Black Gold: Patent Battle Royale Moving From Silicon Valley to Midland, Texas? | Intellectual Property in the Oil & Gas Industry

We have all heard of the patent battles between tech giants Apple and Samsung.  It is easy to imagine the countless patents that protect the new iPhone and Galaxy smart phones.  However, intellectual property is not limited to the Steve Jobs and Mark Zuckerbergs of the world.  A huge amount of intellectual property is being developed, and protected, in the oil field.  In fact, the next major patent dispute is more likely to involve a method of fracking than a processor on a smart phone.  The reason, in part, is that as “easy oil” reserves become more and more rare, oil and gas companies are developing incredible technological solutions in order to harness oil, which was previously believed unreachable.  In solving these complex problems, they are developing vast amounts of intellectual property.  Oil and gas companies of all sizes need to begin protecting their intellectual property because their competitors are.  Failing to protect intellectual property will place these companies at a huge competitive disadvantage in the long run.

Who is Getting Patents?

The short answer is that just about everyone in the oil and gas industry is getting patents.  ExxonMobil had over 10,000 active patents at the end of 2011.  Shell had over 20,000 patents at the end of 2012.  But “big oil” isn’t the only player obtaining patents.  Schlumberger Ltd., Halliburton, and Baker Hughes, Inc., three of the largest oil service providers, obtained 1,257 patents in 2012 alone.  This is more than double the number of patents obtained ten years ago.  There is a reason these companies are putting more and more emphasis on patent protection.

Why Get a Patent?

There are a variety of reasons to get a patent.  First, a patent gives the owner a right to exclude others from practicing the owner’s invention for a period of 20 years after filing.  Thus, if a company obtains a patent on an advantageous method of injecting steam into a well for in-situ sands projects, for example, this gives that company the right to prevent its competitors from practicing its invention.  This is a huge competitive advantage for the patent holder.

Second, a patent portfolio provides a possible additional income stream.  Companies can license their intellectual property.  Third-party companies will pay a patent owner for the right to practice the patent owner’s invention.  The sands project method described above (U.S. Patent No. 6,158,510) was patented by ExxonMobil in 2000.  ExxonMobil licensed it to Baker Hughes in 2012.  ExxonMobil collected more than $129 million in 2011 from licensing its intellectual property to third parties, and this number is increasing every year.

Third, a patent portfolio provides leverage.  If a competitor is infringing upon one of your patents, you may be able to leverage this for the right to license some of its intellectual property, a better business arrangement, etc.  Additionally, it is becoming increasingly common for oil and gas companies to form alliances based, at least in part, on their intellectual property.  For example, if two companies have complementary patent portfolios, these companies are teaming together and forming business alliances to enforce and protect their intellectual property.  The thought is that the synergy of the combined portfolios is worth much more than each portfolio asserted independently.  In short, a patent portfolio is a viable asset which provides many business advantages; if your company is not leveraging this asset, it might consider this strategy.

Don’t Wait!

The prudent practice is to file a patent application before there has been a public disclosure, such as a public sale, use, etc.  If any of these activities have occurred prior to your patent application being filed, it could prevent you from subsequently obtaining a patent.  Thus, if you believe you have a novel method or tool, consult with your patent attorney before publicly using that method or tool.

Conclusion

The oil and gas industry continues to obtain amazing solutions to seemingly impossible problems.  In so doing, they are generating a substantial amount of intellectual property.  Remember, your method or product does not have to originate from Silicon Valley to be patentable.  Creative engineers, drillers, etc. invent patentable subject matter on a daily basis.  Most companies are realizing this and are obtaining, and leveraging, this powerful business asset.  If your company is not doing this, it may be worth a call to your patent attorney.

Bobby Braxton is an intellectual property attorney at Carstens & Cahoon, LLP. He prosecutes patents and trademarks and litigates intellectual property disputes.  

This blog is maintained by Carstens & Cahoon, LLP to inform readers of recent developments in intellectual property. Solely informational in nature, this blog is not intended to create an attorney-client relationship or to be used as a substitute for legal advice or opinions. For more information, please visit www.cclaw.com

By Bobby Braxton

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