Delaware)
- Defendant: Alkane Midstream LLC (Delaware)
- Plaintiff’s Counsel: Norton Rose Fulbright US LLP
Case Identification: 1:22-cv-02142, D. Colo., 10/26/2022
Venue Allegations: Plaintiff alleges venue is proper in the District of Colorado because Defendant Alkane has a regular and established place of business in the District and has committed acts of patent infringement there.
Core Dispute: Plaintiff alleges that Defendant’s flare gas mitigation services, which use stranded natural gas to power on-site cryptocurrency mining operations, infringe four patents related to systems for generating and consuming power from natural gas.
Technical Context: The technology addresses the environmental and economic problem of "flaring"—burning off excess natural gas at oil wells—by capturing the gas to generate electricity for energy-intensive, on-site computing tasks.
Key Procedural History: The complaint alleges that representatives for Defendant Alkane attended industry presentations given by Plaintiff Crusoe in November 2019 and March 2020, where Crusoe's patented technology was described, suggesting a basis for pre-suit knowledge of the technology.

Case Timeline

Date	Event
2018-08-01	Priority Date for ’307, ’309, ’821, and ’059 Patents
2019-11-14	Crusoe presents its technology at a committee meeting allegedly attended by an Alkane representative
2020-10-06	Alkane gives a presentation allegedly depicting a system similar to Crusoe's technology
2020-12-08	U.S. Patent No. 10,862,307 Issues
2020-12-08	U.S. Patent No. 10,862,309 Issues
2022-07-22	Meeting between Crusoe and Colorado Producers where Crusoe was allegedly informed that Alkane would be replacing it
2022-09-06	U.S. Patent No. 11,437,821 Issues
2022-09-20	U.S. Patent No. 11,451,059 Issues
2022-10-26	Complaint Filed

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 10,862,307 - Systems and Methods for Generating and Consuming Power from Natural Gas, Issued Dec. 8, 2020

The Invention Explained

Problem Addressed: The patent addresses the dual problems of natural gas flaring at remote oil wells, which is environmentally harmful and wastes an energy resource, and the high electricity cost required for energy-intensive distributed computing, such as cryptocurrency mining (’307 Patent, col. 1:15-48, col. 2:15-34).
The Patented Solution: The invention provides a modular, on-site system that captures otherwise flared or "stranded" natural gas, processes it into a fuel gas, and uses it to power electrical generators (’307 Patent, col. 2:46-56). The generated electricity is then used to power a distributed computing system, such as a mobile data center containing cryptocurrency mining hardware, thereby monetizing the previously wasted gas (’307 Patent, Fig. 1).
Technical Importance: This approach creates an economic incentive to mitigate natural gas flaring by coupling the wasted energy resource directly to a revenue-generating, high-demand electrical load at the well site (Compl. ¶29-30).

Key Claims at a Glance

The complaint asserts independent claim 1.
Claim 1 of the ’307 Patent includes these essential elements:
- An electrical power generation system comprising one or more power generation modules adapted to consume a fuel gas stream to generate a high-voltage electrical output.
- A parallel panel to receive, combine, and synchronize the high-voltage electrical outputs.
- An electrical transformation module to receive the combined output and transform it into a low-voltage electrical output.
- A distributed computing system powered by the electrical power generation system, which includes a communications system and a first mobile data center containing a plurality of distributed computing units.
The complaint reserves the right to assert dependent claims 14-16 (Compl. ¶67).

U.S. Patent No. 10,862,309 - Systems and Methods for Generating and Consuming Power from Natural Gas, Issued Dec. 8, 2020

The Invention Explained

Problem Addressed: The ’309 Patent addresses the same problems as the related ’307 Patent: the waste and environmental impact of natural gas flaring and the high energy costs of distributed computing (’309 Patent, col. 1:19-50, col. 2:19-39).
The Patented Solution: The solution is a similar flare mitigation system that converts stranded gas to electricity for on-site computing. This patent, however, specifically claims the inclusion of a monitoring and control system that dynamically manages the system's operation (’309 Patent, Abstract). For instance, the system can automatically adjust the electrical load of the computing units in response to changes in the gas supply, optimizing performance and stability (’309 Patent, col. 7:18-28).
Technical Importance: The addition of an automated monitoring and control system allows for more efficient and reliable operation in remote, variable oilfield environments where manual oversight is impractical (Compl. ¶30).

