Intellectual Property and Patent Litigation in the Oil and Gas Industry

To thrive in the highly competitive oil and gas industry, companies must be aware of the need for ­continuous innovation. Oil and gas companies in Alberta are under increasing pressure to recover ­natural resources more efficiently and in a manner that will have a reduced impact on the environment. This requires the ­commitment of considerable time and expense for research and development. The product of these ­efforts, intellectual property, is fast becoming one of the most important assets of many oil and gas businesses. Like any other valuable asset, intellectual property must be vigorously protected.

It is commonly believed that only about 10 ­percent of the bitumen within the oil sands is recoverable using present day ­technology. The race is on to develop new and ­inventive ways to increase this rate of ­recovery. The ­potential returns for ­developing new ­technology are enormous. Innovative ­technology, be it a new and useful drilling ­fluid, a downhole tool, or a method of producing bitumen, can make or break the economics of a well or a business. In some cases, new technology has tipped the balance point on economic recovery; in others, it has unlocked oil thought to be ­unrecoverable (e.g., in-situ oil sands).

Over the past 10 years, the number of oil and gas patent applications and patents has risen dramatically. A patent grants its holder the right to prohibit others from practising the claimed invention. It also grants the patent holder the right to license its technology to others. Patent holders can exercise both rights to increase company revenue substantially.

With the large growth in the number of oil and gas patents being issued, there comes a ­corresponding increase in patent ­infringement proceedings. Patent litigation is the new ­battleground for all oil and gas companies, big and small. Borden Ladner Gervais has ­responded to this development in the industry. Six years ago, BLG had no patent litigators in Calgary, but now we have six partners with expertise in patent litigation.

When a patent holder alleges a patent is ­being infringed, a defendant will almost ­invariably both deny infringement and claim the patent is invalid. Therefore, almost all patent ­litigation involves two related questions. Is the patent valid and is the patent being infringed? The law relating to infringement and validity is complex. Oil and gas patent litigation requires legal counsel with highly specialized skills—not only complete mastery of the applicable law, but also a thorough understanding of the oil and gas industry and its associated ­technologies.

The infringement of a patent can have a ­dramatic impact on a patent holder’s ­bottom line. Smaller players in the industry may ­derive a great deal, if not all of their ­revenue from ­patented technology, so patent ­litigation can often be critical to the success or ­failure of their businesses. For these kinds of ­businesses, patent litigation is “bet the ­company litigation.”

We are frequently asked to advise clients on how best to enforce their patents. In certain circumstances, litigation might be ­avoided—as, for example, when a patent holder agrees to grant an infringing party a license in return for a fee and compensation for past wrongs. However, in the competitive oil and gas ­industry, a business deal cannot always be negotiated. More and more companies are realizing that if they are to stop others from exploiting their intellectual property rights, they must litigate.