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NNPC takes the lead in safeguarding Intellectual Property in the Oil and Gas Industry

 NNPC imagesIt was reported in the news that the Nigerian National Petroleum Corporation (NNPC) Retail Limited has sued the Natural Network Petroleum and Gas Company (NNPG) Limited and two others over infringement on its trademark.  NNPC had in a suit joined Corporate Affairs Commission (CAC) and the Registrar of Trade Marks, Patent and Designs as second and third defendants respectively.

From this action, it would seem that the NNPC is keen on taking the lead in safeguarding Intellectual Property (IP) in the Oil and Gas Industry in Nigeria. It remains to be seen whether indigenous oil and gas companies will follow suit of their own accord or await regulatory changes, making IP Asset development, research & development mandatory, thus leading to IP and Innovation development.

This article attempts to highlight some key IP Issues indigenous Oil and Gas Companies may need to note.

The need for Innovation/Intellectual Property Commercialization

A report issued by PricewaterhouseCoopers in 1999 found that the global IP licensing market totalled more than US$100 billion, giving an idea of how economically important IP assets are today. Right now the total worldwide IP licensing market is estimated to be $250 billion annually.

ExxonMobil is reported to have collected more than US $129 million in 2011 from licensing its IP to third parties, and this number is increasing every year.

IBM alone generates nearly $2 billion a year from out-licensing its IP. The asset value of patents worldwide is estimated at $1 trillion.

U.S. IP licensing revenues were estimated at $120 billion in 2003 and are expected to have reached $500 billion by 2010. University licensing royalties in the U.S. total nearly $1 billion annually.

In 2013, the Shell Oil Company received 189 patents from the U.S. Patent and Trademark Office. Research with patent portfolio analysis tools shows that Shell was assigned 207 U.S. patents in 2014 held by Royal Shell. Shell spent $1.2 billion on R&D.

The Chinese government paradigm

The Chinese Government is fostering home-grown innovation and IP commercialisation through tax incentives. From 2006 through 2010, Chinese oil and gas companies cumulatively boosted R&D spending by 29 percent annually and upstream patenting activity by 66 percent annually. In downstream, the Chinese energy conglomerate Sinopec is amassing a large patent portfolio, at home and abroad.

 

 

Nigeria’s Window of Innovation

For our industries to thrive we need Governmental support for our local industry, government has given some support in the Nigerian Local Content Act? However technological growth and development does not happen by chance, in this writer’s opinion our local companies have a duty to take full advantage of governmental support by actively innovating and commercialising their resulting innovation and Intellectual Property.

Nigerian companies may need to pay a little more attention to research, development and the resulting innovation that increases profitability which should be protected and commercialised by IP possibly Patents, Trademarks, Copyright  and Trade Secrets etc.

During exploration, extraction and transportation of Oil and gas, value is added to the unrefined Oil and Gas by technology, and other business practices that help process the extracts into useful and valuable consumer products.

The innovation, technology and business processes (Intellectual Property Assets) involved, are often protected by IP and become valuable assets to Oil and Gas companies, when they are registered and competitors prevented from accessing and using proprietary innovation for free.

Owners of such IP Assets may actively commercialise their assets by licensing them to companies willing to use these IP Assets in exchange for a license fee.

Trademark as an IP Assets in the Oil and Gas industry

The first barrel in any great oil and gas company is a good name. It should be registered as a trademark.  A trademark is a symbol or a sign which differentiates the goods and services of one business from another one. A trademark provides protection to the owner of the mark by ensuring the exclusive right to use it to identify goods or services, or to authorize another to use it in return for payment of license fees.

The Oil and Gas Industry is particularly susceptible to trademark issues as internal and external consumers rely on their trademarks to purchase goods and services from them.

Filling Stations and Trademark lawsuits

The Managing Director of NNPC Retail Limited, Mr. Fagbola Ladipo was reported to have alleged that the infringement on the NNPC trademark by the first defendant had begun to cause a dwindling in the sales of NNPC in Ondo State. He also alleged that the first defendant was imitating the NNPC logo by using its colour combination of red, yellow, green, uniform, emblem and the acronym NNPC…

The Russian Legal Information Agency (RAPSI/rapsinews.com) reported that sometime in 2003, a court awarded Rosneft oil company $95,000 in its trademark infringement lawsuit against EKA-AZS fuel company, which operates a large chain of filling stations.  The parties told the court they entered into a franchise agreement in 2005 for a term of 5 years, under which EKA-AZS paid $1,000 for the right to use Rosneft’s trademarks to sell fuel at 40 filling stations. Rosneft maintains the defendant illegally used trademarks for five months after the contract expired on September 29, 2010.

