`571-272-7822
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`Paper No. 80
`Entered: November 10, 2022
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`______________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`______________
`
`SWM INTERNATIONAL, LLC and
`NEXTIER COMPLETION SOLUTIONS INC.,
`Petitioner,
`
`v.
`
`DYNAENERGETICS EUROPE GMBH,
`Patent Owner.
`______________
`
`PGR2021-00097
`Patent 10,844,697 B2
`______________
`
`Record of Oral Hearing
`CONFIDENTIAL
`Held Virtually: October 6, 2022
`______________
`
`
`
`
`Before ERIC C. JESCHKE, RICHARD H. MARSCHALL, and
`JASON W. MELVIN, Administrative Patent Judges.
`
`
`
`
`
`
`
`
`SWM and NexTier Ex. 1072 - Page 1
`SWM and NexTier v. DynaEnergetics
`PGR2021-00097 - U.S. Patent No. 10,844,697
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`PUBLIC VERSION
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`PGR2021-00097
`Patent 10,844,697 B2
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`APPEARANCES:
`
`ON BEHALF OF THE PETITIONER:
`
`
`ALEXANDER B. STEIN, ESQ.
`C. ERIK HAWES, ESQ.
`MELISSA STORY, ESQ.
`Morgan, Lewis & Bockius LLP
`1400 Page Mill Road
`Palo Alto, California 94304-1124
`650-843-4000
`
`
`
`ON BEHALF OF THE PATENT OWNER:
`
`
`PRESTON HEARD, ESQ.
`BARRY J. HERMAN, ESQ.
`Womble Bond Dickinson (US) LLP
`Atlantic Station
`Suite 2400
`271 17th Street NW
`Atlanta, Georgia 30363
`404-872-7000
`
`JASON M. ROCKMAN, ESQ.
`LISA J. MOYLES, ESQ.
`Moyles IP, LLC
`One Enterprise Drive, Suite 428
`Shelton, Connecticut 06484
`203-428-4420
`
`
`
`
`
`
`
`The above-entitled matter came on for hearing on Thursday, October
`6, 2022, commencing at 1:00 p.m. EST, by video/by telephone.
`
`
`
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`P R O C E E D I N G S
`- - - - -
` JUDGE JESCHKE: Good morning. Welcome to the Patent
`Trial and Appeal Board.
` This is a virtual hearing in PGR2021-00097 between
`Petitioner SWM International and NexTier Completion Solutions
`Inc. and Patent Owner DynaEnergetics Europe GMBH. The
`challenged patent is U.S. Patent No. 10,844,697 B2.
` I am Judge Jeschke. With me on the panel today are
`Judges Marschall and Melvin. Like counsel, we are, of
`course, located remotely.
` This is a fully confidential hearing with no public
`line or live stream open.
` For the counsel, you've probably noticed a number of
`folks you probably don't recognize, the names out in the
`counsel side. I just wanted to explain that on the record
`here. Those are -- there was a number of law clerks within
`the Patent Trial and Appeal Board that just started, so this
`is an opportunity for them to listen in. They are, of
`course, kind of within the -- you know, the -- the -- in the
`Board now, so they are able to listen in on the hearing, but
`that's -- that's what those names are.
` So I just want to make sure all of those folks are
`muted as well while I'm on that topic.
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` So, with that, let's start with -- with counsel
`introductions for the Petitioner. Go ahead.
` MR. STEIN: Yeah. Hi. Good morning, Your Honors.
`You have Alex Stein on behalf of the Petitioners, and with me
`on the video feed are both Erik Hawes and Melissa Story, and
`we're all Morgan, Lewis & Bockius.
` JUDGE JESCHKE: Okay. Thank you, Mr. Stein.
` For Patent Owner.
` MR. HEARD: Good afternoon, Your Honor.
`Preston Heard here, Womble Bond Dickinson.
` And can you hear me? Just make sure the audio is
`working. Great.
` JUDGE JESCHKE: We can, Mr. Heard.
` MR. HEARD: Okay. Great. And with me is Ms. Moyles,
`who we were unsure her ability to participate, but
`Lisa Moyles, Lead Counsel for us, of Moyles IP, and she is
`able to. We've got Jason Rockman on the line as well from
`Moyles IP and Barry Herman from Womble.
