Magema Technology LLC v. Phillips 66

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Magēmā Technology LLC (Delaware)
  • Defendant: Phillips 66, Phillips 66 Company, and WRB Refining LP (Delaware)
  • Plaintiff’s Counsel: Porter Hedges LLP
• Case Identification: 4:20-cv-02444, S.D. Tex., 07/13/2020
• Venue Allegations: Plaintiff alleges venue is proper because Defendants maintain regular and established places of business in the Southern District of Texas and have allegedly committed acts of infringement within the district.
• Core Dispute: Plaintiff alleges that Defendant’s production and sale of very low sulfur fuel oil infringes four patents related to processes and compositions for refining heavy marine fuel oil to reduce its sulfur content.
• Technical Context: The technology addresses the need for cost-effective methods to produce marine fuel that complies with stringent international environmental regulations (the IMO 2020 Sulfur Cap) that took effect in January 2020.
• Key Procedural History: The complaint alleges that Plaintiff's predecessor, Rigby Refining, disclosed the then patent-pending technology to Phillips under confidentiality between 2017 and 2018 in an effort to commercialize the invention. It is further alleged that Phillips subsequently implemented the technology without a license and that Plaintiff provided Phillips with written notice of the first patent’s issuance in June 2019.

Case Timeline

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

U.S. Patent No. 10,308,884 - "Heavy Marine Fuel Oil Composition" (Issued June 4, 2019)

The Invention Explained

• Problem Addressed: The patent background describes the challenge of meeting new international regulations (MARPOL Annex VI) requiring a drastic reduction in the sulfur content of heavy marine fuel oil (HMFO) (’884 Patent, col. 2:1-34). It notes that prior art solutions, such as blending high-sulfur residual oils with low-sulfur distillates, present significant technical drawbacks, including creating unstable fuels where asphaltenes can precipitate out and cause engine damage (’884 Patent, col. 4:40-67).
• The Patented Solution: The invention claims a low-sulfur heavy marine fuel oil composition that is created by a specific method. The process starts with a high-sulfur heavy marine fuel oil that is already compliant with key industry standards for performance and safety (ISO 8217), aside from its sulfur content. This compliant fuel is then hydroprocessed to remove the sulfur (’884 Patent, Abstract). This method is designed to create a "direct substitute" for traditional fuel oil that meets the new sulfur rules while preserving the essential physical properties (like viscosity and density) required for safe marine engine operation, thereby avoiding the instability issues associated with blended fuels (’884 Patent, col. 12:5-12).
• Technical Importance: This approach deviates from simply blending different fuel streams by proposing the direct desulfurization of an otherwise finished and compliant marine fuel, aiming to solve the regulatory problem without introducing new fuel instability risks (Compl. ¶36).

Key Claims at a Glance

• The complaint asserts infringement of at least independent Claim 1 (Compl. ¶60).
• Essential Elements of Claim 1:
  • A low sulfur heavy marine fuel oil,
  • consisting essentially of a 100% hydroprocessed high sulfur heavy marine fuel oil,
  • wherein prior to hydroprocessing, the high sulfur heavy marine fuel oil is compliant with ISO 8217:2017 and is of merchantable quality as a residual marine fuel oil but has a sulfur content greater than 0.5% by weight,
  • and wherein the resulting low sulfur heavy marine fuel oil is also compliant with ISO 8217:2017, is of merchantable quality, and has a sulfur content less than 0.5% by weight.

U.S. Patent No. 10,533,141 - "Process and Device for Treating High Sulfur Heavy Marine Fuel Oil for use as Feedstock in a Subsequent Refinery Unit" (Issued January 14, 2020)

The Invention Explained

• Problem Addressed: As new regulations decrease the demand for traditional high-sulfur HMFO, oil refiners are left with an excess of this low-value byproduct (’141 Patent, col. 4:1-9). Simply disposing of or finding a market for this stream is an economic challenge for refineries (Compl. ¶30).
• The Patented Solution: The patent claims a process for upgrading high-sulfur HMFO into a more valuable feedstock for use in other refinery units, such as cokers or fluid catalytic crackers. The process involves mixing the HMFO with an "Activating Gas" (e.g., hydrogen), contacting the mixture with catalysts under specified reactive conditions, and performing a multi-step separation to yield a "Product Heavy Marine Fuel Oil" with significantly reduced sulfur (’141 Patent, Abstract; col. 9:26-32). The claims precisely define the physical and chemical properties of both the input feedstock and the resulting output product according to ISO standards.
• Technical Importance: This technology provides a method for refiners to repurpose a diminishing-value byproduct (high-sulfur HMFO) into a valuable input for other profitable refining processes, addressing a market shift driven by environmental regulation (Compl. ¶30).