Sometime in 2015 LUKOIL North America filed a lawsuit in U.S. District Court for the Eastern District of Pennsylvania against R.K. Keystone Mobile Mart Inc., Gurmeet Singh, As Airport Texaco Inc. and Swapnesh Sharma, alleging trademark infringement and trade dress infringement.

According to the complaint, the defendants own and operate the former LUKOIL fuel station at 3575 Airport Road in Allentown even though the station no longer is a franchise under the LUKOIL name.

Sometime in 2011, it was reported by Bloomberg that BP filling station operators in the western U.S. sued BP Plc. seeking $200 million in damages over allegations the company’s sales and inventory software they are forced to use is “an unmitigated disaster.”

Branding in oil and gas

Oil and Gas companies seldom attempt to suggest that they have perfectly “green credentials”. It may be more prudent to emphasise their capacity for innovation which benefits society in future and their importance in providing energy for today’s society.

 

The world’s most valuable Oil & Gas brands

Please find below a table of the world’s most valuable Oil and Gas Brands, at number 8 is Petronas, a national oil company just like the NNPC.

 

Rank 2015 Brand Name Domicile Brand Value ($) 2015
1 Shell Netherlands $30,716,000.00
2 ExxonMobil United States $18,242,000.00
3 Chevron United States $18,163,000.00
4 PetroChina China $17,521,000.00
5 Sinopec China $16,135,000.00
6 Total France $15,203,000.00
7 BP UK $14,743,000.00
8 Petronas Malaysia $9,480,000.00
9 Eni Italy $8,037,000.00
10 Gazprom Russia $ 6,961,000.00
11 Statoil Norway $6,528,000.00
12 ConocoPhillips United States $6,062,000.00
13 Petrobras Brazil $5,945,000.00
14 Mobil United States $4,696,000.00
15 CNOOC China $4,523,000.00
16 Esso United States $4,471,000.00
17 Enbridge Canada $4,340,000.00
18 Exxon United States $3,995,000.00
19 Schlumberger United States $3,994,000.00
20 PTT Thailand $3,681,000.00

 

Interestingly, some Energy brands operating in Nigeria’s upstream sector are struggling to erase negative perceptions especially as it concerns environmental compliance. We have recently seen a number of IOCs divest assets onshore possibly due to a whiplash from host communities over alleged unacceptable environmental practices. All these point to the importance of IP to an Oil and Gas company’s profitability.

 

Conclusion

The challenges facing our oil & gas industry ranging from the fall in crude oil prices to the perception of oil & gas companies by the local populace and the changing global energy landscape make it needful for active collaboration between all stakeholders. In addition, for our Local Oil and Gas companies to grow they may need to take their Research and Development and resulting IP like patents and trade secrets seriously, they may also wish to leverage on the advantages conferred on them by the local content policy currently being pushed by the government. It goes without saying that technological development does not happen by chance, it can be encouraged by good policies like the local content policy serving as a spring board for the inventiveness of our local companies to flourish. 

[1] Source http://www.eregistration.copyright.gov.ng/? last accessed on 30/03/2015

Olufola Wusu Esq © 2015

fola@megathoslaw.com

Olufola Wusu is a Commercial, Oil and Gas and I.P. Lawyer based in Lagos

OLUFOLA WUSU IS NOTED FOR HIS “DYNAMIC PRACTICE” AND “COMMERCIAL ACUMEN”. HE IS PRAISED FOR HIS “FIRST-RATE SKILLS” IN ASSISTING CLIENTS…

NNPC GROUP

NNPC GROUP

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THE NIGERIAN PATENT SYSTEM AS INFORMATION SOURCE IN NATIONAL ECONOMIC DEVELOPMENT.


In most developing nations (including Nigeria) indigenous technological expertise is not sufficiently developed to meet local requirements. To meet their developmental needs, these countries rely heavily on the transfer to them of foreign technology by more developed nations. Bambo Adewopo, Developments and Reform, Nigeria’s commercial laws Essays in honour of Chief Dr Chris Ogunbanjo O.F.R, (Nelson, 1st edition, 2005, page80) Lanre Fagbohun and Bambo Adewopo.

