Q&A With Devon Energy: It’s Time To Talk About IP Protection
A look behind-the-scenes reveals what it takes to protect innovative ideas in the fast-moving US shale sector—key lessons learned, pitfalls to avoid, and how to do it the right way, as told by two of the operator's intellectual property (IP) protection leaders.
Devon Energy considers its development of a new completions technology called Sealed Wellbore Pressure Monitoring (SWPM) to be one of the shale sector’s biggest breakthroughs in subsurface engineering.
The approach to fracturing diagnostics represents a class of next-generation tools designed to make on-the-fly stimulation designs more practical than ever. But the innovation has done something else, too.
It has raised old questions within a relatively new sector about the role of intellectual property (IP) protection. When SWPM was introduced to petrotechnicals outside of Devon, some initially questioned how or why the technique needed to be patented at all.
The ingenuity behind SWPM could be boiled down to solving a math problem: How much fluid is pumped during the hydraulic fracturing treatment of one well before it travels across a known distance and applies pressure to the unperforated casing of a neighboring shut-in well?
The ability to answer this question rapidly and with surety holds great value for any developer of multiwell pads. But, as some wondered, was this simply a formula that could be repeated and used as freely as a decade’s old equation found in a textbook?
Was Devon being too protective over its discovery? Or was it simply being prudent?
Earlier this year, Devon was granted a US patent for SWPM, the end of a process that began on a well pad in 2017. In the meantime, the company shared rights with other operators for field trials before striking a deal last summer with software developer Well Data Labs to market SWPM to the rest of the unconventional business.
The drivers behind Devon’s IP strategy, what it learned while patenting SWPM, and what it hopes others in this space will take away from that experience are shared here by Chad Holeman, corporate counsel at Devon, and Kyle Haustveit, a co-inventor of SWPM and a subsurface engineering manager at Devon.
JPT: Can you begin by explaining your philosophy around IP protection and how SWPM reflects that?
Chad Holeman (CH): We talk about confidential and proprietary information with some degree of frequency. As an organization, I think that we’re further along on the spectrum of maturation as it relates to understanding what that means and safeguarding that information to the very best of our ability.
One key is that you need to be able to differentiate trade secrets, or confidential proprietary information that you want to keep close to the vest, from the inventive concepts that you want to protect and can also commercialize, potentially monetize, or gain some other type of competitive advantage from.
Inventive concepts such as SWPM fit that mold.
Kyle Haustveit (KH): I think the concept of leaving value on the table is one of the biggest reasons we do this.
A lot of operators have made massive investments into the digital revolution and multimillion-dollar investments into diagnostic programs to understand how we are breaking and draining the rock with our stimulations.
Through all that have come a lot of new ideas.
SWPM came from a large diagnostic that we dove back into months after the data were collected. We were able to do that because we had the data available, real-time frac data streaming, and it was organized data from a historian so we could go back and investigate it.
Because of those investments, we’ve been able to commercialize SWPM and partner with Well Data Labs. And like we’ve seen in the tech world, we’ve learned much more rapidly by partnering with other companies than we would have if we had kept the idea inside Devon.
JPT: How do you benchmark your strategy and that of the North American shale sector when it comes to creating and protecting IP?
CH: People usually look to the supermajors that typically have entire departments dedicated to IP protection. The number of patent applications and patents that have resulted from those efforts are quite voluminous.
However, for companies in our peer group, we are now beginning to see that filing patent applications, going through patent prosecution, and ultimately receiving a notice of allowance1 from the US Patent and Trademark Office (USPTO) has become a bigger priority.
KH: The shale sector is a new industry relative to the rest of the oil and gas industry. And anytime you go solve new and difficult problems with a combination of new technologies, you’re bound to start seeing IP protection become more of a common practice.
JPT: Place this back into the context of SWPM. What did it take to go from the “Aha!” moment to a commercial software tool sold by one of your existing software vendors?
CH: Over the past 4-plus years we’ve been on a very fascinating and educational journey. We started by asking how could we unlock the value of some of these ideas, get them to the point of scalability.
We also needed to develop a barometer to know what success looks like, and the other key was understanding how long our runway, or time to arrival, was to achieve success.
