Innovation in the oil and gas industries, as measured by the number of patent filings, is increasing worldwide. As reported by Thomson Reuters, from 2012 to 2013 the number of patent applications filed worldwide increased by a whopping one-third. (“Unconventional energy boom drives oil and gas patents to record” (Thomson Reuters)) See below for a caveat. Thomson Reuters attributes the increasing IP filings to the oil industry’s expansion into less-established forms of oil and gas extraction, such as hydraulic fracturing.
The oil and gas patent filings in the U.S. went up 18 percent in 2013. Much of the increasing patenting occurs in China, where roughly 60 percent of new patent applications are filed. The recent growth in Chinese industry has led to a greater demand for energy, and China’s filings have surpassed those of the U.S. to take over the top spot in international filings in the industry, according to the report.
The numbers reflect an increasing investment in intellectual property in the oil and gas industries, but the conclusions based on the numbers require some explaining because of the heavy effect of Chinese patent numbers. First, the Chinese government subsidizes patent application filing in several ways, which results in more patents of dubious value. A recent study found that Chinese applicants break up inventions into small bites for the purpose of filing multiple applications on one invention to increase subsidies (Z. Lei, Z. Sun, B. Wright, “Patent subsidy and patent filing in China”). Second, a large majority of Chinese patent applications are low quality “utility models,” rather than patents on inventions, as in the U.S. and Europe. Without the eye-popping patent numbers from China, the numbers still increase, just not in a hockey stick.
Further, it is unclear how Thomson Reuters obtained data for 2013 because patent applications remain secret for 18 months in nearly all countries. The numbers might reflect official reports from patent offices around the world, which tend to be crude.
But the above questions about the data do not affect the overall conclusion: increased investment in IP in the oil and gas industries is clear and the surge of patenting in China is impressive.
This post was coauthored by Dmitry Dymarsky (BakerHostetler 2014 Summer Associate).