DCT

6:23-cv-00344

Lancium LLC v. US Data Mining Group Inc

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 6:23-cv-00344, W.D. Tex., 05/10/2023
  • Venue Allegations: Venue is alleged based on Defendants' operation of regular and established places of business within the Western District of Texas, including cryptocurrency mining facilities in Upton County and Granbury.
  • Core Dispute: Plaintiff alleges that Defendants’ cryptocurrency mining operations, which utilize flexible datacenters co-located with power sources to modulate power consumption, infringe seven patents related to dynamic power management for datacenters.
  • Technical Context: The technology involves managing large, flexible electrical loads, such as datacenters, to stabilize power grids with intermittent renewable energy sources and to capitalize on real-time electricity price fluctuations.
  • Key Procedural History: The complaint alleges that on October 24, 2022, Plaintiff sent a notice letter regarding several of the asserted patents to Compute North Holdings, Inc., whose assets were subsequently acquired by Defendants on or about November 25, 2022. This event forms the basis for Plaintiff's allegations of pre-suit knowledge and willful infringement.

Case Timeline

Date Event
2018-01-11 U.S. Patent No. 11,016,456 Priority Date
2018-09-14 U.S. Patent Nos. 10,444,818 & 11,016,553 Priority Date
2019-10-15 U.S. Patent No. 10,444,818 Issued
2019-10-28 U.S. Patent Nos. 10,608,433 & 11,594,888 Priority Date
2020-01-01 Defendant USBTC was formed (approx.)
2020-03-31 U.S. Patent No. 10,608,433 Issued
2021-05-25 U.S. Patent No. 11,016,456 Issued
2021-05-25 U.S. Patent No. 11,016,553 Issued
2021-06-01 U.S. Patent No. 11,025,060 Issued
2021-06-08 U.S. Patent No. 11,031,813 Issued
2022-10-24 Plaintiff sent notice letter to Compute North Holdings, Inc.
2022-11-25 Defendants acquired certain assets of Compute North (approx.)
2023-02-28 U.S. Patent No. 11,594,888 Issued
2023-05-10 Complaint Filing Date

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

U.S. Patent No. 11,016,456 - "Method and System for Dynamic Power Delivery to a Flexible Data Center Using Unutilized Energy Sources"

The Invention Explained

  • Problem Addressed: The complaint describes the technical challenge of integrating variable renewable energy sources into the power grid, which creates volatility in electricity production and price, and the inability of traditional large industrial loads to quickly adjust their power consumption to match these fluctuations (Compl. ¶¶11-12).
  • The Patented Solution: The invention is a "flexible datacenter" that can be rapidly "turned off" or "turned down" to capitalize on these fluctuations. It achieves this with a "behind-the-meter" (BTM) power input system that receives power from a generation station before that power is stepped up for grid transmission, and a control system that modulates power to the datacenter's computers based on an "operational directive" (’456 Patent, Abstract; col. 5:5-15). This allows the datacenter to act as a controllable, variable load that helps stabilize the grid and consume otherwise curtailed or low-priced energy (Compl. ¶13).
  • Technical Importance: This approach enables large, power-intensive computing facilities to function as grid-stabilizing assets, thereby making intermittent renewable energy sources more economically viable (Compl. ¶14).

Key Claims at a Glance

  • The complaint asserts at least independent claim 1 (Compl. ¶42).
  • Essential elements of Claim 1 include:
    • A flexible datacenter comprising:
    • a behind-the-meter (BTM) power input system, wherein the BTM power input system is configured to receive power from a power generation station prior to the power undergoing step-up transformation for transmission to a power grid;
    • a power distribution system;
    • a plurality of computing systems; and
    • a datacenter control system configured to modulate power delivery to the plurality of computing systems based on an operational directive.
  • The complaint does not explicitly reserve the right to assert dependent claims for this patent.

U.S. Patent No. 10,444,818 - "Methods and Systems for Distributed Power Control of Flexible Datacenters"

The Invention Explained

  • Problem Addressed: The patent background describes the economic and operational problems of "curtailment," where power generators, particularly renewable ones, must reduce output due to grid congestion or low demand, leading to wasted energy and inefficient capital use (’818 Patent, col. 1:52-col. 2:58).
  • The Patented Solution: The patent describes a distributed power control architecture. This system includes a flexible datacenter with a BTM power source and a "remote master control system" that issues instructions to the datacenter to control the amount of BTM power it consumes (’818 Patent, Abstract). In response to a "ramp-down" directive from the remote system, the datacenter’s local control system causes the computing systems to execute a "set of predetermined operations" correlated with that directive (’818 Patent, col. 6:21-31).
  • Technical Importance: This distributed control architecture allows for the coordinated management of multiple flexible datacenters, enabling them to respond collectively to grid-level signals or broad economic conditions, rather than just local power availability (Compl. ¶15).