Key Claims at a Glance

• The complaint asserts infringement of at least independent Claim 1 (Compl. ¶78).
• Essential Elements of Claim 1:
  • A process for treating high sulfur Heavy Marine Fuel Oil for use as feedstock in a subsequent refinery unit, comprising the steps of:
  • mixing a quantity of Feedstock Heavy Marine Fuel Oil with an Activating Gas mixture;
  • contacting the mixture with catalysts under reactive conditions to form a Process Mixture;
  • receiving and separating liquid components from bulk gaseous components;
  • subsequently separating residual gaseous and byproduct components to yield a Product Heavy Marine Fuel Oil; and
  • discharging the product.
  • The claim further requires that both the starting Feedstock and final Product meet extensive, specified parameters for sulfur content, viscosity, density, and other properties defined by ISO standards.

U.S. Patent No. 10,604,709 - "Multi-Stage Device and Process for Production of a Low Sulfur Heavy Marine Fuel Oil From Distressed Heavy Fuel Oil Materials" (Issued March 31, 2020)

• Technology Synopsis: The patent describes a process to convert "Distressed Fuel Oil Materials"—oils that are not compliant with industry standards and are thus unmerchantable—into a valuable low-sulfur fuel (’709 Patent, col. 7:51-64). It claims a multi-stage process that first uses a pre-treatment unit (such as a distillation column) to process the distressed material into a compliant feedstock, which is then hydroprocessed to remove sulfur (’709 Patent, Claim 1).
• Asserted Claims: At least Claim 1 (Compl. ¶99).
• Accused Features: The complaint alleges Defendants process "Distressed Fuel Oil Materials in Vacuum Flasher No. 5," which it asserts is a distillation column functioning as a pre-treatment unit, before hydroprocessing the material to create the final product (Compl. ¶102).

U.S. Patent No. 10,584,287 - "Heavy Marine Fuel Oil Composition" (Issued March 10, 2020)

• Technology Synopsis: This patent claims a low-sulfur heavy marine fuel oil as a product-by-process. The product is defined by the specific manufacturing process, which includes combining a compliant high-sulfur fuel oil with an activating gas, heating and pressurizing the mixture, contacting it with a specific type of catalyst system (fixed or ebulliated bed), and then performing a multi-step separation process (’287 Patent, Claim 1).
• Asserted Claims: At least Claim 1 (Compl. ¶120).
• Accused Features: The complaint alleges that Defendants' VLSFO product is produced by a process that includes mixing hydrogen with a high-sulfur feedstock, contacting it with a fixed bed catalyst, and separating the resulting components, thereby allegedly practicing the claimed process steps (Compl. ¶¶126-129).

III. The Accused Instrumentality

Product Identification

• The accused instrumentalities are Defendants’ low sulfur fuel oil ("LSFO") products, specifically identified as "Very Low Sulfur Fuel Oil" ("VLSFO"), and the processes used to manufacture them at Defendants’ Wood River and Bayway refineries, referred to as the "LSFO hydrotreater projects" (Compl. ¶59).

Functionality and Market Context

• The accused VLSFO product is a marine fuel with a sulfur content of "less than 0.5 wt%" (Compl. ¶63, citing Ex. 15). The complaint alleges this product is not a blend of different components but is instead "100%" "Fuel oil, no. 6" produced through hydroprocessing (Compl. ¶63). The accused processes allegedly "take high sulfur fuel oil and turn it into" the final low-sulfur product (Compl. ¶64, citing Ex. 14). The complaint alleges these projects were announced in June 2019 and allow Defendants to upgrade "over 30,000 barrels a day of high-sulfur fuel oil to very low sulfur" to meet the new IMO 2020 market demand (Compl. ¶51, ¶55). A presentation slide from a 2019 energy conference, attached as Exhibit 13 to the complaint, announces the "Wood River LSFO hydrotreater project" and "Bayway LSFO hydrotreater project" (Compl. ¶51, Ex. 13 at 13).

