Innovation has always been key to the oil & gas industry and recent years have seen some exciting developments, particularly in subsea technology.
For example, autonomous underwater vehicles (AUVs) . . . independent robotic, programmable vehicles . . . have highly advanced capabilities so they may be more cost effective than alternatives, or allow access to previously unreachable areas.
Another example: subsea CT scanners now enable oil & gas companies to scan pipelines to detect and analyse deposits without interrupting operations.
Other important developments are in progress: for instance, Siemens is said to be testing how power network components react to extreme water pressures, with the intention of offering a new power system for pumps and compressors for large oil & gas developments at depths to 3,000m, so delivering enhanced production capacity.
In today’s market, innovation is more important than ever. Existing easy-to-access resources are being depleted and new discoveries are often more difficult to extract, requiring new technology and methods in order to commercialise them.
And, as everyone is only too well aware, the current low oil price means both service companies and operators must be more cost-effective, efficient and competitive to stay in business.
However, these challenging times also create a more litigious environment so it is essential that companies, whether in subsea or other areas, protect their intellectual property (IP).
This month’s column sets out below an overview of relevant IP rights for the oil & gas sector and what you can do to protect your business.
The term IP covers intangible property such as information, inventions, brand names, reports and designs. IP laws exist to govern the ownership and exploitation of such property.
IP can be registered – so parties must apply to the relevant registrar (such as the UK Intellectual Property Office) to record their rights to property, as with trademarks and patents, or unregistered – so ownership arises automatically, as with copyright.
Within those categories IP takes various forms. The ones most likely to be used in the oil & gas sector are:
Patents which protect inventions. The inventor receives a monopoly over the invention (for a period of 20 years in the UK) in exchange for making the details publicly available. To qualify, inventions must meet strict criteria – they must be new, inventive and something which can be made or used industrially (for example, a valve or a process for logging a well);
Trademarks allow businesses to protect their brand by registering names, logos and the shape of goods/packaging;
Copyright protects certain original works, including written and artistic works, for example, equipment manuals and technical drawings. Ownership automatically lies with the creator (except where the creator is employed, in which case their employer will own the copyright);
Know-how/trade secrets refer to commercially sensitive information which can be protected by imposing confidentiality obligations on relevant parties through contract.
If you fail to protect your IP, you stand to lose valuable property, your commercial advantage and risk expensive and time-consuming disputes. Here are some examples:
The creator of an invention may decide to run field tests, prior to applying for a patent, to ensure that the product is commercially viable and to generate interest from potential customers. If adequate precautions are not taken to ensure that the invention remains confidential, the inventor may lose the right to patent protection.
Patents can be an effective way of protecting inventions, but there are some drawbacks – the costs, the fact details are made public which creates a risk of exploitation and the burden of having to challenge infringements. This can be a particular problem for smaller service providers, which may therefore choose instead to protect their inventions as know-how or trade secrets but can then find it difficult to maintain confidentiality. The key is to ensure that the terms of commercial agreements are as clear and robust as possible.
If valuable IP becomes public, it is open to exploitation. For example, parties could find a way around the precise wording of the patent or it could be developed and sold more cheaply in other countries. In recent years there has been particular concern regarding exploitation of IP in countries like China and a number of disputes have arisen as IP laws in these jurisdictions do not always offer the same protection we are used to in the UK or the US. There is a drive to improve this, and the UK Intellectual Property Office has signed an agreement with the equivalent organisation in China which should allow applicants to obtain faster patent protection in China. However, the risk remains and requires vigilance over potentially infringing products.
A further area of risk is where companies collaborate or engage service companies to develop IP, as there is often a lack of clarity as to who owns and can exploit any IP which arises. Care therefore needs to be taken in the legal documentation.
There are various options open to companies to protect their IP and the solution will vary depending on the type, size and demands of your business.
The key point is that new technology and its related IP has never been more important and you should take the time to consider what IP your company has and what you can do to protect it.
Do you have any inventions?
Have you checked whether they infringe an existing patent or if they qualify for patent protection?
If not, how will you protect them?
Do you have any registered trademarks and if not, why not?
Do you have appropriate services and collaboration agreements in place?
Are these contracts clear in terms of ownership of IP and protection of confidential information?
Create an IP plan for your business to ensure that opportunities are not missed and that wherever possible value is added.
IP can be challenging but is a valuable and important issue since it may well be that your new cutting edge technology proves to be your winning strategy.
Penelope Warne, senior partner & head of energy at international law firm CMS