The energy industry’s rapid adoption of computer-implemented inventions is driving a massive IP strategy overhaul among oil and gas companies and other energy firms, according to in-house counsel and private practice attorneys.
Client demands for lower prices are forcing energy businesses to find new ways to be efficient. Digital technologies, including computer simulations, big data and artificial intelligence (AI), are becoming increasingly attractive to them as a means to address that challenge.
The problem is that many energy companies are inexperienced when it comes to digital technologies and often find it difficult to demonstrate why these inventions should be eligible for protection at the patent office or to protect the data generated by their innovations.
These challenges are compelling in-house counsel to rely more on their external practitioners, build their digital expertise and get better at harvesting innovations from engineers.
“Digital technologies are a completely new field for most energy companies,” says Hein Wille, corporate IP director at SBM Offshore in Monaco.
“For example, we now have a complete fleet management system that tells us what is happening on a given vessel. We can use what we learn from one ship and apply those lessons to improve all the others. The real value there is we can optimise the operation of those vessels for our clients.
“Personally, I think the industry’s adoption of digital tech is a little late coming,” he adds. “Oil and gas is quite a traditional industry, and acceptance of new technologies is slow because those inventions must always be tried and tested before they can be called proven technologies and used for offshore applications.”
Nicolas Schmitt, head of IP at IFP Energies Nouvelles in France, adds that these challenges are worth the reward of reducing friction in refinery management and other vital processes in the industry. “Digitalisation is an important step in the development of these heavy industries.”
Digitalisation not only offers increased efficiency, but improved safety and reduced costs and staffing as well. The World Economic Forum estimates that it has the capacity to unlock around $1.6 trillion in value for oil and gas companies.
Oiling the wheels
To ensure that these efficiency and cost-saving benefits are protected from copycat competitors, energy companies are turning to external counsel – new and current – with digital tech patenting expertise.
Wille at SBM Offshore says his company approached several IP law firms that specialised in digital projects. In the end, two were selected to pitch their services, and the one that demonstrated specialist knowledge of the oil and gas and technology industries won the work.
“We are investing a lot in digitalisation and we need a return on investment,” he says. “This new IP law firm has proven invaluable by teaching us what to do and what not to and, most importantly, what can and cannot be protected.”
He adds: “Their teaching was an absolute eye opener because we did not realise that a lot of what we were doing was protectable and that even where some device was not patentable, there was often still a patentable method in what was occurring.”
His company had been under the impression that software was not patent eligible in Europe under the European Patent Convention’s Articles 52 to 57, he explains. It quickly became clear with new advice, however, that computer-implemented inventions with a real world effect were indeed eligible for patent protection.
“It wasn’t just software patentability they alerted us to, but all kinds of methods for operating fleets.”
Schmitt at IFP Energies adds that he relies more on external counsel now to keep him up to date with patent law developments that might affect his digitalisation strategies. The fact that the Japan Patent Office published guidance on AI patentability earlier this year was an important development for Schmitt.
He says he also relied on his law firm partners to give good advice on whether something should be patented or kept as a trade secret.
Giving the private practice perspective, Reddie & Grose partner Duncan Nevett says an important change that oil-and-gas-focused law firms and businesses need to watch is the entrance of pure tech players into the energy sector.
He points out that like the automotive industry, which has seen an influx of software and telecoms businesses looking to contribute to autonomous vehicles, oil and gas could become more attractive to big tech players with large portfolios as it becomes more reliant on digital technologies.
When that happens, he says, energy firms will have to be more diligent when it comes to conducting freedom to operate searches.
Drilling down on data
Like in many other industries going through a period of rapid digitalisation, energy companies are also seeking to find ways to protect data that can help them improve processes and services. By sharing operational experiences with clients, while maintaining exclusivity over the data shared, these companies can attain a strong competitive edge in the market.
“Ownership of data is our main issue,” says Wille at SBM Offshore. “Raw data produced by machines that is made smart and used to communicate is very important.”
He adds that one of the most important challenges companies like his face in regards to data is negotiating ownership with external software partners.
“Those contracts are very hard to negotiate,” he says. “Often software companies will not change their ownership clauses, so you must be creative there as well.”
Wille says his approach to these negotiations is to set out that any improvement to partner software belongs to the partner, and to be firmer on ownership of data related to the software applications applied to SBM’s systems.
The energy industry is facing many of the same challenges as the car industry now. It is a traditional heavy manufacturing sector that is suddenly being faced with the need to patent digital inventions that are known for being difficult to protect.
At the same time, new software players are entering the market; they will be the entities both teaming up with the energy companies to create new and lucrative solutions and those challenging them on patent and data infringement matters.
