The ‘energy transition’ is underway. It won’t be swift, it won’t be easy. However, the world has acknowledged the need to reduce emissions and embrace alternative sources of energy: with the energy giants now crucially on board, the process has begun.
This is playing out against a broader backdrop of rapid technological change, as we embrace digitalisation in all areas of our lives, presenting various opportunities and intellectual property (IP) challenges.
Tim Eggar, the chairman of the UK Oil & Gas Authority (OGA) started this year with a warning to the energy sector that it must step up its response to the energy transition challenge or lose its societal ‘licence to operate’.
In a recent speech, he recognised the important role digitalisation has to play. One clear action he highlighted was to ‘take to the next level’ the National Data Repository. This is the OGA’s new digital platform for offshore petroleum-related information and samples which anyone can register to access, and which the OGA describes as ‘a key piece of the UK’s digital infrastructure’.
This follows on from the OGA’s Digital Strategy for 2020–2025, published at the end of last year. The strategy looks at how the energy industry can leverage data and digitalisation – data analytics, AI business intelligence and machine learning – to support maximising economic recovery and the energy transition.
Digitalisation has the potential to unlock huge value for the industry, with improved accuracy and performance, and to achieve substantial cost reductions. On the operational side this could be via doing more remotely and enabling more predictive maintenance. For retail or utilities, this could mean more ‘smart energy’, enabling consumers to manage home electricity consumption more closely.
The Digital Strategy document quotes some impressive statistics from McKinsey: open data in the oil and gas industry could unlock between $240 and $520 billion of value per year.
Another key driver of the energy industry is safety: remote operations and predictive maintenance can also save lives and reduce impact on the environment.
Copyright and trade secrets can contribute to a strong portfolio of IP rights protecting these innovations, including algorithms and software coding.
Patenting can also be an extremely effective tool for protecting and commercialising technical innovations – presenting barriers to market entry for others or generating substantial royalties or other benefits via licensing.
That said, innovations in the area of artificial intelligence (AI), machine learning and software face patentability challenges: an abstract computer programme is not in itself patentable, and neither is an algorithm as an abstract mathematical method.
However, it is possible to patent a system that uses a computer programme, or an AI or machine learning system that uses particular algorithms, to create a problem-solving technical effect in the ‘real world’. That is, provided the inventor behind the idea was in fact a human being rather than AI itself; for now at least, the European and UK Patent Offices will not recognise AI as an inventor. If there was no human (co-)inventor: no patent.
Technological convergence and the ‘internet of things’ throws up a further challenge for the energy industry. How to deal with standard-essential patents (SEPs) governing the wireless interoperability of the hardware behind a lot of the smart sensors in industrial operations and smart meters in our own homes, or with charging standards for the growing electric vehicle infrastructure?
A SEP licence must be on ‘FRAND’ (fair, reasonable and non-discriminatory) terms. Some standards institutes have begun to publish proposed best practices for licensing SEPs, but there is no universal alignment. Historically confined to the telecoms sector, SEP litigation has already encroached on the automotive industry. Many SEP holders refuse to license wireless component suppliers. Instead, on using these components for critical functionality, the car manufacturers receive claims for fees from patent licence ‘pools’ seeking a percentage of the higher-valued end product.
Patent pools have stated their intent to make claims in the energy sector in relation to connected homes. Utilities offering smart meters to consumers to monitor energy consumption, for example, will need to be mindful of patents relating to Smart Energy Profile 2.0 (IEEE 2030.5 standard) for energy data communications. If suppliers don’t have the necessary SEP licences, warranties or indemnities from suppliers will not guarantee continued freedom to offer the service to customers.
Some SEP holders demand that sellers take a global licence, and there is a current debate as to whether a single, global FRAND licence can or should be determined from any one territory. We readily await a Supreme Court decision on this issue in the UK. The consequences could be far-reaching.
Data & Machine Learning
The protection and commercialisation of data itself is another key area. Should large datasets be made freely available to all, in line the with the OGA’s National Data Repository? This information can be very costly to generate and potentially extremely valuable. Confidentiality rights and copyright can help, as can perhaps even database rights for large systematically ordered databases where there has been substantial investment in obtaining, verifying and presenting the data.
Many commercial issues remain open, however. For example, in the case of machine learning: if a system is ‘trained’ on a valuable dataset, who should benefit most from the resulting improved version – the owner of the original software or the provider of the data?
Technology is not the only issue. Reputation is paramount – arguably more important than ever for energy companies looking to plot a successful course through the energy transition, leveraging their ‘green’ credentials to retain their societal licence to operate.
Copyright, trade mark and design right protection of names, logos, packaging and broader branding, along with concerted efforts to combat counterfeiting, vigilance on the internet and social media and so on, will all play key roles for businesses in the energy sector.
Brexit will inevitably play a part. For example, the UK Government recently announced it does not plan to introduce the new EU directive on copyright in the digital market into UK law. Over time, this could lead to divergence on the level of responsibilities of online service providers in different countries to actively police copyright infringement and more of a headache for rights owners, including businesses in the energy industry.