The shared use of data is imperative in promoting a dynamic and supportive economic climate in the industry today. With current environmental restrictions and limited access to prospective acreage deterring cost-effective E&P activity, non-exclusive data licensing bridges these and other inhibitory issues that proprietary ownership doesn’t reach. This non-exclusive intellectual property, such as seismic, near-surface, shallow hazard, gravity, magnetic, and electromagnetic surveys, is acquired by a geophysical company which then singularly promotes and makes the data available to the E&P industry. An E&P company then obtains the valuable high-quality data, along with a restricted license, at a fraction of the cost of conducting a proprietary survey. However, the information is considered an asset at all times, and the original geophysical company retains ownership.

Chip Gill, president of the International Association of Geophysical Contractors (IAGC), recently addressed the ethical treatment of this data. He described the two business models that the seismic industry uses today. The contract business model, the proprietary model, provides vessels or crews to acquire data for oil companies. The E&P company pays the full cost of the project and owns the data. This particular model is much more expensive, and the price is dependent on the supply and demand of vessels and crews. Internationally, this is the primary business model used to make agreements.

Non-exclusive data differs from proprietary data in that the contractor designs and acquires the data with the idea of licensing it to multiple companies. The contractor retains ownership of the data, and there are contractual obligations for both parties.

“Non-exclusive data is intellectual property (IP) for the contractors,” Gill said. “It has the same protection issues as software, music, or films.”

The non-exclusive model began in the 1980s when contractors used extra time between surveys to acquire data in areas they thought might be of future interest. More recently it has become a mainstay for many geophysical contractors, who estimate the cost and potential market, examine the risk, and design the surveys to ensure adequate interest and return.

“The scale of the investment is significant,” Gill said, adding that the industry invested US $764 million in the US Outer Continental Shelf in 2007 and would have spent more if not for capacity constraints.

E&P companies face some serious challenges, he added:
• Gaining access to prospective acreage;
• Maintaining a supportive economic climate;
• Finding a fair and equitable contracting environment;
• Recruiting and retaining a skilled workforce;
• Handling environmental limitations and restrictions; and
• Protecting IP.

Access to high-quality non-exclusive data can help offset these challenges by providing:

Access to data at a fraction of the cost;

• Cost-effective trend and regional prospecting;
• Quick entry into new areas;
• Lower economic hurdles;
• Additional risk capital since the risk is taken on by the contractors rather than the client; and
• A helping hand for resource managers such as government entities because access to these datasets facilitates evaluation of natural resources and helps to promote activity.

To give some idea of how useful non-exclusive data has been to the E&P industry, Gill said that, to his knowledge, all of the deepwater discoveries in the Gulf of Mexico in the past 10 years have been based on non-exclusive data.

E&P companies paid little attention to non-exclusive data investments until the mid-1980s, when increasingly attractive prices and superior data demanded to be noticed. A business model for licensing developed over time, allowing for market and risk fluctuation. Yet with amplified demand for ventures in this process, several issues surfaced.

The primary issue is that data is licensed to the operator, not sold. Since the contractor owns the data, that contractor should, according to the IAGC, have a say in how it’s used. It’s like subscribing to an online newsletter and forwarding it to 100 other people. All of these people get to read the information, but the company providing the newsletter is only getting paid for one subscription.

Threats to the non-exclusive model are not only the fault of E&P companies — overinvesting by seismic contractors in the 1990s led to a $2 billion write-off earlier this decade. But issues with clients have been significant as well.

For instance, when two companies merge, data sharing is not allowed if one of the companies does not own a license to that data. But when contractors have tried to stress this point, some E&P companies have responded with threats such as, “If you charge us licensing fees, we’ll never use your company again.” Gill referred to this as “excessive leveraging of E&P purchasing power.”

Other abuses include theft of data, violation of license terms, the assumption by the licensee (the E&P company) of rights not expressly granted in the contract, and a lack of education regarding ownership and license terms.

To protect its member companies against these problems, the IAGC has had in effect for several years a Model Licensing Agreement (MLA), the most recent version of which was released earlier this year. Some of the revisions include the addition of new definitions and protections as well as more specifically addressing “derivative” products, things such as subsurface models or amplitude maps that might be derived from the original seismic data. There is also stronger language dealing with confidentiality agreements, which pertain to third parties, consultants, and processing and storage contractors who might come into contact with the data for a short period.

This sounds like a lot of work. But some of the examples of abuse that Gill discussed demonstrate the need for strong and very specific contractual language. For instance, an ongoing trial pitted two merged companies against a contractor that insisted that its licensed data was non-transferrable without a license fee. The defendants argued that the surviving entity should have the right to retain and use the data licensed by one of the former companies without being subject to a fee. The court sided with the data owner.

In another bizarre example, an oil company asked for a quality control (QC) review of a dataset. It brought pretty much its entire exploration department, including the vice president, in to QC the data and spent several hours in review. The data owner noticed that the participants were taking notes on the location of the amplitudes and promptly terminated the review, confiscating the notes.

Later this company placed a bid on the area in question without licensing the data. The dataset it had reviewed was the only dataset available for this area.
“This was downright theft of IP,” Gill said.

During the question-and-answer portion of the talk, people brought up several interesting questions. One questioner asked if it is wrong to transfer the data to an office across the ocean through video chat or some other form of conference. It was a difficult question to clarify because it is licensed data that is not meant to be shared electronically. However, if it is an internal conference with other company employees, these rules would not apply.

Another member raised a funny but intriguing question. If the licensee does additional work on the data, does the licensor own that additional work? For example, if one writes a novel in Microsoft Word, does Bill Gates own the novel? Of course not, but with seismic data, the situation is much more complicated.

In summary, perhaps the best advice of all is to keep a close working relationship with the data owner and contact that company with any questions. “If the right is not explicitly granted in your contract, you probably don’t have it,” Gill said.

To obtain a copy of the presentation, visit www.iagc.org.