Key Claims at a Glance

The complaint asserts independent claim 1.
Claim 1 of the ’309 Patent includes these essential elements:
- An electrical power generation system with a power generation module and an electrical transformation module.
- A distributed computing system with a communications system and a first mobile data center.
- A monitoring and control system in communication with the electrical power generation and distributed computing systems.
- The monitoring and control system is adapted to monitor the gas profile and, upon determining a change, automatically modulate an electrical load of the distributed computing system.
The complaint reserves the right to assert dependent claim 14 (Compl. ¶77).

Multi-Patent Capsule: U.S. Patent No. 11,437,821

Patent Identification: U.S. Patent No. 11,437,821, Systems and Methods for Generating and Consuming Power from Natural Gas, Issued Sep. 6, 2022.
Technology Synopsis: This patent is part of the same family and covers similar technology for converting stranded natural gas to power for on-site computing. The claims focus on a system architecture comprising a plurality of power generation modules, a parallel panel, and a distributed computing system that may include multiple mobile data centers (’821 Patent, col. 27:28-28:50).
Asserted Claims: Independent claim 1 is asserted (Compl. ¶87).
Accused Features: The complaint alleges that Alkane’s flare gas mitigation services, which utilize stranded gas to power cryptocurrency mining, infringe this patent (Compl. ¶87).

Multi-Patent Capsule: U.S. Patent No. 11,451,059

Patent Identification: U.S. Patent No. 11,451,059, Systems and Methods for Generating and Consuming Power from Natural Gas, Issued Sep. 20, 2022.
Technology Synopsis: This patent is also part of the same family. The claims are directed to methods of operating a flare mitigation system, including the steps of receiving a fuel gas stream, generating a high-voltage electrical output, transforming it to a low-voltage output, powering computing units, and automatically monitoring operational parameters to modulate the system’s electrical load (’059 Patent, col. 28:1-29:1).
Asserted Claims: Independent claims 1 and 16 are asserted (Compl. ¶97).
Accused Features: The complaint alleges that Alkane’s methods of operating its flare gas mitigation services infringe this patent (Compl. ¶97).

III. The Accused Instrumentality

Product Identification

The accused instrumentalities are Defendant Alkane’s "flare gas mitigation products and services" (Compl. ¶11).

Functionality and Market Context

The complaint alleges that Alkane provides services that capture stranded flare gas from oil and gas producers and use it to power on-site computing equipment for cryptocurrency mining (Compl. ¶44, ¶49). Alkane’s President is quoted in a news article stating, "We power customers who mine Bitcoin... If we can’t make fuel out of it and there’s gas that needs to be consumed, we’ll turn it into power for Bitcoin miners" (Compl. ¶51). The complaint alleges that Alkane displaced Crusoe as the service provider for certain "Colorado Producers" by offering to pay a higher price for the stranded natural gas (Compl. ¶47, ¶49).

IV. Analysis of Infringement Allegations

No probative visual evidence provided in complaint.

The complaint incorporates by reference an Exhibit 9 containing claim charts, but this exhibit was not filed with the complaint provided for analysis (Compl. ¶67, ¶77, ¶87, ¶97). The narrative infringement theory is summarized below.

’307 and ’309 Patent Infringement Allegations

The complaint alleges that Alkane’s flare gas mitigation systems practice the inventions of the ’307 and ’309 patents (Compl. ¶67, ¶77). The core of the infringement theory is that Alkane deploys and operates systems at oil well pads that (1) use stranded natural gas to run on-site power generators, (2) transform the resulting electricity, and (3) use that electricity to power containerized data centers for cryptocurrency mining. These actions are alleged to map directly onto the claimed system elements, including the power generation, transformation, and distributed computing components. For the ’309 patent specifically, the complaint's allegations imply that any system Alkane operates would necessarily have to monitor and control its electrical load to function in a variable oilfield environment, thereby practicing the claimed monitoring and control system (Compl. ¶77).

