A recent article by three professors of business, energy and economics looks at the role of patents on hydraulic fracturing, or fracking, the process of injecting pressurized water and chemicals into subterranean formations to extract natural gas.
Entitled “Fracking Patents: The Emergence of Patents as Information-Containment Tools in Shale Drillling,” the piece posits that the information-control mechanism of patents will hamper efforts to test the environmental effects of patented fracking technologies.
More particularly, the authors note that there are serious environmental hazards associated with fracking due to the toxic chemicals used in the processes, and assessing the extent of the harm requires field testing of the processes. However, such field tests would constitute infringement if the techniques or materials used have been patented:
A third party interested in investigating the impact of fracturing fluids on the environment or evaluating issues beyond discrete chemical composition…will need to make use of the patented materials. Without a license, it is unlikely that any exception in patent law would excuse such activity from infringement.
Fracking patents, therefore, can act as information-containment mechanisms where the patent owners enforce their rights to shut down the testing activities:
A patentee can assert its rights to control testing and experimentation, and thereby shape the information environment.
The article was written by Daniel R. Cahoy, Professor of Business Law and Dean’s Faculty Fellow in Business Law at Penn State, Joel Gehman, Assistant Professor of Strategic Management & Organization and H.E. Pearson Faculty Fellow at the University of Alberta, and Zhen Lei, Assistant Professor of Energy and Environmental Economics at Penn State.
I corresponded with Professor Cahoy via email, and he provided the following summary of his work on fracking patents:
Based on a general interest in hydraulic fracturing technology and intellectual property rights, my colleagues (Joel Gehman, Assistant Professor of Strategic Management and Organization, Alberta School of Business, and Zhen Lei, Assistant Professor of Energy and Environmental Economics, Penn State) and I wanted to investigate whether patents could have an impact on the natural gas boom. We first determined that there are indeed many patents that cover fracking technology and the numbers appear to be growing dramatically. That has obvious implications for future market development, pricing, etc. But we were also curious as to whether patents could impact our understanding of the most controversial question related to fracking: the potential for environmental harm.
Our first paper is a discussion of the critical information issues in hydraulic fracturing and the manner in which patents can prevent the kind of experimentation necessary to develop that information. We consider the lingering impact of Madey v. Duke on experimental use and build on the general work others who have considered patents as information limitation tools, such as Professor Brenda Simon at TJLS. We conclude that there are options for overcoming patent information-barriers, most creatively through the use of a public university’s inherent sovereign immunity rights. This paper was published in 2013 in the Michigan Telecommunications and Technology Law Review and is available for free download at http://ssrn.com/abstract=2065032.
Our future work involves building an accurate, comprehensive database of patents related to hydraulic fracturing for in-depth analysis of trends, ownership consolidation and even the possible influence of patent trolls. The challenge is the fact that hydraulic fracturing is actually a bundle of technologies and practices (fluids, proppants, service equipment, etc.). We are working with experts in energy exploration and computer science to help us separate the wheat from the chaff. We expect to have our initial collection ready for initial analysis in the fall.
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