Such transfer can be effected through foreign direct investments, joint venture agreements, licensing and franchising agreements or other similar schemes:

The Patent System and technology transfer

It has been asserted that the transfer of technology involves and can only be achieved by indigenous inventiveness by Nigerians arising from access to and knowledge of Patents, Designs and Trade Marks.

A viable patent system is meant to contribute to this process in many ways. Firstly, the patent registry is enriched through the wealth of information about new products and processes which are disclosed in the registration of patents, thereby encouraging the transfer of technological information. Harvard Law Review vol. 118 April 2005. This is made possible due to the disclosure function of the patent system. In addition, an interested indigenous entrepreneur can link up with appropriate right owners to procure a license to enable him exploit the invention. Bambo Adewopo, Developments and Reform, Nigeria’s commercial law s Essays in honour of Chief Dr Chris Ogunbanjo O.F.R, (Nelson, 1st edition, 2005, page79) Lanre Fagbaohun and Bambo Adewopo

The purpose of a patent license is to authorize the license to use an invention protected by a patent and it also provides authorization to the licensee to use an invention protected by a patent and it also provides authorization to the licensee and grants a set of exclusive rights including the use of the invention for manufacturing, selling or placing it on the market. Technology Transfer also called Transfer of Technology (TOT) and Technology Commercialisation, is the process of skill transferring, knowledge, technologies, methods of manufacturing, samples of manufacturing and facilities among  governments or universities and other institutions to ensure that scientific and technological developments are accessible to a wider range of users who can then further develop and exploit the technology into new products, processes, applications, materials or services. It is closely related to (and may arguably be considered a subset of) knowledge transfer. Wikipedia (http://en.wikipedia.org/wiki/Technology_transfer).  It often involves the use of Technology brokers who are people who have discovered how to bridge the disparate worlds and apply scientific concepts or processes to new situations or circumstances. Hargadon, Andrew. Harvard Business School Working Knowledge for Business Leaders , August 4, 2003.

The Nigeria Technology policy looks beyond the mere encouragement of technology flow to Nigeria but it also seeks to assist Nigerian enterprises to identify and select only foreign technology which is suited to local needs and requirements, and on the best contractual terms and conditions. In implementing the National Science and Technology polices the Federal Government of Nigeria established the Federal Ministry of science and Technology and various institutions including the National Office for Technology Acquisition and Promotion. These institutions have substantive mandates to ensure that science and technology are used to resolve socio-economic problems arising from the attendant problems that characterize under development.

Terms such as export restriction or prohibition clauses, by which production and sale of the patented product, or product obtained by the patented process is restricted only to the country of the transferee of the technology, these include clauses, where the transferor of the patented technology restricts the procurement of certain materials needed for explanation of the invention from sources other than itself. We also have “no challenge clauses”, where the transferee is precluded from challenging the validity of the patent under which the technology is transferred and restrictions on research and development of the transferred technology.

This last restriction inhibits local creativity in adapting foreign technology to suit the nation’s peculiar requirements and directly counters the objectives of the Technology policy.  However, The Patents and Designs Act prohibit the inclusion of such clauses in patent license agreements.

Section 23(3) provides that any clause in such a license is null and void in so far as it imposes on the licensee in the industrial and commercial field restrictions which do not derive from the rights conferred by the patent or are unnecessary for safeguarding those rights. The problem is that the registrar is not authorized to examine applications for registration of these agreements, to ensure compliance with Section 23(3) before granting the license, and in view of the limitations imposed on the Registrar’s power of examination under Section 4(2) it is possible this duty does not exist. The proviso to Section 23(3) substantially negates the efficacy of that section. As it permits the inclusion of clauses dealing with the following matters.

 

Limitations concerning the scope, extent, territory or duration of the exploitation of the patent of the quality or quantity of the product in connection with which with patent may be exploited;

 

Obligations imposed on the licensee to abstain from all acts capable of prejudicing the validity of the patent; and limitations justified by the interest of the licensor in the technically efficient exploitation of the subject of the patent.

It has been argued that these three exceptions can easily be utilized to justify export prohibition clause, no challenge clauses and tie-in-clauses respectively, with negative implications for indigenous technology development. Bambo Adewopo, Developments and Reform, Nigeria’s commercial laws Essays in honour of Chief Dr Chris Ogunbanjo O.F.R, (Nelson, 1st edition, 2005, page80) Lanre Fagbohun and Bambo Adewopo.