` JUDGE JESCHKE: Okay. Thank you. That answers my
`next question about the LEAP issue. So it sounds like
`Patent Owner will have an extra 15 minutes, and I'll talk
`about that in a moment, but good to see you, Ms. Moyles. I'm
`glad you're feeling better.
` Okay. So, as provided in the hearing order from
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`August 31st and as in the revised order after that, after the
`prehearing conference, each side -- well, I guess Petitioner
`now is going to have 60 minutes total, and Patent Owner will
`have with its LEAP request 75 total minutes.
` And, again, this is a fully confidential hearing.
` So, as you all know, of course, the Petitioner bears
`the burden of persuasion here and will proceed first,
`followed by Patent Owner, then Petitioner again for a brief
`rebuttal and Patent Owner for a sur-rebuttal after that.
` As each presentation estimate nears its end, we will
`let you know when there are about two minutes left and when
`your time has expired.
` There are some pending motions here. Petitioner and
`Patent Owner may use some of their allotted time to discuss
`those if they'd like.
` For the clarity of the record and given the remote
`nature of the hearing here, please make sure to identify
`early and often the current slide number for the
`demonstratives, which is extremely helpful once we go back to
`the transcript to make sure we understand exactly where
`you're -- what you're discussing.
` Also, please remember to speak directly into the
`microphones. You all have been doing that well thus far.
` All of the panel members, of course, have a set of
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`demonstratives as well as access to the complete record, so
`there's no need to share on your side the demonstratives.
` Counsel, also, if after the -- after the hearing is
`complete, if you could just stay on the line for a few
`minutes to help with spellings, if the court reporter has any
`questions.
` One thing -- you know, we'd like to keep the
`arguments here focused on the merits, so counsel is reminded
`not to interrupt the other side with any objections, which
`rarely ever happens, but we just wanted to remind you all of
`that.
` And, with that, the presenting counsel for
`Petitioner, if you could provide an estimate for your opening
`and rebuttal, we could give you a good estimate on time. So
`I assume it'll be probably Mr. Stein, I guess, will be doing
`the discussions?
` MR. STEIN: Yes, Your Honor. And I think we'd like
`to spend about 45 minutes on the opening, so I'm hoping to
`reserve 15 minutes for rebuttal; although, if it runs over a
`little bit, I'll eat into that rebuttal time a little bit.
`But if we could get the reminder around that 15-minute mark,
`I'd appreciate it.
` JUDGE JESCHKE: Sure, yeah. And that's a good point,
`Mr. Stein.
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` Obviously, for both sides, it's -- you know, these
`are just estimates, so if you want to cut into your time --
`we're going to tell you where your time is, so you can decide
`from there. It's not -- we don't really care how much time
`you take on each part, you know, within a certain bounds of
`reasonableness, but -- but yeah, these are just estimates, so
`you can feel free to use less or more as you need to.
` Okay. I think -- so I think, then, we will set the
`clock, Mr. Stein, at 45 minutes, and you can begin whenever
`you're ready.
` MR. STEIN: Thank you very much, Your Honor.
` ORAL ARGUMENT ON BEHALF OF PETITIONER
` MR. STEIN: And it's my privilege to be here on
`behalf of the Petitioners, SWM International and NexTier
`Completion Solutions.
` If you have my demonstratives in front of you, if you
`could turn to slide 2. It's just sort of an overview of what
`we'll be talking about today.
` So I'll start with a very brief discussion of the
`'697 patent. I know Your Honors have already had a hearing
`on this particular patent, so I'm not going to spend much
`time on that section unless there are questions.
` JUDGE JESCHKE: Yeah. You can skip as much of that
`introduction as you'd like, Mr. Stein. You can go to
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`slide 11 if you'd like to. I think there's probably more
`pressing things. We probably know --
` MR. STEIN: Absolutely.
` JUDGE JESCHKE: -- know the background pretty well by
`now.
` MR. STEIN: Okay. I'm happy to do that. So I'll
`just spend one moment.