IV. Analysis of Infringement Allegations

’884 Patent Infringement Allegations

• Identified Points of Contention:
  • Scope Questions: An issue may arise regarding the meaning of "compliant with ISO 8217:2017" as applied to the feedstock. The analysis may question whether the high-sulfur material Defendants process is a finished, merchantable fuel meeting all ISO 8217 criteria before treatment, or an intermediate refinery stream that would not be considered "compliant."
  • Technical Questions: What evidence does the complaint provide that the accused VLSFO "consist[s] essentially of a 100% hydroprocessed" fuel? The litigation may explore whether Defendants add any other components, such as cutter stocks or other streams, that would materially affect the fuel's properties and potentially move it outside the claim scope.

’141 Patent Infringement Allegations

• Identified Points of Contention:
  • Scope Questions: The claim requires treating HMFO "for use as feedstock in a subsequent refinery unit." The analysis may raise the question of whether Defendants' process is directed to this purpose or to creating a final, saleable fuel oil product, which could suggest a mismatch with the claim's stated purpose.
  • Technical Questions: The claim recites two distinct separation steps. A factual question will be whether Defendants' process actually performs these two separations—first removing "bulk gaseous components," and then separately removing "residual gaseous components and any byproduct"—or if it uses a single, integrated separation system that does not map onto the claimed sequence.

V. Key Claim Terms for Construction

"consisting essentially of" (’884 Patent, Claim 1)

• Context and Importance: This term's construction is critical to defining the scope of the claimed composition. The infringement analysis for the '884 Patent will depend on whether the accused product is limited to only the hydroprocessed fuel oil and immaterial additives, or if it can include other fuel components.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: Practitioners may note that this is a standard term of art that permits the presence of unrecited ingredients that do not materially affect the "basic and novel" characteristics of the invention.
  • Evidence for a Narrower Interpretation: The specification distinguishes the invention from prior art "blending" solutions, describing the product as a "direct substitute" (’884 Patent, col. 12:10-12). This emphasis on a single-source, processed fuel, as opposed to a multi-component mixture, could be argued to narrow the scope of permissible unrecited ingredients.

"compliant with ISO 8217:2017" (’884 Patent, Claim 1; ’141 Patent, Claim 1)

• Context and Importance: This term defines the quality of the starting material for the claimed invention. The dispute may turn on whether the "high sulfur fuel oil" feedstock used by Defendants is a finished, merchantable fuel that meets all detailed ISO 8217 specifications or is merely an intermediate refinery stream that would not be considered "compliant."
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: A party could argue that the term implies general suitability for marine use, rather than strict, test-by-test adherence to every parameter of the ISO standard for a feedstock that is about to be further processed.
  • Evidence for a Narrower Interpretation: The claims of both the ’884 and ’141 patents recite this limitation for the feedstock. The specifications repeatedly cite the ISO 8217 standard and its specific physical properties (e.g., viscosity, density, CCAI), suggesting that starting with a product defined by these specific characteristics is an essential feature of the invention (’884 Patent, col. 8:58-65).

VI. Other Allegations

• Indirect Infringement: The complaint alleges that Defendant Phillips 66, as the operator and managing partner of Defendant WRB Refining LP, induces WRB to practice the allegedly infringing processes at its refineries (Compl. ¶69, ¶90).
• Willful Infringement: The complaint alleges pre-suit knowledge of the patents and technology. It asserts that Defendants were made aware of the patent-pending technology as early as April 2017 during confidential discussions and received explicit written notice of the issuance of the ’884 Patent in June 2019, but allegedly continued their infringing activities thereafter (Compl. ¶71, ¶92).

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

• A core issue will be one of definitional scope: does the claim term "compliant with ISO 8217:2017," when applied to the feedstock, require the starting material to be a finished, merchantable fuel meeting every parameter of the standard, or can it be construed to cover an intermediate refinery stream that has similar bulk properties but is not a final product?
• A key evidentiary question will be one of compositional purity: what is the precise composition of Defendants' accused VLSFO product? The viability of the infringement claim against the '884 Patent will likely depend on whether the product "consist[s] essentially of" a 100% hydroprocessed fuel or contains other components from blending that materially alter its characteristics.
• A central technical question will be one of process mapping: do the unit operations in Defendants' refineries perform the specific, sequential separation steps recited in the process claims (e.g., '141 Patent), or is there a fundamental mismatch between the accused real-world process and the discrete steps required by the patent claims?