News from Peace Heaven, the professional DRA (Drag-Reducing Agents) supplier

Houston Business Journal
A tiny Brookshire company that makes specialized chemical products for the oilfield is locked in a legal battle with giant ConocoPhillips Inc. over patent rights.
Gerald Eaton, president and founder of Energy & Environmental International, says his company has been nearly driven out of business by the "crippling costs" of Houston-based Conoco's patent infringement lawsuit, filed in September 2001.
In January, EEI counter-sued ConocoPhillips and Conoco Specialty Products Inc. in federal court in Houston, charging Conoco with anti-competitive practices and misuse of the judicial process for the purpose of driving EEI out of the pipeline flow improvement business.
ConocoPhillips, according to EEI's lawsuit, already controls 95 percent of the worldwide market for drag reducing agents — chemicals that are introduced into hydrocarbon pipelines to improve the flow of oil and refined products.
The current litigation arose out of a lawsuit that Conoco lost.
In 1999, a small Virginia-based company, General Technology Applications, sued Conoco for infringing on flow improvement patents which GTA had licensed EEI to use. In May 2000, a jury in Virginia found Conoco liable for willfully infringing the GTA patents, and Conoco was ordered to pay GTA $55 million in damages. (Conoco Inc. merged with Phillips Petroleum Co. in 2002 and is now known as ConocoPhillips).
Conoco said in 2000 that it was convinced its technology — patented after GTA's — did not infringe on GTA and that the jury misconstrued certain legal and technical issues to reach an "erroneous" verdict.
"Our position is we don't infringe on their patents — period," Conoco spokesman Carlton Adams said at the time.
The Houston Business Journal obtained a copy of a letter that Conoco sent to customers in May 2000 saying the company would "vigorously appeal" the verdict and reporting that it also had "begun the process of pursuing others who may be manufacturing or marketing a flow improver product" involving technology covered by Conoco's patents. Conoco said in the letter it intended to file suit against such other companies.
Conoco lost its appeal in the GTA case in September 2001 when a federal appeals court in Virginia affirmed the jury verdict. But Conoco nevertheless immediately filed suit against both GTA and EEI in federal court in Houston for alleged patent infringement.
Conoco soon settled with GTA — but not with EEI. "We developed our own intellectual properties over 10 years of effort, and we were very cautious in the whole thing," says EEI's Eaton, who was a vice president with Atlantic-Richfield, or ARCO, in the early-1980s when that company began developing the new drag reduction technology.
ARCO's technology eventually ended up belonging to Baker Petrolite, a division of Baker Hughes, which is also a competitor in the flow improvement market.
EEI was issued a patent in February 1999 and another in January 2000 for two different processes related to drag reduction. The second patent covered two co-catalysts that EEI says are "unlike any co-catalyst ever used to form drag reducing agents."
Eaton says the litigation has "devastated" EEI's business, causing it to lose customers and business opportunities.
"When you're a big company and you're being sued, it's no problem," he says. "But if you're small, customers shy away from you."
Conoco officials could not be reached for comment regarding this latest round of litigation with EEI.
Meanwhile, Eaton says the financial burden of the litigation is crippling EEI, while ConocoPhillips is a company with $60 billion in annual revenue and $35 billion in market capitalization.
Last month, Conoco won a motion to collect attorneys' fees and penalties from EEI because EEI had been unable to comply with the time restrictions of certain legal demands made by Conoco.
"We only have five people, and 80 percent of the market for what we make is outside the U.S.," says Eaton. "We had to be in Southeast Asia. We were just trying to do our work."
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