Title: Practical IP Lessons From the Field Part Three: Field Trials, Trade Secrets, and the Hydrogen Horizon
Speakers: Charles Baker and Greg Len
Greg Len (00:09):
Welcome, Charles. Thank you for taking the time to talk with me today about IP issues in oil and gas companies. What do you see as some of the issues that often face oil and gas companies as they’re investing resources in new technologies, for example, putting them out in the field?
Charles Baker (00:24):
Sure, and that’s a good point. At times, clients have come to us after they’ve had field trials. With field trials, you usually have several IP issues you have to deal with.
First of all, you’ve got your own employees. You have to make sure that they’re covered under good, tight NDAs and also potentially non-compete agreements. Then you’ve got third parties or other contractors that are there at the well site, and you want to have them covered under good NDAs as well.
The other area you have to be careful with in this type of testing — or development of products — if you’re doing it with another party, you’ve got to make sure that there’s a really good, tight agreement in place about who owns what rights, because it can become a dispute later on. One party may claim they contributed to the invention and should be listed as a joint inventor or should have some type of rights. If you draft a tight agreement accordingly, you should be able to avoid those issues, and they’re very important.
Now, the other procedural thing you need to be aware of is that timing is important. What I mean by that is: when do you have to file your patent application? If you have developed certain technology and you field tested it, you’ve made a public disclosure. Field testing — maybe you’ve gone to a trade show and you’ve disclosed your product — constitutes a public disclosure of the patent as well. In the United States, you have a one-year grace period from the time you did the field testing or attended the trade show. But not all jurisdictions give you that one-year timeframe. So if you’re going to go outside the United States, you need to be very careful to make sure you haven’t blown through some deadline.
Greg Len (02:07):
What about trade secrets? How do trade secrets come up as issues for oil and gas companies out in the field?
Charles Baker (02:15):
Yes, trade secrets come into play in a few ways. Fortunately and unfortunately, we still have people who may not adhere to trade secret laws. You also have some people who believe that if they work for a company and come up with an invention, it belongs to them — but it doesn’t. It belongs to the company.
So you have departing employee issues, trade secret concerns, and non-compete agreements. A lot of the times when we get involved in cases like the recent one I was telling you about — the fracking wellhead case — there were trade secret and non-compete issues because the other side had hired a couple of former employees from the patent owner, and they were not very thrilled about that. When we eventually got involved and wrapped up the case, I made sure we brought in our labor and employment colleagues here in Houston, who do a lot of work in the oil and gas sector on non-compete and non-disclosure employment-type issues.
Greg Len (03:20):
So we’ve just talked about investing in new technologies. We’re seeing the oil and gas industry undergo what I’d call a rapid digital transformation. What are some of the areas where you’re seeing this innovation in terms of digitalization?
Charles Baker (03:34):
Personally, I’m seeing it mainly in the field. Technologies have advanced significantly through AI. AI is just modernizing the way oil and gas operators and service companies are drilling wells these days. These wells are expensive — your typical fracking well these days costs in excess of $10 million. So the industry needs to continue reducing costs and the footprint of a well, so to speak. They’ve done a good job of that through digitization, through AI, and through equipment that reduces the number of hands on a rig.
What happens sometimes, unfortunately, on rigs is that people get hurt. So if you reduce the number of people susceptible to injury through automation on a drilling rig, that’s a great thing. You also see a lot of activity happening remotely — petroleum engineers and drilling engineers running a rig essentially from the operator’s office. I’ve seen that quite a bit offshore, where you’ve got those huge drill ships and the engineers are onshore directing the crew on how to operate everything. There’s been a lot of forward movement in the field in that respect.
Greg Len (04:55):
It’s exciting. Moving on — we’re talking about all these new innovations in the industry. Based on your long involvement in the energy industry here specifically in the Houston area, what can you tell us about the initiatives to make Houston an epicenter of clean hydrogen?
Charles Baker (05:12):
Sure. That’s a pretty new movement, and I’m excited about it. The infrastructure is already in place here in Houston along the Gulf Coast. We’ve got the pipelines, the storage facilities, and these huge salt domes in East Texas ready to store hydrogen. We’ve got the refineries here that can certainly be adjusted to deal with hydrogen. We’ve got the offshore wind sector that can help with the production of green hydrogen — which is basically using electricity to separate oxygen and hydrogen from water. That’s the greenest form of hydrogen, and it’s a big movement.
I’ve recently learned that we have what’s called a hydrogen hub here, where there’s a collaborative effort by many of the major oil and gas companies to work together to put this infrastructure in place and move forward with green hydrogen here in Houston. So I’m excited about it.
Greg Len (06:15):
I am excited too. That’s actually my background — my first engineering job out of grad school was working at a startup hydrogen fuel cell company in Boston, so I’m really excited to see all the activity down here in Houston.
So Charles, we’ve both — in our separate careers and at our respective firms — previously litigated patent infringement cases at the International Trade Commission. What is the ITC, and why would some clients want to use it?
Charles Baker (06:41):
Sure. The ITC is the International Trade Commission. Some people would ask, “Well, what does enforcement of IP have to do with trade?” Think about it this way: trade involves the importation of goods. If people are importing goods that infringe a U.S. patent, there is a separate form of relief available versus district court, where you’re typically seeking damages and an injunction. The ITC provides a different form of relief — an exclusion order. That’s all the ITC is there to do: determine whether or not to issue an exclusion order preventing a product from being imported into the United States. For example, if Apple were sued at the ITC and lost, technically Apple could not import any more iPhones.
Greg Len (07:29):
That’s a killer draw.
Charles Baker (07:30):
Very strong incentive, yes — for defendants to settle those cases.
Greg Len (07:35):
Right.
Charles Baker (07:35):
The other great thing about the ITC is that it moves quickly — though that’s both good and bad, because it’s also expensive. From beginning to end, the timeline is about 15 months. If I recall correctly, the case has to be completed in 12 months, and the judge then has three months to issue a decision. So you’re on a very compressed schedule. Think of it as a mini trial, but without a traditional trial itself — you do all the work, submit the paperwork to the administrative law judge, and he or she issues an opinion and the case is concluded. Companion cases filed in district court at the same time are usually stayed, similar to what happens with an IPR. It’s a good and exclusive remedy.
Greg Len (08:19):
Well, you and I are both patent litigators, and we’ve been talking a lot about litigation. What, if anything, can you tell us about our IP transactional colleagues at the firm and what they do in advising clients?
Charles Baker (08:32):
Sure. We’ve got a large number of both lawyers and technical advisors across the firm and our offices who are here to help. As I mentioned, I’m chiefly a litigator. My experience in negotiating agreements is mainly in settlement and license agreements, all within the context of litigation. So when I have a client with needs outside of that, I can turn to colleagues who have a variety of backgrounds — electrical, chemical, and mechanical engineering, as I mentioned. They can assist with portfolio management in both trademark and patent IP, and they help with prosecution. We have a large group of prosecution lawyers across the firm, including here in Houston and in Dallas who specialize in oil and gas. We can handle collaborative agreements, licenses, and anything to do with IP development. We’ve got the people here on the ground and ready to go.
Greg Len (09:34):
Well, thank you, Charles. I want to thank you for taking the time to speak with us today, and I hope to get together again soon.
Charles Baker (09:40):
Great. Thank you, Greg.
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