DCT
1:23-cv-01252
Upstream Data Inc v. Crusoe Energy Systems LLC
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Upstream Data Inc. (Canadian)
- Defendant: Crusoe Energy Systems LLC (Delaware)
- Plaintiff’s Counsel: DLA Piper
- Case Identification: 1:23-cv-01252, D. Colo., 05/18/2023
- Venue Allegations: Venue is alleged to be proper in the District of Colorado because Defendant has its principal place of business in Denver, commits alleged acts of infringement in the district, and maintains a regular and established place of business there.
- Core Dispute: Plaintiff alleges that Defendant’s "Digital Flare Mitigation" systems, which use stranded natural gas to power on-site cryptocurrency mining, infringe a patent related to the same technology.
- Technical Context: The technology provides a method to monetize otherwise wasted natural gas at remote oil and gas sites by using it to generate electricity for energy-intensive blockchain mining operations.
- Key Procedural History: The complaint alleges that Defendant’s own patent applications were rejected by the U.S. Patent Office over the published application for the patent-in-suit. It also references prior litigation initiated by the Defendant against one of the Plaintiff’s customers in the same district.
Case Timeline
| Date | Event |
|---|---|
| 2017-02-08 | ’372 Patent Priority Date |
| 2018-01-01 | Approximate date of conception for Defendant's technology, as alleged in prior litigation |
| 2023-02-07 | ’372 Patent Issue Date |
| 2023-05-18 | Complaint Filing Date |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 11,574,372 - “Blockchain Mine at Oil or Gas Facility” (issued Feb. 7, 2023)
The Invention Explained
- Problem Addressed: Remote oil and gas facilities often lack the infrastructure to transport and sell excess natural gas, forcing them to engage in the economically wasteful and environmentally harmful practices of venting or flaring the gas (’372 Patent, col. 7:46-8:10).
- The Patented Solution: The invention proposes a system that captures this "stranded gas" at the facility and uses it as fuel for an on-site generator, which in turn powers a portable blockchain mining device (’372 Patent, Abstract; col. 1:15-24). This solution converts a waste product into a valuable digital asset, such as cryptocurrency, directly at the source (Compl. ¶10). The system is designed to be portable, for example, within an intermodal shipping container, for deployment at remote sites (’372 Patent, col. 2:26-39).
- Technical Importance: This approach creates an economic incentive for oil and gas operators to mitigate flaring, while also addressing the high energy costs and geographic centralization challenges associated with traditional blockchain mining (Compl. ¶11-12).
Key Claims at a Glance
- The complaint asserts independent claim 1 and dependent claim 2 (Compl. ¶29).
- Independent Claim 1 requires:
- A source of combustible gas from a hydrocarbon production, storage, or processing facility.
- A generator connected to the gas source to receive a continuous flow of gas.
- A blockchain mining device connected to the generator.
- The blockchain mining device must have a mining processor and a network interface.
- The network interface connects to the internet to access a blockchain database on a peer-to-peer network.
- The mining processor is adapted to mine transactions for the blockchain database.
III. The Accused Instrumentality
- Product Identification: Defendant Crusoe’s “Digital Flare Mitigation” systems and similar technology (Compl. ¶4, 17).
- Functionality and Market Context: The complaint alleges the accused products are containerized, modular cryptocurrency mining systems designed to be connected to sources of stranded natural gas at remote well sites (Compl. ¶6). The system is described as one that "harnesses stranded natural gas to create on-site power that supports intensive computing functions, such as Bitcoin mining" (Compl. ¶18, citing an exhibit from prior litigation). A diagram from the Defendant's website, included in the complaint, illustrates a system capturing gas from oil site tanks to power a containerized data center, which is alleged to reduce CO2 equivalent emissions (Compl. p. 7). The complaint positions the accused products as direct competitors to the Plaintiff’s own commercial embodiments of the patented technology (Compl. ¶17, 21).
IV. Analysis of Infringement Allegations
The complaint references a claim chart in Exhibit 3, which was not attached to the filed complaint. The infringement theory is summarized below based on narrative allegations.
