Energywire Covers Fracking Patents Paper

My working paper – Fracking Patents: The Emergence of Patents as Information Containment Tools in Shale Drilling – with Dan Cahoy and Zhen Lei was the subject of a recent story by Gayathri Vaidyanathan in Energywire, a publication of E&E Publishing.

HYDRAULIC FRACTURING: Flurry of patents could hinder chemical research, legal experts warn  (Monday, July 23, 2012)

Gayathri Vaidyanathan, E&E reporter

Companies that invent novel hydraulic fracturing chemicals or methods could use patents filed with the Patent and Trademark Office to stop scientists from studying the environmental and health impacts of the chemicals, some legal experts warn.

The situation has not yet occurred but needs to be on the government’s radar as a possibility, said Daniel Cahoy, associate professor of business law at Pennsylvania State University.

Since 2005, the patent office has issued an increasing number of patents related to fracking, a process in which pressurized water, sand and chemicals are injected into the earth to extract oil and gas. Most of these patents have been for chemical additives used in the fracturing process, such as gelling agents used to keep proppants suspended in water or nanochemicals that increase production.

Patents are meant to promote knowledge sharing by granting the patentee sole rights to an invention for some time, in exchange for revealing the details of the invention to the world.

But due to court decisions in the United States, patents also allow companies to stop unauthorized use of the invention by scientists for noncommercial purposes. This role of patents could be used to limit independent research into environmental and health effects, according to draft legal study, Cahoy said.

“Given that experimentation with some of the chemicals and methods used in hydraulic fracturing are necessary to understand the dangers, it is possible patents could be used as a means of controlling that information,” he said.

The issue highlights the controversy surrounding the secrecy in fracking. Companies often designate certain components in fracking fluids as “trade secrets,” which are different from patents because they hinge on complete secrecy. Industry says the secrets give companies a competitive edge in particular shales that are challenging to drill.

But the secret can be broken and details about the invention can become well-known. This is especially true as state governments such as Pennsylvania’s and Wyoming’s have exerted pressure on companies to reveal, confidentially to the government, their secrets. This increases the likelihood that secrecy could be challenged in court or that other ingredients in a recipe could be figured out. Once a secret is out, there can be no further safeguard against competition or unauthorized use; a company cannot have a trade secret and a patent for the same chemical.

“If you are the only one in your field that is doing something, and nobody is going to figure it out independently, you might as well keep it as a trade secret,” said Rochelle Dreyfuss, a professor at New York University School of Law. “But as the number of participants in the field starts to increase, the chances that somebody else is going to figure out what you figured out will increase, too, so at that point it might be worth getting patents.”

With the proliferation of drilling companies and greater governmental pressure to reveal fracking fluid recipes, even more patents could be filed in the future to protect against competition, said Cahoy. And those intellectual property rights can be enforced uniformly, against competitors and even scientists.

“As trade secrets become less viable as information disclosure is compelled [by government], patents become the only alternative or the better alternative,” he said.

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 The full paper is available for download from SSRN.

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