` So going to slide 4, the only thing I'd like to
`highlight is what this patent really focused on, the majority
`of the patent is about this self-centralizing tool. That's
`most of the figures; that's most of the description.
` What we're talking about today -- and I'm going to
`jump right ahead in a second -- is this tandem seal adapter
`and some characteristics of that tandem seal adapter, which
`has an annotated view on slide 6. And that's really where
`Patent Owner has stretched this patent quite a bit, which is
`why we'll be talking about how they've run into the prior art
`and how they run into some pretty important issues under
`Section 112.
` Before I jump away from the patent, I just want to
`mention slide 7, which talks about an assembly process. So
`this is from the patent at column 10, lines 4 to 16. And
`what you'll see there is that the patent describes an
`assembly process where you push the tandem seal adapter into
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`one of the gun carriers, and then you then thread -- and this
`is highlighted in green text at the bottom of slide 7 -- a
`subsequent gun assembly onto the first gun assembly or you
`thread a top sub.
` So I just want to have everyone keep that in mind,
`and that'll be important when we get to one of the later
`sections.
` And I'll -- now I'll follow the direction and go
`right to slide 11. So we'll talk about the Petition's
`unpatentability grounds and just a brief overview of SafeJet
`with a focus on its status as prior art.
` So, turning to slide 12, this is a table of the
`grounds that we presented in the Petition. The ones that we
`focused on in our Reply brief and the ones that I'll spend
`all my time on today are the ones based on SafeJet, so that's
`Ground 1, which is an anticipation ground; and Grounds 4 and
`6, which are obviousness grounds for Claim 8, both with
`SafeJet as the primary reference; and then I'll talk about
`Grounds 8 to 10, which are the 112 issues.
` So turning --
` JUDGE JESCHKE: Mr. Stein, I had one question about
`this with the grayed-out. Are you affirmatively withdrawing
`the grayed-out grounds or no?
` MR. STEIN: We're not affirmatively withdrawing them.
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`We still stand behind what was in the Petition, but given the
`limited space and the limited time -- limited space in our
`brief, limited time at the hearing -- our -- we feel our
`strongest grounds are 1, 4, 6, and 8 to 10, so that's where
`we'll spend our time.
` JUDGE JESCHKE: Okay.
` MR. STEIN: So turning to slide 13, just a brief
`background of the SafeJet system and how we've relied on it.
`So this is a piece of product prior art. And, you know, we
`-- I've appeared in front of the PTAB a few times, and
`product prior art is not used often, but that is what we're
`using today in this PGR.
` And so I just want to highlight that it's this system
`as a whole. And we have a lot of evidence demonstrating the
`aspects of this system, the sales of this system, the public
`uses of the system, and so it's the collective whole of this
`evidence that we're relying on.
` And one other thing to emphasize here in slide 13 is
`this is a third party's product. This is Schlumberger's
`product. This is not the Patent Owner's product. And that's
`going to become important when we talk about this
`experimental use exception, but this is a third-party
`product.
` And with that, I'll jump to slide 14. So these are
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`sort of the key features of the SafeJet system, some of which
`I have in front of me, and I'll talk about each of the
`components. But we have what SafeJet referred to as the
`bulkhead, and we also had -- or Schlumberger, or SafeJet --
`the feedthru. This is an original feedthru. That was in the
`possession of Steve Olsen, who's one of our witnesses that
`we'll talk about in a second, a former Schlumberger employee.
` See, the way this is assembled, as you can see there,
`is you thread in the feedthru to the middle of this bulkhead,
`and then you have an assembled piece like this, which is what
`you see on the slide there.
` So, on the left, you have what Schlumberger referred
`to as the bulkhead. It has a part that supports the box end
`of a gun carrier. It has an o-ring groove with an o-ring in
`it. It has a shoulder. There's another o-ring with an
`o-ring groove, and then it has another part that supports the
`pin end. And like I just demonstrated, you have a feedthru
`that threads into the middle of that bulkhead.
` And before I leave this slide, I'll just mention some
`terminology. So while Schlumberger called that piece a
`bulkhead, the patent refers to that as a tandem seal adapter.
