Some economists have recently predicted that it not be until the
third fiscal quarter 2015 that oil prices may begin to stabilize
(for example, see ATB Financial’s Alberta Economic Outlook Q2
2015, published March 31, 2015). ATB Financial predicts,
however, that the price stability will begin at around $50 per
barrel rather than at the over $100 per barrel highs of
mid-2014. While economists may disagree about the specific
price that the market will agree upon - and the timing of reaching
such an agreement - many economists do agree that the global thirst
for oil will result in higher prices in the future, as compared
The current low and unstable price of oil has caused a number of
Alberta-based companies to make hard financial decisions.
News reports often include stories about major exploration and
producing companies instituting hiring freezes and cost cutting
measures, which include a large number of layoffs. What is
not so prevalent in the news reports are stories about the smaller
and intermediate oil and gas companies that are cutting costs, also
likely through layoffs.
During these tough economic times, we advise many of our oil and
gas clients about some pro-active steps that they can take to be
better prepared for when the price of oil rises again. In
effect, the current climate may provide management a moment to
pause and review standard form agreements and company policies to
determine if the company is properly securing any
innovation-related rights that may arise through the course of its
One proactive step that we advise our clients to undertake is to
review any innovation(s) that may have been developed while the
price of oil was high, but when things were busy company resources
may have been directed at the core operations of the company.
It is not uncommon for “good ideas” to be put to the
side when a company is very busy. Now that companies may be
slowing down, it may provide an opportunity to revisit when and how
any new solutions to a practical problem in the field were
discovered. While it may be some time before oil surpasses
$100 per barrel, new solutions can act as a spark for
innovation. Innovation can result in increased operational
efficiencies in the field. In our view, innovation and
increased operational efficiency will help many oil and gas
companies improve their profits, or create profits, when oil
stabilizes at, say, $50 or $60 per barrel. Securing rights in
innovations - such as through trade secrets or patents - may
provide a competitive edge within the market and also a potential
revenue stream through licensing of the innovation.
Another proactive step that we advise our clients to undertake
is to review all employment and contractor agreements. The
purpose of this review is to ensure that all personnel are obliged
to transfer any innovation-related rights to the company. If
the agreements are not explicit on this point, we propose that now
may be a good time to revise the agreements because when the price
of oil begins to rise, and the next wave of hiring begins, revising
the agreements will likely be deprioritized and forgotten. It is
important to get legal advice on the best way to implement changes
to agreements for existing employees, to ensure that the changes
are enforceable. Including an explicit obligation to transfer
innovation-related rights to the company at the time when new
employment agreements are made may circumvent protracted
negotiations with employees or contractors in the future.
We also advise our clients to pair a review of agreements with a
review and, if necessary, update of any company policies that
relate to how employees and contractors identify and report when
innovation has occurred. The policies may also provide
incentives for individuals that do innovate and report the
innovation in line with the policies. While the agreements
make individuals aware of their obligation to transfer innovation
related rights to the company, the policies also help the
individuals identify when innovation may have occurred and when
those obligations arise. Furthermore, a policy that provides
incentives for reporting new ideas and solutions to management may
help fan the spark of innovation within the company.
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