The aim of acquiring technology is to and the rapid industrialization of Nigeria which is a major objective of the government as a means to the attainment of higher levels of well-being of the people. The advancement of science and the development of a technological base are essential conditions of industrial growth. DR. (Mrs) Nasir “THE ROLE OF INDUSTRIAL PROPERTY IN ECONOMIC DEVELOPMENT” Modern Practice Journal of Finance and Investment Law MPJFIL vol. 6 No 3-4

 

DEVELOPMENT OF INDIGENOUS CAPABILITIES

Within the ambit of technology development, the patent system has three main objectives.

First, it serves as an instrument of justice to the inventors to reward his ingenuity, and enable him profit from his creativity without hindrance from imitators.Some people see the patent system as creating a social contract whereby the states as representing the community, grants a monopoly to the inventor to profit by his invention in return for his making the product available for general use during the terms of patent protection and for making the secret public so that all can exploit it when the patent expires.

To most, the system would seem simply to protect a piece of personal property, namely the product of the inventor’s intellectual effort, from theft. Paul Marett, Intellectual Property, Law London Sweet and Maxwell, 1996 at Pp. 1-2

The inventor of a useful product is a benefactor to his society because his invention constitutes an addition to the sum of human prosperity. By securing his title through its recognition and protection, the law seeks to encourage inventive activity and innovation in all spheres of human activity. The second objective is the enhancement of development through increased inventiveness and innovative activities resulting in the availability of new and improved products as well as more efficient processes which help to develop society in the industrial, technological and other sectors.

In order to encourage innovation, NOTAP renders support services to encourage innovation, NOTAP renders support services to transform, innovation which is commercializable into products goods and services. It also renders technology development services to inventors by advising and assisting to upgrade some R&D results or inventions submitted for patenting in order to meet the standard required by the Trade Marks and Patents Registry. NOTAP also produces industrial project profiles for potential entrepreneurs for the development for the development of Small and Medium scale Enterprises (SMEs) Section 3(2) of the Act

Thirdly, the patent system, by its requirement of clear and complete disclosure, serves as an information source to relevant industries. As other inventors and researchers can thus freely draw on, and utilize such information to further improve existing products and processes. The most commonly offered economic justification for the patent system is that it preserves the incentive for inventors to create, develop, and commercialize new technologies and innovations. Economists and legal commentators often invoke a second economic rationale for the patent system however: that it “serves to disseminate technological information, and that this accelerates the growth of productivity in the economy.

It is clear that the patent system can catalyse the attainment of technology and general socio-economic development. To translate this potential to practical utility, however, the patent law must be properly synchronized with the objective of the national technology policy, which is the strengthening of the technological base of the nation through the enhancement of national capability in science and technology.

The disclosure function of the patent system is premised on three assumptions. The first assumption is that the patent system encourages the disclosure of information that would otherwise remain secret.

 

The second assumption is that inventors look through the patent records searching for new ideas and technologies.

 

The third assumption is that innovators can find valuable information in the patent records. Bambo Adewopo: Developments and Reform, Nigeria’s commercial laws Essays in honour of Chief Dr Chris Ogunbanjo O.F.R, (Nelson, 1st edition, 2005, page86) Lanre Fagbohun and Bambo Adewopo

There is a need to strengthen our patent laws to enhance the implementation of the National Industrial and Technology Policies. Also, the patents Registry should be properly equipped and staffed to perform the technical, administrative, logistics and other functions required of patent offices worldwide.

 

The Efficacy of the System as an Information Source

A major advantage which the patent system has over trade secrets as a form of protection of technological know-how is the disclosure requirements of the system which ensure its potential efficacy as an important source of scientific information. William M A Landes and Richard A Posner, the Economic Structure of Intellectual Property Law (2003) page294

An important secondary purpose of the patent system, however, is to encourage disclosure of information about new technologies and innovations. Patents may help accelerate the process of cumulative innovations because they encourage inventors to patent and disclose small technological advances, allowing everyone in the field to build upon one another’s work continually. William M A Landes and Richard A Posner, the Economic Structure of Intellectual Property Law (2003) page294

