There is a growing focus on the need for operators in the oil and gas sector to innovate, both in terms of developing new technologies and processes throughout the value chain and in the deployment of those technologies and processes. Comments from Government, analysts and operators highlight that innovation is increasingly seen as a key strategy to drive growth and control costs.
A 2013 survey by PwC of innovation in the oil and gas industry found a clear correlation between innovation and success in growing revenues. However, only about half of the oil and gas companies surveyed said they had a well-defined and well-executed innovation strategy.1
The survey also concluded that finding the right mix of incremental, breakthrough and radical innovation across the whole range of innovation areas is important.
This focus on innovation has already seen a strong increase in the filing of “standard” patents by key technology providers in the oil and gas sector.
However, it seems that many companies may not be aware of the Australian “innovation” patent system, which provides effective and enforceable protection for incremental innovations, which may not meet the inventive threshold required for standard patents. Innovation patents are particularly suited to protecting fast-changing areas of technology, and can be deployed when enforceable rights are needed quickly.
The key features of Australian innovation patents include:
- They can be used to protect something that is an “innovative step” over the existing technology in the field, and so protect incremental advances on or uses of existing technologies.
- An enforceable patent right can be obtained within as little as 4 to 5 months of lodging an application, as opposed to standard patents which can take 2 to 3 years or more to be granted and can face lengthy pre-grant oppositions by competitors.
- The costs associated with securing an enforceable patent right are generally substantially less than those associated with securing a granted standard patent.
- They have a term of up to 8 years (contrasting with the maximum 20 year period for standard patents).
- They can be sold and licensed.
- Like standard patents, they entitle the patent owner to seek injunctions and damages against infringers, and in most cases they are more difficult to invalidate than a standard patent.
- They can be used to protect technology in parallel with standard patents.
An example of innovation patent enforcement
An example of the successful deployment of innovation patents is found in the dispute between SNF and Ciba Speciality Chemicals (now BASF), competitors in the supply of chemicals and associated technology for use in mineral processing operations.2
Ciba had a pending standard patent application relating to processes using particular flocculants for treating mineral tailings. That application had been opposed by a number of Ciba’s competitors and was therefore held up (and still is) in the Patent Office.
However, Ciba had also secured five innovation patents, derived from the standard patent application and concerning the same technology as the standard patent application. Ciba therefore relied on its innovation patents in pursuing a claim for infringement against SNF for its supply of chemicals at a number of Australian mining operations.
The trial judge ruled in favour of Ciba, with SNF found to infringe the innovation patents and SNF’s attempt to invalidate the patents unsuccessful. SNF’s subsequent appeals also failed.
The case plainly demonstrates the advantages of innovation patents, with Ciba being able to secure patent rights quickly, which it was able to enforce, notwithstanding the opposed status of its standard patent application.
Trends in filings
An examination of Australian patent filings indicates that there has been a consistent up-swing in filings of patents by many companies operating in the oil and gas sector, consistent with a growing focus on protecting innovation.
For example, between 2005 and 2011 (the most recent year for which full figures are available), the annual number of filed patents by 6 major firms in the oil and gas sector increased by over 50%.3 This upswing is consistent with reported increases in other jurisdictions such as the United States.
However, innovation patents still only represent a very small percentage of total filed patents, being in the order of less than 5% of total filed patents.
By way of comparison, in 2011, 14 innovation patents were filed in relation to 'basic chemical processing, petrol', while in the same year 207 innovation patents were filed in relation to civil engineering, building, mining, 240 were filed in relation to information technology, and 286 were filed in relation to consumer goods & equipment.4
There is therefore a real untapped potential for operators in the oil and gas sector in Australia to utilise innovation patents as part of a strategy to build innovative businesses, protect the full range of innovations, and quickly secure a competitive advantage. Operators failing to innovate risk being left behind by competitors with well-defined and well-executed innovation strategies.
Rebekah Gay and Benjamin Cameron