August 2, 2017

No (Valuable) Copyright In Seismic Exploration Data?: “You Take The Risks And Costs, We’ll Take The Data?”

Imagine that you create a unique work of art. Surely, that work cannot simply be taken from you, copied, and given to others! It must get some sort of protection in our laws — like a copyright — right?

Think again — at least, if you invested your talents, energy, and materials into seismic exploration. That is the effect of the Alberta Court of Appeal’s new case in Geophysical Service Incorporated v. Encana Corporation (2017 ABCA 125).

Seismic data is invaluable for oil and gas exploration and development in Canada. This data, obtained by recording the results of sonic resonance reflected back from the subsurface geology, helps determine the make-up of that geology and in turn whether or not valuable minerals are present.

Background to this seismic shift

In the Geophysical Services Incorporated (GIS) case, GIS spent approximately $400 million developing a database of valuable non-exclusive (or speculative) seismic data. It was costly, risky, and complex work to develop these assets.

Within the oil and gas and exploration industry, it is known that seismic data is highly confidential. Access is restricted, and it is only shared for a fee, with strings attached. Copying and transfer are prohibited.

The provincial and federal legislation in Canada requires seismic exploration companies to obtain approvals from the National Energy Board (NEB) and other regulators, in order to access the lands and ocean areas to survey for data.

In exchange, surveyors like GIS receive a “privilege period” during which the surveyor has an exclusive right to control the data (not completely unlike a trademark or other intellectual property).

After this privilege period expires, third parties are permitted to copy the data. There is no requirement that the recipient pay the seismic company a fee for that right.

Shots fired: GIS’ legal claims & lower court rulings

In the GIS v. Encana case, GIS sued Encana, the NEB, Public Works, and other regulators, as well as numerous companies who obtained copies and even the copying companies, for what GIS termed a breach of its “copyright” in the seismic data.

GIS claimed that the legislation only allows viewing of the data, not copying (or release) of it, without paying GIS’ fees. GIS added claims of “conversion” (theft), breach of confidence (taking confidential information), and contractual interference.

The lower court (Alberta Court of Queen’s Bench) found that the legislation and regulatory scheme overrode GIS’ copyright, and permitted the disclosure of “confidential” information it claimed occurred. It also found that copyright can exist in the data, and receive protection from the Copyright Act.

So, doesn’t that mean they can protect it from release? Yes, but, there is a significant caveat.

The lower court dismissed GIS’ claims because, while the data could conceivably have a copyright, GIS traded that 50 year copyright for the shorter “privilege,” in the seismic surveying legislation and regulations.

The Court of Appeal weighs in

The Court of Appeal re-examined GIS’ claim, which on appeal GIS cast also as a case of “confiscation without compensation,” of its copyright data.

The Court found that, although protected by copyright, initially, the data that seismic companies like GIS obtain, in the context of the regulatory regime, has that copyright restricted as a condition of exploring for it. The exclusivity lasts only for the privilege period of 5, 10, or 15 years (depending on the licensing body granting the survey).

In short, the Alberta Court of Appeal ruled in favour of a nuanced public policy bargain on property rights, which encourages developing Crown mineral resources: you get rights but only for the greater good of all concerned.

Rather than rewarding only the entrepreneurial spirit, the Court chose to focus on the backdrop of exploration and development of natural resources as an overriding policy.

The policy rationale for this balance is that surveying rights are granted to companies to obtain data rapidly and to disseminate it as quickly as possible to others once the short “privilege” period ends. This generates incentive to develop public mineral resources.

While one might think it unfair to limit the property of survey companies in this data, in favour instead of developing public resources, the Court noted that seismic surveyors were involved in discussions leading to the rules, including on the time-frames in which data would be “privileged” (protected).

Seismic companies commented specifically on the time period required to recover their investment in creating the data, particularly for offshore seismic surveying. After this consultation, the regulators moved the time up from 5 years to 10 years, in some cases (while the NEB offers 15 years, and did so throughout).

Are we on the same wavelength?

The result is not terribly surprising. What GIS claimed was essentially one form of intellectual property (“privilege” granted for seismic data (5-15 years), over another (copyright: 50 years). In that sense, it follows the well-known genesis of most intellectual property: it is a bargain to recover the fruits of your labour to get protection for a period of time, after which the public interest in your ingenuity or creativity takes the field.

Yet, the lessons inherent in this decision are numerous.

One key lesson appears to be that it pays to be involved in the consultation phase of new legislation under consideration, when it may impact your long-term business strategy.

In terms of substantive legal principles, one take-away is that rights under the Copyright Act can be limited by other federal statutes such as the Canadian Petroleum Resources Act.

The Court of Appeal upheld the lower court’s finding that it did just that: restricted and exchanged the “copyright,” for essentially a time-limited “privilege” of use of your own seismic data property. Once that right is over, others have their turn.

We can offer a practical observation. In our laws, Canadian governments largely control access to the resources; when dealing with Canadian regulators and legislators, it is best business practice to be involved, at day 1, in the conversation about how legislation will work. The outcome may well impact a company’s long-term business position.

In the GIS v. EnCana case, such efforts were partly successful. The longer 15 year period provided by the NEB was directly and ironically related to GIS’ own early participation in the legislative consultation.

Thank you for reading this report from Walsh LLP’s Commercial Litigation lawyers, including Benjamin Kormos. Call us today, if you wish to discuss any business-driven legal questions, or to assist with ongoing litigation. We are happy to offer our strategic advice.