`We've -- those are just interchangeable to us, so I'll
`probably just use the patent's terms and call it a tandem
`seal adapter. And the feedthru, Schlumberger called that a
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`feedthru; the patent calls that a pressure bulkhead, but
`those are mostly just interchangeable.
` So slide 15, just an introduction to Mr. Steve Olsen,
`one of the former Schlumberger employees that's offered
`testimony in this case. He worked at Schlumberger for well
`over a decade. He was a field specialist when SafeJet was
`introduced. He oversaw uses of SafeJet in the field for
`customers in 2009 and other times, and he personally provided
`these components. This is the charge tube that Mr. Olsen had
`in his possession, and this is the original feedthru that we
`talked about, and these were used to then create the bulkhead
`based on these components and also the testimony of
`Mr. Markel.
` If you turn to slide 16, Daniel Markel was also an
`employee of Schlumberger for almost 20 years. He was the
`mechanical engineer that actually designed the SafeJet tandem
`seal adapter and the pressure bulkhead. He actually built
`those, and it was his recollections that were used to, like I
`said, produce this evidence.
` If we turn to slide 17, how did we rely on the
`SafeJet system as prior art? So looking at post AIA 102,
`there's kind of three buckets that we have now. We have
`public use, we have on sale, and we have otherwise available
`to the public. We relied on all three of them. That's a
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`quote from the Petition. We really only need one for it to
`be prior art. We relied on all three, and I want to
`emphasize that just for a moment because some of the
`experimental use stuff we'll talk about really has no impact
`to the "otherwise available to the public" and very little
`impact on the "on sale" bar as well, and I'll get into those
`details.
` So, turning to slide 18, who was the SafeJet system
`sold to? Well, it was sold to a number of --
` JUDGE JESCHKE: Mr. Stein, I had a question about
`this one. So you have in the top here of this slide, it
`says, Bought the SafeJet system. I'm wondering what really
`supports that idea.
` So here's my -- my thinking is, Did rights in the gun
`ever actually transfer to anyone, from Schlumberger to
`anyone? This is a system claim -- Claim 1 is, at least -- so
`it would seem under the law that it would require that
`transfer. It seems from the documents that we have -- for
`example, Exhibit 1032, which is that ticket -- it shows --
` MR. STEIN: Yeah.
` JUDGE JESCHKE: -- rental, rental of a SafeJet gun
`system.
` So my question for you is, Was there an actual sale
`or was this a payment for, I don't know, a service provided?
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`In other words, you know, for Schlumberger to come and
`detonate this gun within ConocoPhillips, let's say, you know,
`wellbore. Could you address that issue?
` MR. STEIN: Yeah, absolutely. And I'd like to draw
`Your Honors' attention to that piece of evidence, slide 20,
`where it does mention rental. And if you -- if you look
`there, there's a few things that I would say.
` These -- these perf guns just aren't rented at all
`because once -- once you fire them, they're destroyed.
`That's the end of the gun. So there's not much to rent. So
`it does transfer to whoever's using it. You run it down
`hole, it explodes, and that's the end of it. There's nothing
`that can then be returned. So in the sake of sort of
`understanding what a rental means, there wouldn't be anything
`to give back. So just as to the premise of that, it doesn't
`make much sense.
` And if you look at slide 20, you'll see that there's
`sort of two line items. We've highlighted one in green in
`the bottom left, and then there's one above it. So the one
`above it says rental, but the one below it says flat charge,
`prepayment, final order. So there might be multiple things
`discussed here, but what's pretty clear to us is that there
`was a sale, there was a flat charge, and there was a
`prepayment.
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` And then specifically on the rental piece -- and I
`want to find the quotation here -- but Mr. Olsen during his
`deposition talked about that, and he explained that that was
`sort of a placeholder because they didn't kind of have a SKU
`number. So if you look at Exhibit 2033 --
` JUDGE JESCHKE: When you say "that," do you mean the
`line item 20 on slide 20?
` MR. STEIN: Yes, that's what I mean.
` JUDGE JESCHKE: Okay.
` MR. STEIN: So if you look at Exhibit 2033 -- and
`it's a condensed transcript, so I'm -- I'm going to point to
`the little quadrant page, not the lower right-hand corner
`page -- so 2033, page 2, quadrant page 217, and that's
`line 8, and you'll see this was a discussion during his
`deposition.
