IP Trends in the Energy Sector

Time 5 Minute Read
March 2014
Legal Update

With continuing globalization of the energy economy, numerous trends are emerging with respect to intellectual property, including a steady increase in the number of U.S. patents filed in the traditional oil and gas sector since 2000, from just under 600 that year to more than 1,200 in 2012.

One important strategy change stems from the fast track filing system now available in the U.S.

“A typical filing strategy in the industry used to involve filing first in the home country with Patent Cooperation Treaty (PCT) and non-PCT filings one year later. Multiple inventions might be included in one filing with the most commercially valuable pursued first and then follow-up applications. The typical time for a patent to be granted via this route in the U.S. may be 38 months or more,” explained Greg Porter.

“An alternative strategy now involves filing a Track One application in the U.S. which can achieve one or more patents issued within six months to a year. Although more expensive, the early patent increases the potential for early stage investors and private equity."

“If a Track One application does not achieve a patent then trade secret protection can be evaluated as an alternative before the application publishes, again creating opportunity for earlier stage investors and private equity.”

Successful trade secret protection will depend upon whether the information has independent economic value and is not generally known to the public or others who can obtain economic value from its disclosure or use.

Trade secret theft can be combatted via the Tariff Act of 1930 (Section 337) which allows the International Trade Commission to exclude imports when it finds unfair methods of competition and unfair acts in the importation. Recent cases have held that products manufactured overseas with the assistance of misappropriated trade secrets can be refused entry into the U.S. even if the theft occurred entirely on foreign soil.

The more competitive market will inevitably translate into more IP lawsuits and related disputes. Factors influencing this include more competition in the market, the threat posed by non-practicing entities and the threat from former employees and other competing start-ups.

Although the number of patent suits in the U.S. energy sector remains low thus far, the trend is upwards with six U.S. energy patent cases between 1995 – 2000, 11 in 2001 – 2006 and 12 between 2007 – 2012. However, when one looks at the total number of patent cases brought by non-practicing entities across all industry sectors in the past five years in the U.S. one gets a sense of the potential for litigation to spiral upwards. There were around 600 NPE patent cases in 2008, rising to over 1,500 in 2011 and more than 3,000 in 2012.

“The energy industries currently rank 14th out of the 20 major technology industries in terms of patent litigation but we can reasonably expect this to change in an increasingly competitive market where IP is traded as a commodity separate from the traditional products and services,” said Greg Porter.

“Part of protecting against such litigation will involve strong employee and confidentiality agreements, maintaining a robust patent portfolio and carrying out cost-effective freedom to operate searches and clearances.”

Intellectual property protection in the Middle East

The Middle East provides unique intellectual property protection for technology, brands, engineering designs and software, although the position is not uniform across the region.

There are two main routes for the protection of tools, processes and inventions via patent in the region. The first involves filing a single GCC application, usually within 12 months, and the second is to pursue the national filing route after 30 months via the international PCT.

A single Gulf Cooperation Council (covering Qatar, Saudi Arabia, Bahrain, Kuwait, Oman and UAE) application filed in parallel to an international PCT application is the most cost-effective but pursuing a national filing route at each of the national patent offices following the international PCT route offers a second chance but is more expensive.

There has been a steady rise in annual patent filing numbers in the GCC countries since the late 1990s, from 57 in 1998 to 2,198 in 2013 – illustrating the fact that companies increasingly see the value of protecting IP in the Middle East. Of the 23,000 applications filed between 1998 and 2013, only 5% were filed by residents but that balance may well be starting to shift.

Saudi Aramco’s track record provides a case in point. It has been steadily increasing its number of patent filings over the past decade, from 49 in 2004 to a record 373 worldwide patent filings in 2013, suggesting a marked increase in research and design spend and consequent focus on IP value and protection.

Wider IP protections can also be achieved throughout the region, especially in relation to brands. Industrial designs can mostly be protected in the region but the weakest safeguards exist in relation to software and copyright law in Qatar, Iraq and Iran.

“The region’s technology needs are evolving fast and the question companies in the market, or those wishing to enter it, need to ask themselves is whether their IP strategy is fit for purpose. Others are ramping up Middle East IP protection – should you?” said James Brown of Murgitroyd European Patent Attorneys.

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