Innovation Asset Blog

Patents vs. Trade Secrets as Protection for Canadian Oil & Gas Innovations

In an article first published in 2011, Mark Sajewycz, a partner with the law firm Norton Rose Canada LLP, surveys alternative intellectual property protection paths available to Canadian oil & gas companies. It is not just the land or resources beneath it that represent the value, but also the enabling exploration, extraction and upgrade technologies, argues Sajewycz. He adds that holding rights to such technologies can be powerful competitive advantages. Careful consideration should therefore be given to the vehicle one chooses to protect these innovations.

The article provides an overview of patents and trade secrets and continues by considering the relative benefits and risks of each. A patent has limited time duration whereas trade secrets can be perpetual if properly treated as such. Yet Sajewycz points to these potential hazards for trade secrets:

  • If public disclosure should occur, the commercial value of that protection is essentially lost;
  • The invention could be conceived independently by a competitor without reference to the trade secret and receive a patent on it. This could potentially block the trade secret holder from exploiting the technology;
  • There might be a regulatory framework requiring certain disclosures which could expose the technology. As an example, Sajewycz points to the public approval process for oil & gas projects in Alberta required by the Alberta Energy Resources Conservation Board (ERCB).

While there are mitigating factors to the examples above, the article suggests that if the value of protecting a technology through the patent regime justifies the costs, this approach should be favored in situations where trade secrets are hard to control or commercial exploitation opportunities abound. In addition to the ERCB example, Sajewycz notes the following:

  • If it is an oilfield service company, multiple customers are likely to be exposed to the technology in question, thereby increasing the risk of trade secret leakage “notwithstanding best efforts to control communication through confidentiality or nondisclosure agreements.”
  • Even operating companies, “which are in a better position than oilfield service companies to control third party access to technology,” could have high employee mobility or collaborative R&D initiatives with universities or consultants that pose challenges to information control.
  • “Disruptive or game-changing” technologies might lend themselves to licensing opportunities, for which patent protection is a more efficient protection mechanism. For example, the article suggests that Canada’s largely untapped gas shale reserves could be a catalyst for the aggressive development of innovative next-generation extraction technologies. This, in turn, could pave the way for “extensive exploitation of shale gas reserves worldwide,” for which the economic benefits are “potentially very significant.”

In sum, there are myriad opportunities for the Canadian oil& gas industry to utilize the protections of intellectual property to its competitive advantage. Careful consideration should be given the precise mechanism utilized for such protection.

Peter Ackerman

Peter Ackerman

Founder & CEO, Innovation Asset Group, Inc.