As we gained traction with leadership, we decided that success might look like a commercial agreement with a third-party vendor to market the SWPM concept in return for some type of monetary consideration. We were also intentional in the negotiations about securing a perpetual irrevocable license to the core technology.
Then we were able to say that this was a defensive move as well that would prevent someone from knocking on our door in the future and claiming that we infringed on their IP. So, at the end of the day, the experience and learnings associated with SWPM illustrate there is a lot of value to be gained by seeking IP protection.
The IP Protection Basics for Innovative Operators
|The Dos||The Don’ts|
JPT: Where does that journey begin? If your engineering team has developed an idea worthy of the label “innovation,” what does it cost in terms of time and money to start the patent process?
KH: The bare minimum investment here is $1,820—that’s the filing fee for a US patent application.
CH: That covers the provisional application and after that, a nonprovisional application is going to run between $2,000 and $4,000. This depends on several things, including how many patents are being filed.
Once a case is picked up at the USPTO, then you have to take into consideration all the correspondence that you will have with a patent examiner, which is where additional fees start to come into play.
More costs can be expected if outside counsel is used. We’re currently working toward bringing all of these capabilities in-house to remove our need to use such outside services in the near future.
KH: In terms of time, I would say relatively small and incremental amounts are required to work with external counsel, as Chad mentioned. It’s not like we are doing technical work in order to get the patent. We’re doing the technical work and then along the way realizing that, ‘Hey, this is patentable.’ So, a lot of the technical work has been done regardless of where we are with IP protection.
The time between the Aha! moment to granted claims can take years—we just received notice of allowance for our SWPM claims 2 years after filing the first provisional patent.
JPT: Let’s go the other direction. What are the concerns with an engineering team holding onto that good idea but forgoing the patent protection process?
KH: The big one is that someone else will go patent it and then charge you to perform the work that you’ve invented. In my opinion, that’s probably the worst case if you’re not intentional about protecting your ideas.
CH: I’ll add to that. If there’s any information that is disseminated to any external party, or that finds its way into the public domain, you are on the clock. You have 12 months to file a provisional patent application to put your flag in the ground. Otherwise, you’re dealing with a ‘loss of rights’ issue.
JPT: OK, so when did you realize that SWPM needed to be patented?
KH: It was the day we had the Aha! moment.
Wolfgang Deeg first recognized some unique pressure inflections, and then a few weeks later, the pressure information was coupled with optical fiber cross-well strain data and we knew we had something special.
And, we knew we had to discuss a patent because we were already going through this journey. We were in the middle of working on the IP for something else, and so I had a relationship with Chad. He educated me on the importance of securing IP before we broadcasted it.
I think that is a key part of this discussion. We need to make sure individuals know that an Aha! moment should be immediately followed up with a discussion with internal legal counsel. It needs to be followed up with a discussion on whether the idea is worth investing in and if it is patentable.
It should not be followed up with a post on a website or in a publication.
CH: I am smiling as Kyle says all of this.
We have a lot of talented professionals who routinely bring forth inventive concepts we need to evaluate. We obviously go through a thorough evaluation process to determine whether we can move forward on these concepts, but it’s been remarkable to see the uptick in these types of activities since we started with SWPM.
We have about 10 other patent applications at various stages in patent prosecution at the USPTO right now. The ability to bring SWPM forward and push it all the way through, and receive a notice of allowance, created a lot of excitement within the organization.
JPT: Have you ever had to enforce your IP rights on SWPM?
CH: We have numerous conversations with various third parties, but we are very respectful and diplomatic about it. We’re just letting them know that they need to ask about partnering and determine whether we want to partner at all. As far as SWPM is concerned, the notice of allowance means we have protection over this concept for 20 years from the initial 102(e) filing date.
If we utilize so much time and energy in protecting these ideas and these concepts, we also have to be willing to then mind the store, so to speak, regarding the term of patentability. That means we have to more than occasionally look out to see if there is anyone infringing, and if that’s the case, we have to be willing to seek legal recourse.
KH: On enforcement, I think about educating the community as to what a patent means, what it limits others in doing. This is very important—it’s not common sense and it’s not something often taught in the engineering curriculum.