Key Claims at a Glance

  • The complaint asserts at least independent claim 1 (Compl. ¶61).
  • Essential elements of Claim 1 include:
    • A distributed power control system comprising:
    • a flexible datacenter comprising a plurality of computing systems powered by a behind-the-meter input system and a datacenter control system;
    • a remote master control system configured to issue instructions to the flexible datacenter that affect an amount of behind-the-meter power consumed;
    • one or more processors and data storage with instructions that cause the data center control system to perform operations, including:
      • receiving a first operational directive from the remote master control system to ramp-down power consumption, and
      • in response, causing the computing systems to perform a first set of predetermined operations correlated with the directive.
  • The complaint does not explicitly reserve the right to assert dependent claims for this patent.

Multi-Patent Capsules

  • Patent Identification: U.S. Patent No. 11,016,553, "Methods and Systems for Distributed Power Control of Flexible Datacenters," issued May 25, 2021.

  • Technology Synopsis: This patent is similar to the ’818 Patent but claims a distributed power control system where the ramp-down directive originates from a "local station control system" that is configured to at least partially control the co-located power generation system (Compl. ¶82).

  • Asserted Claims: At least independent claim 1 (Compl. ¶82).

  • Accused Features: The complaint alleges infringement by Defendants' BTM Accused Instrumentalities, specifically noting that generators at the Echo and Delta sites can instruct the datacenters to operate at lower power levels to satisfy grid or safety obligations (Compl. ¶¶88-89).

  • Patent Identification: U.S. Patent No. 11,031,813, "Systems and Methods for Auxiliary Power Management of Behind-the-Meter Power Loads," issued June 8, 2021.

  • Technology Synopsis: The patent claims a method for managing power when an intermittent BTM power source, such as a wind farm, transitions to a "stand-down mode." The system detects this transition, responsively selects an alternate power source (e.g., the grid), and enables power delivery from the alternate source to at least one computing system to maintain continuous power, while causing other systems to ramp down (Compl. ¶104).

  • Asserted Claims: At least independent claim 15 (Compl. ¶104).

  • Accused Features: The complaint alleges that when the co-located wind farm at the Echo site is not generating power, the datacenter is configured to source power from the ERCOT grid, thereby selecting an alternate power source, and to ramp down miners that are unprofitable on grid power pricing (Compl. ¶¶106, 110-112).

  • Patent Identification: U.S. Patent No. 11,025,060, "Providing Computational Resource Availability Based on Power-Generation Signals," issued June 1, 2021.

  • Technology Synopsis: This patent claims a method where a control system receives "power-generation economic signals" (e.g., electricity price), identifies when these signals cross a predefined threshold, and in response, adjusts the rate of power use by a flexible datacenter (Compl. ¶126).

  • Asserted Claims: At least independent claim 1 (Compl. ¶126).

  • Accused Features: Defendants' "Reactor" platform is accused of performing this method by monitoring energy price data from grid streams and triggering curtailment events when real-time energy costs render mining unprofitable, such as when prices exceeded $5,000/MWh (Compl. ¶¶129-131).

  • Patent Identification: U.S. Patent No. 10,608,433, "Methods and Systems for Adjusting Power Consumption Based on a Fixed-Duration Power Option Agreement," issued March 31, 2020.

  • Technology Synopsis: This patent claims a system that receives "power option data" based on an agreement, which specifies minimum power thresholds over a set of time intervals. The system's control system then determines a performance strategy to ensure the datacenter's power consumption target is equal to or greater than the required minimum threshold for each interval (Compl. ¶148).

  • Asserted Claims: At least independent claim 1 (Compl. ¶148).

  • Accused Features: The complaint alleges that Defendants' participation in ancillary service programs, such as those offered by ERCOT, constitutes operating under a power option agreement, where they must consume at least a specified amount of power over set time periods to act as a Load Resource (Compl. ¶152).

  • Patent Identification: U.S. Patent No. 11,594,888, "Methods and Systems for Adjusting Power Consumption Based on a Fixed-Duration Power Option Agreement," issued February 28, 2023.

  • Technology Synopsis: This patent claims a method related to the system in the ’433 patent. It involves monitoring conditions, receiving power option data (power thresholds and time intervals), and determining control instructions to dynamically adjust power consumption as a function of those instructions (Compl. ¶168).