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` So, again, just sort of a placeholder on that field
`ticket, but it doesn't mean that this was rented and then
`returned. It was sold. That's what the testimony shows.
`And I think it's also clear that if you sort of divide off
`that line item from the one below it, about a flat charge,
`prepayment, it's very clear that this was sold. It was not
`-- it was not a rental.
` And I'd also draw Your Honors' attention, then, to
`slide 21. So it wasn't just this one purchase order that we
`have that's -- you know, we have a snippet on slide 20.
`Slide 21 is an email exchange from Schlumberger, which --
`with its customers, which comes after that field ticket. And
`you can see that it says in the middle there, Last job we did
`was in August. There we consumed 75 SafeJet.
` And I think the act of consumption would tell you
`that it's not a rental. You don't -- you don't normally
`refer to something as being consumed if you're renting it and
`then returning it. And I think that -- on top of the
`descriptions here talking about there was a certain stock,
`there was a prepurchase, there was new stock -- I think the
`evidence is very clear that this was sold. It exchanged
`hands, and it didn't come back, and I think that's what the
`evidence shows.
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` So, continuing -- continuing on, if you go to
`slide 22, the other thing I'd like to mention as well is some
`additional evidence from Mr. Olsen concerning the payment and
`the exchange of money before these items were produced.
` So if you look at, for example, Exhibit 2033, page --
`quadrant page 22, lines 2 to 5,
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` So they had to pay, and then it was produced.
` Oh, and hopefully I got that citation right. It's
`Exhibit 2033, quadrant page 222 -- I might've said 22 --
`lines 2 to 5.
` And then the other part that I would flag is also on
`that same Exhibit 2033, page 57, lines 2 to 14, where
`Mr. Olsen talks about him being present when these sale
`discussions were being had because he was there to support
`the tech side of it. His quote was, I was there to back them
`up for the tech side of it. So he was at these discussions.
`He was at the table because he was part of the negotiations
`and he was supporting the sales people.
` So, with that, I'll kind of breeze through the -- we
`think the sales are very definitive. And, like I said, we
`really only need one for this to qualify as prior art. We
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`have much more than that. We also have public uses. And I
`don't want to spend too much time here because I think it's
`pretty clear, but I just want to emphasize a few things.
` So slide 23 shows that, you know, there is evidence
`of when, where, and by whom this SafeJet system was used, and
`there's even comments in this record showing how much the
`clients liked it. You can see on slide 23, the bottom right
`corner, Client liked gun system. Client was impressed.
` And then if we continue on, in slides 24 and 25 --
` JUDGE JESCHKE: Mr. Stein, my -- my -- I have a
`question about these uses, and I guess it's the public nature
`of the uses.
` MR. STEIN: Sure.
` JUDGE JESCHKE: And should we be concerned in any way
`about the fact that -- I think that these strings come
`assembled to the site -- and correct me if I'm wrong on that
`-- such that even someone in the public, let's say, who
`happened to be on this land, which I suspect is private land
`anyway, that they aren't able to see, for example, some of
`the claimed features. Why should we not be concerned about
`that as negating, if you will, the public use of this
`product?
` MR. STEIN: Sure. So I'll say two things. So, one,
`this wouldn't affect the sales. The sales are clear it's
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`prior art for the sales. Now going back to --
` JUDGE JESCHKE: I understand.
` MR. STEIN: Yeah. So public uses, the first thing I
`would point to, just to address your question about assembly,
`they don't come assembled. They're assembled at the well
`site.
` So we looked at that portion from the patent at
`column 10, and that's the same way that SafeJet is assembled.
`You bring the carriers, you push the tandem seal adapter in,
`and you screw on top. And there was -- there's significant
`discussion from Mr. Olsen concerning how this assembly took
`place, where it took place on site, and that many, many
`people came and saw him assembling it.
