backPatent disputes and licensing deals have frequently reached the headlines over the past few years. Many of these high profile stories have involved telecommunications, computers, and pharmaceutical patents. But statistics provided by the United States Patent and Trademark Office (USPTO) show that the number of patents granted in the oil and gas sector has grown at a double-digit rate in the six years since the 2008 recession. This increased volume is worth noting as oil and gas companies evaluate their patent portfolios and IP strategies.
Patent Office Statistics and Class System
The USPTOs Patent Technology Monitoring Team periodically issues general reports profiling patenting activity. Some of these reports including the Patent Counts by Class by Year Report that is the focus of this article show the number of patents granted in each of the approximately 475 U.S. patent classes. [1]
Patent classes are major divisions of technology in the U.S. Patent Classification System. Two classes of particular interest to the oil and gas industry are Class 166 (Wells) and Class 507 (Earth Boring, Well Treating, and Oil Field Chemistry). While not every patent in these classes is necessarily an oil and gas related patent, oil and gas is a major component of this technology area.
The analysis below compares the number of patents that issued in the six years for which data is available since 2008 ( i.e., 2008-2013) with the six prior years ( i.e., 2002-2007).
Growth In Classes 166 (Wells) and 507 (Earth Boring, Well Treating, and Oil Field Chemistry)
The USPTO granted 5,043 patents in Class 166 (Wells) between 2002 and 2007. Between 2008 and 2013 that number grew to 7,436 an increase of 47%. The USPTO granted 747 patents in Class 507 between 2002 and 2007. Between 2008 and 2013 that number grew to 1,210 an increase of 62%. By way of comparison, the number of patents across all classes was up only 23% in the same period.
How This Growth Stacks Up To Other Technology Areas
The growth of patents in Classes 166 and 507 outpaced growth in most of the largest patent classes. For example, Classes 166 and 507 grew at a faster clip than Class 348 (Television up 39%), Class 424 (Drug, Bio-Affecting and Body Treating Compositions up 23%), and Class 438 (Semiconductor Device Manufacturing: Process up 23%). Indeed, among the largest classes, only Classes 370 (Multiplex Communications up 130%) and 455 (Telecommunications 129%) grew at a faster rate between 2008 and 2013.
Thus, when compared to similarly sized classes, growth in the oil and gas-related classes exceeds all but a handful of other technology areas. The growth of oil and gas-related classes also far exceeds the average growth for these groups.
Possible Impacts and Strategies
The increased number of oil and gas-related patents could have a number of effects.
Enforcement litigation related to oil and gas patents may increase. After all, a large part of a patents value is in the right to exclude others from practicing the claimed invention. With more patents in this space, there is a greater potential for litigation to enforce those patent rights.
Indeed, the number of patents may continue to grow and at an even faster rate. As industry participants obtain more patents, their competitors may also have an incentive to increase the size of their patent portfolios. Indeed, a sizeable patent portfolio can be a useful tool. Not only can patents be used to exclude others from practicing inventions, they can also discourage lawsuits (or create favorable settlement leverage) through infringement counterclaims against competitors.
Yet another possibility is that more oil and gas companies will take advantage of new post-grant review proceedings offered in the USPTO. Post-grant review proceedings allow a party to challenge the validity of issued patents at a lower cost and faster pace than typical federal court litigation. There is generally less discovery in these proceedings as the process focuses on invalidity, and infringement is not at issue.
With the number of oil and gas patents on the rise, these issues are likely to be encountered with greater frequency. Developing a sound patent strategy will be important for energy companies in 2015 and beyond.
[1] In particular, this article focuses on Part II of the Patent Counts by Class by Year Report. See http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cbcby.htm.