  • Asserted Claims: At least independent claim 21 (Compl. ¶168).

  • Accused Features: Similar to the ’433 patent, infringement allegations are based on Defendants' participation in ancillary service and demand response programs, which allegedly require them to dynamically adjust power consumption in response to control instructions to meet agreed-upon power thresholds (Compl. ¶¶173-174).

III. The Accused Instrumentality

Product Identification

The accused instrumentalities are Defendants' cryptocurrency mining datacenters, particularly the "Echo" site at King Mountain, Texas and the "Delta" site at Granbury, Texas, and the associated control systems (Compl. ¶¶18, 28, 30). These are managed by Defendants' subsidiary U.S. Mining Infrastructure Operations (USMIO) (Compl. ¶23).

Functionality and Market Context

The accused datacenters are large-scale cryptocurrency mining operations co-located with power generation facilities, such as a wind farm, allowing them to operate "behind-the-meter" (BTM) (Compl. ¶¶28-29). They are controlled by proprietary software platforms named "Operator" for asset management and "Reactor" for energy curtailment (Compl. ¶¶24-25). The complaint alleges the "Reactor" platform is an "algorithmic energy curtailment" system that adjusts the power consumption of each individual miner in real-time based on profitability profiles derived from grid energy price data streams (Compl. ¶25). This system is allegedly capable of full power ramp-down or ramp-up in seconds, allowing the datacenters to participate in ancillary service programs offered by Independent System Operators like ERCOT (Compl. ¶¶25-26). A screenshot from Defendants' materials describes USMIO as managing 680 MW across three sites in Texas and Nebraska (Compl. ¶23, p. 8).

IV. Analysis of Infringement Allegations

11,016,456 Infringement Allegations

Claim Element (from Independent Claim 1) Alleged Infringing Functionality Complaint Citation Patent Citation
a behind-the-meter (BTM) power input system, wherein the BTM power input system is configured to receive power from a power generation station prior to the power undergoing step-up transformation for transmission to a power grid The accused "Echo" and "Delta" datacenters are co-located with power generation facilities and are configured to receive power "behind-the-meter." The Echo site is co-located with a wind farm and can receive up to 100% of its power from that wind farm. ¶45 col. 5:5-15
a power distribution system The accused datacenters have power distribution systems that receive power and distribute it to their cryptocurrency miners. ¶46 col. 9:8-10
a plurality of computing systems The accused datacenters contain a plurality of cryptocurrency miners, which are alleged to be the claimed "computing systems." ¶46 col. 7:20-24
a datacenter control system configured to modulate power delivery to the plurality of computing systems based on an operational directive The accused datacenters use the "Operator" and "Reactor" software platforms. Reactor is an "algorithmic energy curtailment platform" that adjusts miners' energy consumption in real time based on profitability, which is alleged to be modulating power based on an operational directive. A screenshot of the "Operator" dashboard shows monitoring and control over individual miners (Compl. p. 14). ¶47 col. 6:22-26

10,444,818 Infringement Allegations

Claim Element (from Independent Claim 1) Alleged Infringing Functionality Complaint Citation Patent Citation
a flexible datacenter comprising: (i) a plurality of computing systems powered by a behind-the-meter input system... and (iii) a datacenter control system configured to control the plurality of computing systems and the behind-the-meter power input system The accused Echo and Delta sites are alleged to be flexible datacenters with cryptocurrency miners ("computing systems") powered by a BTM input system. They include control capability to adjust miner energy consumption in real-time. ¶¶64-66 col. 5:5-15
a remote master control system configured to issue instructions to the flexible datacenter that affect an amount of behind-the-meter power consumed by the flexible datacenter The "Reactor" platform is alleged to be the remote master control system, as it adjusts consumption of each miner in real-time and is capable of full power ramp-down and ramp-up in seconds. The "Operator" platform is alleged to provide "centralized site management." ¶¶67-68 col. 6:15-21
receiving a first operational directive from the remote master control system, wherein the first operational directive is an operational directive for the flexible data center to ramp-down power consumption The Reactor platform allegedly sends operational directives to miners to ramp down power consumption based on real-time data analysis. ¶68 col. 6:21-27
in response to receiving the first operational directive, causing the plurality of computing systems of the flexible datacenter to perform a first set of predetermined operations correlated with the first operational directive In response to a directive from Reactor, the miners allegedly adjust power consumption based on preprogrammed custom firmware, which includes "chip frequency modulating commands." This adjustment is alleged to constitute the "first set of predetermined operations." ¶68 col. 6:27-31