The patent system also theoretically prevents wasteful duplication of the original inventor’s research because the patents not only disclose how to make and use the claimed invention, but also notify the public of the patentee’s exclusive rights to that technology. William M A Landes and Richard A Posner, the Economic Structure of Intellectual Property Law (2003) page294. By virtue of Section 3(2) (a) of the Act, in applying for a patent, a description of the relevant at the relevant information must be submitted. A description must be full, and disclose the invention in a manner sufficiently clear and complete to enable it to be put into effect by a person skilled in the art or held of knowledge to which the invention relates. Section 3(2) of the Act. By virtue of this provision, the patent register has the innate capacity of becoming a most valuable repository of scientific and technological information on the latest technology worldwide. Bambo Adewopo, Developments and Reform, Nigeria’s commercial laws Essays in honour of Chief Dr Chris Ogunbanjo O.F.R, (Nelson, 1st edition, 2005, page86) Lanre Fagbohun and Bambo Adewopo

The efficacy of the Nigerian Patent system in this regard is however severely limited in two respects. The Registrar is expressly precluded from examining the question of whether the description, which had been filed in respect of the patent application, satisfies the requirements of completeness and clarity under Section 3(2) of the Act. In the absence of such monitoring, patentees either wilfully or negligently flout this requirement. Rather than setting out precise and best methods of manufacture, they may give inadequate disclosure or opaque disclosures. Where a patentee does not disclose clearly and completely in compliance with Section 3(2) the available remedy is to challenge such a patent as an invalid one under the provisions of Section 9 of the Act. Where an indigenous inventor is unsure of the profitability of his invention, he may not devote his time or resources to pursue legal action for this purpose. Even where a compulsory license is granted, the licensee is unlikely be able to practically work the invention, without support or assistance from the patentee, this support is unlikely under those circumstances.

NEED FOR AN EXAMINATION SYSTEM: There is a pertinent need to introduce an examining system which assesses patent applications and ensures compliance with the disclosure requirements before the grant of a patent. This system will require skilled personnel. It would be good for the patent office to work in conjunction with university research terms and or any other competent body who will provide the required technical and specialized services necessary for the efficient performance of this function.

 

ACCESSIBILITY OF INFORMATION CONTAINED IN THE REGISTER OF PATENTS: Another limitation to the patent system as a source of information dissemination is the question of accessibility of information contained in the Register of Patents. The difficulty encountered in obtaining needed information and questionable value of what is retrieved, combine together to strip society of the benefit of the patent system as a fountain of scientific information, thereby limiting the effectiveness of the system as a vehicle for technological development.

NOTAP has been active in this regard with the creation of the Technical information Bulletin first published in January, 1996. The bulletin is a repository of technical information about sources and types of technology including details of expired patents when can be freely exploited. The World Intellectual Property organization (WIPO) has assisted NOTAP in establishing a Patent Information and Documentation Centre (PIDC). The Federal Government has also strengthened NOTAP by deploying appropriate skilled personnel to manage the (PIDC). The centre has a deposit of over one million technology in patent document stored in CD-ROMS. It has planned an on-line linkage with WIPO in Geneva. The PIDC also has the GLOBAL PAT CD-ROMS, which has made it possible to access technology information available in patent documents globally, specifically, the publications from 1971 to year 2000. Funke Araba “INTELLECTUAL PROPERTY REGIME, TECHNOLOGY TRANSFER AND INNOVATION CULTURE. PRE REQUISITES FOR ECONOMIC DEVELOPMENT IN NIGERIA,”MODUS INTERNATINAL: LAW and BUSINESS QUARTERLY Dec, 2001 vol. 6, No.4

Small and medium scale enterprises will be among the beneficiaries of a well-run patent system in Nigeria as they will be able to avail themselves of the benefits of  a viable patent system at no extra cost.

Conclusion

One of the key issues often neglected with transfer of technology is how to construct a receptor to capture the transferred technology and ensure that it is fully internalized to enable it blossom and grow to create similar new technologies on its own within a given time frame without external support. It is only then that technology can be said to be transferred. Without a deliberate receptor programme, technology transfer will continue to be by chance. Nigeria’s national R&D spending is very low with little verifiable statistics and little or no results to show.

There must be massive increase in R&D expenditure to yield appreciable results in innovation. Funding for R&D development would not come solely from government but it needs to create the enabling environment for research and development to thrive which will in turn birth innovation, for one it needs to solve the problem of epileptic power supply. This is a call for our nation and the need for all of us to work together to ensure that a vibrant “Innovative Culture” is established.

Olufola Wusu Esq.

Copyright © 2012

 

Counsel Megathos Law Practice

Olufola Wusu is a Solicitor & Advocate and Intellectual Property consultant

He can be reached at folawusu@yahoo.com

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