Identified Points of Contention

Structural Questions: The infringement analysis may focus on whether Alkane’s systems contain specific structures recited in the claims. For example, what evidence demonstrates that Alkane's systems employ a "parallel panel" that "combine[s] and synchronize[s]" high-voltage outputs as required by claim 1 of the ’307 patent?
Functional Questions: A central question for the ’309 patent will be whether Alkane’s systems perform the specific function claimed for the "monitoring and control system." Does the accused system "automatically modulate an electrical load" in direct response to a "change in the gas profile," or does it perform a more generic load-balancing function that falls outside the claim scope?

V. Key Claim Terms for Construction

"mobile data center"

Context and Importance: This term appears in the independent claims of both the ’307 and ’309 patents and is central to the claimed distributed computing system. The infringement analysis will depend on whether Alkane's on-site computing arrangements, which allegedly power Bitcoin miners, meet the definition of a "mobile data center."
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The specification describes the component as a "modular computing installation" and states it may comprise an "enclosure defining an interior space" with a plurality of computing units inside (’307 Patent, col. 4:6-9, col. 5:9-10). This language could support a construction covering any containerized or transportable computing hardware setup.
- Evidence for a Narrower Interpretation: The specification also provides specific examples, such as a "prefabricated housing or enclosure" like a "customized shipping container" designed for "portability, durability, safety, stackability, ventilation, weatherproofing, dust control and operation in rugged oilfield conditions" (’307 Patent, col. 18:50-54). This could support a narrower construction requiring features specifically adapted for oilfield deployment.

"automatically modulate an electrical load"

Context and Importance: This active limitation from claim 1 of the ’309 patent is a key point of distinction for that patent's invention. The dispute may turn on whether Alkane’s systems perform this precise automated function in response to the specified trigger (a change in the gas profile).
Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The term itself, viewed broadly, could encompass any automated adjustment of power consumption. Practitioners may argue this covers standard power management features common in computing systems.
- Evidence for a Narrower Interpretation: The specification links this function directly to the oilfield environment, stating the system may "determine a change in the profile, flow rate and/or pressure of the raw natural gas ... and then automatically modulate electrical load of a mobile data center accordingly" (’307 Patent, col. 7:19-24). This suggests the modulation must be tied to the characteristics of the gas supply, not just general system performance.

VI. Other Allegations

Indirect Infringement

The complaint alleges that Alkane actively induces infringement by its customers and/or end users by "selling, aiding, providing support for, [and] providing instructions for use of the Accused Products" (Compl. ¶69-70, ¶79-80).

Willful Infringement

The willfulness allegation is based on alleged pre-suit knowledge of Crusoe's technology and patents. The complaint contends that an Alkane representative was present at a November 2019 presentation where Crusoe's technology was described, and that Alkane subsequently "modified its flare gas mitigation system to power cryptocurrency mining, mirroring Crusoe’s patented" system (Compl. ¶53-54, ¶58, ¶72, ¶82).

VII. Analyst’s Conclusion: Key Questions for the Case

This dispute appears to center on the application of specific patent claim language to flare gas mitigation systems used for cryptocurrency mining. The key questions for the court will likely be:

A core issue will be one of definitional scope: Do Alkane’s on-site, containerized cryptocurrency mining operations constitute a "mobile data center" as that term is defined and used within the context of the asserted patents?
A key evidentiary question will be one of technical operation: What evidence will demonstrate that Alkane's systems perform the specific, automated control functions claimed in the ’309 patent, such as modulating the electrical load in direct response to changes in the natural gas supply profile?
A central factual question will concern knowledge and intent: What was the extent of Alkane's knowledge of Crusoe's technology following the alleged industry presentations, and does the evidence support the allegation that Alkane deliberately mirrored Crusoe's patented system, which would be critical for the willfulness claim?