Identified Points of Contention

  • Scope Questions: A central question for the '818 patent may be one of architectural mapping: does the Defendants' allegedly integrated "Operator" and "Reactor" software architecture meet the distinct claim elements of a "remote master control system" that issues instructions to a separate "datacenter control system"? The complaint's allegations may suggest a more centralized control structure than the distributed system recited in the claim.
  • Technical Questions: A key evidentiary question for the '818 patent may be one of functional scope: does adjusting power consumption via "chip frequency modulating commands" in firmware constitute performing a "set of predetermined operations" as required by the claim? A court may need to determine if this limitation requires a more complex set of computational steps beyond direct power modulation in response to a ramp-down signal.

V. Key Claim Terms for Construction

  • The Term: "operational directive" (’456 Patent, Claim 1)

  • Context and Importance: This term is the trigger for the claimed power modulation. Its construction is critical because if interpreted broadly to include any internal, algorithmically generated signal (like a profitability calculation), it may be easier for the Plaintiff to prove infringement. If interpreted narrowly to require an external command from a grid operator, it may be more difficult. Practitioners may focus on this term because the accused "Reactor" platform appears to operate based on internal profitability calculations derived from external price data, which may or may not be considered an "operational directive" in the context of the patent.

  • Intrinsic Evidence for Interpretation:

    • Evidence for a Broader Interpretation: The claim language itself does not specify the source or format of the "operational directive," which may support an interpretation that includes any signal, internal or external, that dictates the datacenter's power state.
    • Evidence for a Narrower Interpretation: The specification discusses responding to directives from a "local station control system," "remote master control system," or "grid operator," suggesting the term may contemplate a command from a distinct power management entity rather than a purely internal, automated calculation (’456 Patent, col. 9:15-20).

  • The Term: "remote master control system" (’818 Patent, Claim 1)

  • Context and Importance: The claim requires a distributed system with a "remote" controller distinct from the local "datacenter control system." The case may hinge on whether the accused architecture, as described, embodies this separation. If "remote" is construed to mean merely logically separate (e.g., a cloud server), it may favor the Plaintiff's theory. If it requires a more distinct operational and geographical separation as depicted in the patent's figures, it could present a challenge.

  • Intrinsic Evidence for Interpretation:

    • Evidence for a Broader Interpretation: The term "remote" is not explicitly defined with a geographical constraint in the specification's text, which could support a construction based on logical or network separation.
    • Evidence for a Narrower Interpretation: Figure 4 of the ’818 Patent depicts the "REMOTE MASTER CONTROL SYSTEM (420)" as a separate block, connected via a network link (425) to the on-site "DATACENTER CONTROL SYSTEM (220)," suggesting a clear architectural and potentially physical separation (’818 Patent, Fig. 4). The complaint describes the accused "Reactor" and "Operator" platforms as being "integrated," which may not align with this depicted separation (Compl. ¶25).

VI. Other Allegations

  • Indirect Infringement: The complaint alleges inducement of infringement, stating that Defendants encourage and facilitate infringement by third-party owners of datacenters for whom Defendants manage operations (Compl. ¶¶51, 72, 94).
  • Willful Infringement: Willfulness is alleged based on pre-suit knowledge. The complaint asserts that Defendants acquired the assets of Compute North LLC on or about November 25, 2022, and that as part of due diligence, they learned Lancium had put Compute North on notice of infringement of several asserted patents via a letter dated October 24, 2022 (Compl. ¶¶48-50, 69-71).

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

  • A core issue will be one of architectural mapping: do the Defendants’ software platforms, described as the integrated "Operator" and "Reactor" systems, embody the distinct, multi-component structures claimed in patents like the '818 and '553 Patents, which recite separate local and remote control systems? The court will likely need to determine if the accused software is a single, centralized system or a distributed one that maps onto the claim elements.
  • A key evidentiary question will be one of functional equivalence: does the real-time, profitability-based adjustment of cryptocurrency miner power via firmware commands, as alleged in the complaint, meet the claimed functional requirement of causing computing systems to "perform a first set of predetermined operations" in response to a ramp-down directive?
  • A central question for the patents related to ancillary services (e.g., ’433, ’888) will be one of definitional scope: does Defendants' participation in ERCOT demand response programs, as a "Load Resource," constitute operating under a "power option agreement" that specifies "minimum power thresholds" and "time intervals" as those terms are used in the claims?