Someone may read a paper and think they can replicate it without much difficulty. And in many cases, they’re right. But, they may not understand the legal implications. This is where we get into some of the terminology like treble damages, the concept of knowingly infringing on an idea.
People need to ask what that might mean for them and the company they are working for.
JPT: Let’s get back into the go-to-market strategy you selected for SWPM. How did you arrive at selecting Well Data Labs to develop it into a commercial software?
KH: We were trying to learn fast. Again, you see this in the tech world and the open-source culture. People learn from each other; they challenge their codes and then they improve their codes through iterations. So, we stacked hands and said we think we can learn faster by taking this external.
There are a lot of smart people out there with a lot of wells in different areas and that are being fracked with different techniques. If we exposed them to SWPM and they started using it, then we knew we would learn with them—and with that, we would learn more rapidly.
The reason we chose Well Data Labs is because they were streaming frac data for about 50% of the operators stimulating wells in North America. So, we knew they’d have instant access to a large customer base. They saw the SWPM presentation at an SPE conference and realized its potential—that this could lead to real-time completions. It’s been a great partnership, and they have teams that challenge us and vice versa.
JPT: SWPM relies on some good hardware but nothing especially new. And this partnership bolsters the argument that it’s more of software product. In the future, operator-developed IP will be more focused on which one: hardware or software?
KH: I think it will be a combination. But a lot of innovation will come from advanced custom visualizations that leverage the data we’ve already stored in an organized manner, using that historian to go back and search.
There is a long list of IP that’s waiting to be found in the historical data sitting in our servers right now. We just need to figure out how to write the correct equations on top of it or create the right custom visualization to have another Aha! moment.
Remember, we’ve gone from taking PDFs after a single frac stage and then moving that into a CSV file so we can plot and change colors to where we are now streaming all that data into a historian. From there we can access it, view it, and attach it to software.
What I am seeing right now, though, is beyond the point of just applying equations. With these new visuals, it’s like watching a movie that uses the data to tell the story. We can see it in a way that allows us to make changes and add value to our decisions.
JPT: When an oil company starts developing commercial software, how does it change the relationship between software vendor and software buyer?
CH: As far as how we protect our assets and inventive concepts, I think the language on that will be baked into agreements in a different way moving forward.
From the legal perspective, what I look to do is be very deliberate and intentional as it relates to protecting our background IP2 but also any collaborative efforts that may create foreground IP3. That requires us to be pretty judicious in how we draft the language to make sure we’re adequately protected.
KH: I think it’s a beautiful relationship when an operator can solve a difficult problem and then lean on a service provider to scale it and expand its influence. That’s how I see our relationship with Well Data Labs.
We understand the problems at a different level because we’re an operator. It’s very difficult for a third party to be watching from the outside and try to figure out exactly what we’re trying to solve for. But if we can solve that problem and then give them something that’s 95% of the way there, they can take it and expand the use in order to allow us to learn faster. It’s a great thing and there’s going to be a lot more of this in the future.
JPT: Speaking of the future, what is next for SWPM? Do you continue to keep building upon it?
KH: Yes, we have some inventive ideas related to SWPM that are going to help us further real-time completions. Again, it’s because we’re now learning faster through repetition. So there’s been no shortage of ideas from inside Devon, as Chad said. Folks have recognized what this work flow looks like and also why it is important to file for IP.
There is another important point to make here. What we saw internally from the digital revolution was an increase in the use of data and demand for data scientists. We saw a big uptake and had a lot of data scientists come into Devon, but we didn’t gain as much traction as we had hoped for.
In the last few years, though, what we have seen is that data science has started to have a really big impact on our industry, and it’s come as engineers and geoscientists have learned data science techniques and how to program in Python or MATLAB.
People who understand the subsurface are now taking those skill sets and applying them to their work. It’s simpler and more effective, I think, to teach petro-professionals how to be data scientists than it is to teach data scientists to be technical professionals.
1After examination by the USPTO, and if it is determined that the applicant is entitled to a patent, a notice of allowance is sent to the applicant who is then required to pay a fee within 3 months to have the patent officially published.
2Background intellectual property refers to IP rights that existed before an entity enters into a contract with a project partner.
3Foreground intellectual property refers to IP created or acquired by a party in the joint project and who among the partners retains full or partial ownership of the new IP.