` And I'm going to pull -- let me -- I think the --
` JUDGE JESCHKE: People -- people from the -- from
`ConocoPhillips, for example, or the --
` MR. STEIN: From the customers. There was -- so the
`-- the one site to look at is Exhibit 2033, again,
`Mr. Olsen's deposition, quadrant page 158, and that's
`line 52, where -- again, this is Patent Owner's counsel
`talking to Mr. Olsen. And you can see he's talking about --
`starting at line 2 -- he's talking about who the models were
`seen to. And the part I wanted to draw your attention to --
`I'm not seeing immediately -- is -- oh, quadrant page 159,
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`line 15.
` When you showed the models -- for instance, to
`ConocoPhillips -- was there any expectation of
`confidentiality?
` No.
` And then the -- I want to find the other citation
`too. I may have to come back to that in a second, but he has
`significant testimony also about the fact that he took these
`pieces, laid them out, and showed everyone how to put them
`together. I'll -- I'll have to maybe ask someone on my team
`to pull those cites, and then I'll get them to you in a
`minute.
` But hopefully -- did that -- did that address your
`question?
` JUDGE JESCHKE: Yeah, I think so. I think that's the
`issue that is in my head about these uses. I think it's --
`it's -- it's well supported that there were uses, certainly,
`that took place. It's just a public nature of them that I'm
`trying to unpack fully, but I think -- I think the cites that
`you've given are helpful. Thank you.
` MR. STEIN: Okay. And I'll come back and pull a few
`more because there's a lot of testimony in the record, as
`well, about him laying components out, people coming in,
`seeing him doing that -- so people saw the whole system, and
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`they saw it being assembled as well.
` I'm looking at if we have the cites.
` Oh, here. So here it is. So Exhibit 2033, quadrant
`page 163, line 13, Did -- this was again being asked by
`Patent Owner's counsel -- Did you then separately demonstrate
`how to actually put the guns together? Did Schlumberger do
`that and then deliver it to the rig?
` Same sort of question you were asking, Your Honor.
` JUDGE JESCHKE: Mm-hmm.
` MR. STEIN: And Mr. Olsen says, We did show them the
`-- all the components and how it went together after, during
`that. It was a long day of testing and proving to them that
`it worked, and showed them everything. Again, with
`explosives, you don't have unnecessary people in the area.
` And then line -- quadrant page 164, line 3, So they
`saw all the hardware. But we didn't have to assemble all the
`hardware for this purpose to demonstrate what we were showing
`them, that it would work.
` There's some other citations too. I'll -- let me --
`let me come back to that later.
` So let's continue. So, now, moving past the public
`uses, I want to go to this proposition of experimental use,
`and I just want to talk about it just for a second.
` So the argument that was presented in the
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`Patent Owner's Response, which is reproduced on slide 27,
`focused explicitly on this thing called the experimental use
`doctrine. If you look at their brief, you'll see they really
`only have one supporting citation. It's to MPEP 2133.03(e),
`which is about this experimental use doctrine. This doctrine
`has no applicability to a third party's uses, and I just want
`to flag that. It's in the briefs.
` And we've reproduced on slides 28 and 29 the case law
`showing that this would apply to things that the Patent Owner
`might've done; it does not apply to what a third party is
`doing. So it's normally a Patent Owner that says, yeah, I
`was using this, but I was using it for purposes of
`experimentation, so I can still keep my patent. It's not
`used for a Patent Owner to point to what a third party is
`doing, and the case law is very clear on that.
` And then turning to slide 30, I'll just briefly
`mention that in the Sur-Reply, the argument completely
`shifted. You'll see they never mentioned experimental use
`doctrine. They're now arguing about the Pfaff factors and
`some other cases.
` But even that belated argument, which I think
`could've been waived since it wasn't made in the
`Patent Owner's Response, that even that, it doesn't save this
`position because those cases, again, they don't cover what a
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`third party is doing. They're all about the inventor's
`activity, the experimental nature of what the inventor
`might've been doing; it's not about third parties. So even
`those cases don't save that position.
` And continuing on to slide 31, I think this is very
`strong evidence as well. This is a snippet from
`Exhibit 1060. And I think if there's really any question
`that this was not -- you know, whether this was commercial,
`whether it was secret, I think it pretty much falls apart in
`view of this article. This is something Schlumberger
`published. Schlumberger was trumpeting how great this