’372 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| A system comprising: a source of combustible gas produced from a facility selected from a group consisting of a hydrocarbon production, storage, or processing facility; | Defendant’s systems are “connected to sources of stranded natural gas” at remote well sites. | ¶4 | col. 1:16-19 |
| a generator connected to the source of combustible gas to receive a continuous flow of combustible gas to power the generator; | Defendant’s systems “harness[] stranded natural gas to create on-site power.” | ¶18 | col. 1:19-20 |
| and blockchain mining devices connected to the generator; | The on-site power supports “intensive computing functions, such as Bitcoin mining” using “cryptocurrency mining systems.” | ¶17, 18 | col. 1:21-22 |
| in which: the blockchain mining devices each have a mining processor and are connected to a network interface; | An illustration in the complaint, taken from patent Figure 2, depicts a "Mine" (12) containing components including mining processors and network equipment. | ¶13, 14 | col. 3:3-5 |
| the network interface is connected to receive and transmit data through the internet to a network that stores or has access to a blockchain database; | The system is designed to "wirelessly connect the remote mine to the internet" to manage operations. | ¶14 | col. 3:5-8 |
| the mining processors are connected to the network interface and adapted to mine transactions associated with the blockchain database and to communicate with the blockchain database; | The accused systems are explicitly described as performing "Bitcoin mining." | ¶18 | col. 3:6-10 |
- Identified Points of Contention:
- Scope Questions: A potential dispute may arise over the definition of "facility." The claim recites "a hydrocarbon production, storage, or processing facility." The parties may contest whether the specific connection point of the accused systems falls within the scope of this term as it is defined and used in the patent.
- Technical Questions: While the complaint alleges a direct overlap in functionality, a key question will be whether the specific hardware and software architecture of the accused "Digital Flare Mitigation" systems contains every element of the asserted claims. The complaint does not provide sufficient detail for a deep technical comparison, but it does allege the systems perform "Bitcoin mining," which directly implicates the claimed function (Compl. ¶18).
V. Key Claim Terms for Construction
- The Term: "facility" (from "hydrocarbon production, storage, or processing facility")
- Context and Importance: The definition of "facility" is critical to establishing the first element of the claim. Infringement will depend on whether the Defendant’s points of connection to "sources of stranded natural gas" (Compl. ¶4) qualify as the claimed type of "facility."
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The claim language itself presents a list ("production, storage, or processing"), suggesting the term is not limited to a single type of location. The specification further supports this by describing embodiments connected to a "multi-well pad," "oil and gas separating vessels such as tanks," and the "inlet line of the flare" (’372 Patent, col. 2:11, 2:14-15, 2:21-22).
- Evidence for a Narrower Interpretation: A party might argue that the primary embodiment, depicted in Figure 1 and described as a "remote oil well" (’372 Patent, col. 6:53-55), limits the term's scope to the immediate wellhead or production site, potentially excluding downstream storage or transport infrastructure.
VI. Other Allegations
- Indirect Infringement: The complaint alleges active inducement, stating that Defendant sells, provides support for, and provides instructions for use of the accused products to its customers and end users, thereby encouraging their infringing use (Compl. ¶31-32).
- Willful Infringement: The willfulness claim is supported by allegations of pre-suit knowledge. The complaint asserts that Defendant was aware of the technology because: (1) the patent’s underlying published application was cited by the USPTO during the prosecution of Defendant's own patent applications; (2) Defendant identified Plaintiff as a competitor in a 2021 company blog post; and (3) Plaintiff marked its own products with the patent number (Compl. ¶21, 35).
VII. Analyst’s Conclusion: Key Questions for the Case
- Priority and Validity: The complaint frames the dispute as one of a "pioneer" (Plaintiff) versus a "follower" (Defendant). A central issue will be whether the patent, which claims priority to February 2017, is valid and enforceable against Defendant’s technology, which Defendant allegedly conceived in 2018. The outcome may depend on the patent’s ability to withstand challenges based on prior art that Defendant may introduce.
- Willfulness and Intent: Given the complaint’s specific allegations that Defendant knew of the inventor’s technology via patent office rejections and had identified Plaintiff as a competitor, a key question will be whether any infringement was willful. The evidence cited in the complaint raises a significant question about Defendant's state of mind when developing and selling its accused systems.