Aside from being faced with considerable public resistance and environmental impact studies, there are also a number of legal issues to consider when exploiting shale gas. The inevitable advances in drilling technologies, many specifically targeting the areas of public concern, could lead to significant gains for those holding the patents but also give rise to potential IP disputes. We have sought to outline below the challenges and possible courses of action for companies exploring the shale gas industry at this time.
A significant practical challenge for shale gas exploitation in European jurisdictions is that the rights to natural gas resources below the ground generally vest in the state rather than the landowner. It will be necessary to communicate other, more indirect economic benefits that local communities could enjoy. Cuadrilla is the leading mining & exploration company engaged in the shale gas field in the UK. Its experience in Lancashire, UK, is instructive.
In September 2011, Cuadrilla published a report1 that it commissioned about the benefits to the Lancashire economy from a single, representative test well, at Preese Hall. Alongside the benefits it set out, it also detailed its investment in the technology, with:
Cuadrilla also made a point of stating how many jobs it estimated would be created in Lancashire and in the wider UK from its test well operations. Making this sort of case will be an essential feature of the shale gas experience in Europe including in the UK. Recently, and as mentioned previously (see BBC Article 5 March 2014), the potential sites in the North West of England were found to be up to four times larger than previously thought, and so while the above figures point towards a great benefit for both the local and the wider economy, it seems to be not too farfetched to say that such benefits may also be even greater.
Intellectual property (IP) rights can protect technology and provide a basis for its commercialisation, with key IP for the oil and gas industry being patents, confidential information, copyright and design rights. There are various factors to consider when deciding on the best way to exploit IP, including available resources, costs and complexity of the manufacturing process and strength of the IP rights and indeed those of competitors. The degree of risk or reward that a party wishes to assume will essentially determine the decision.
There are various ways to acquire the necessary IP including:
There are various laws and statutory provisions relating to ownership of IP rights. For example, in the UK under s7 of the Patents Act 1977, a patent may be granted to the inventor/joint inventor, the person entitled to the whole of the UK property in invention at the time of invention (by agreement or by rule of law), or the successor in title to either of the aforementioned. Joint ownership is particularly a patent and knowhow problem, with affected areas including joint research agreements, and inventions shared by employees of different companies. Patents do not require a unique owner. In the UK, a co-owner needs other co-owners’ permission to assign or license, but not to exploit the invention themselves. Under s37 of the Patents Act 1977, the Comptroller has discretion as to determination of the right to a patent after its grant. Different rules in different territories can cause confusion and lack of cohesion. The risks include difficulty exploiting patents commercially and costs.
Regeneris Consulting/Cuadrilla Resources (September 2011), Economic impact of shale gas exploration and production in Lancashire and the UK (PDF) ↩
See Crehan v Inntrepreneur Pub Co (CPC) and another (Office of Fair Trading and others intervening)  UKHL 38 ↩
Articles 101 and 102 of the Treaty on the Functioning of the European Union (PDF) ↩
Saltman Engineering Co v Campbell Engineering Co (1948) 65 RPC 203 ↩
Coco v A N Clark (Engineers) Limited  RPC 41 ↩
Faccenda Chicken Limited v Fowler  1 All ER 617 ↩
Indata Equipment Supplies Limited v ACL Limited  FSR 248 ↩
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