Wednesday, September 28, 2011
The lack of qualified employees owes in part to the historically deficient Brazilian public education system. This system produces few candidates qualified to become petroleum engineers, geologists, geophysics, technicians, etc. As a result, many companies are obliged to create their own training centers to educate employees. Petrobras, for example, established an eleven-month-long training program for newly hired engineers to strengthen their knowledge before releasing them into the field.
Another solution is outsourcing through the importation of foreign employees. According to the Brazilian Labor Ministry, the number of authorized foreign workers rose 30% in 2010 alone. This number, however, does not mean the skilled labor shortage will be solved anytime soon since demand far exceeds even this dramatic growth. The reason for this is that Brazilian work visas can be a challenge to obtain and procuring permanent visas requires even more lengthy and expensive immigration procedures.
The burden for an "importer" of foreign labor does not end with the visa process. Foreign workers need to pass through an acculturation program and require relocation support which is extremely burdensome to the hiring company. This, together with the higher salaries paid to skilled oil and gas workers, substantially increases payroll and general operating costs.
The fun does not stop there.
Many foreign companies who have experienced light labor regulation in other Latin American countries are often surprised by the relatively onerous and inflexible Brazilian labor laws and the influence of powerful labor unions. The current, protectionist labor laws are derived from the "corporatist" labor code of the fascist government of Benito Mussolini. In fact, the Brazilian labor code is so pro-employee that a collective bargaining agreement may prevail over both the Labor Code and the Constitution if it is more beneficial to the employee. It should be no surprise then, that employee termination is also extremely difficult, with expensive severance provisions common.
To say Brazilian unions are powerful is a gross understatement. In Brazil, workers automatically "join" a union, defined by the region the worker works in, and his field of work. A worker, by law, must pay dues to that union (one day’s salary per year). In Brazil there are around 18,000 labor unions, all deeply rooted in their respective sectors, with guaranteed dues to fund their operations and enormous political influence.
This clash of labor culture may make life difficult for foreign companies doing business in Brazil. Those who fail to put this critical element into the mix when developing a plan to enter the Brazilian market, place the success of their entire venture at risk.
Tuesday, September 20, 2011
The Leahy-Smith America Invents Act, signed by President Obama into law on September 16, 2011, is the culmination of patent reform efforts taking years. Making several significant and long-awaited changes to US patent law and a myriad of potentially less significant changes, the Act as a whole likely represents the most substantial change to US patent law since 1952. This blog entry summarizes the Act’s most important changes.
Adoption of a "First to File" Patent System
Harmonizing American patent practice with the rest of the world’s most advanced economies – and representing its single biggest change – the Act converts the US patent system from "first to invent" to "first to file." In other words, priority will be established on the basis of when a patent application is filed, and not on the basis of which inventor first conceived and reduced the invention to practice. Limited exceptions to the "first to file" regime are available for an inventor who files an application within one year of his or her first disclosure (for example, at a conference).
Some critics charge that this change will create a "race to the PTO" that unfairly burdens individuals and small entities that may not have the resources to file applications as promptly as large companies. Advocates contend that the change will reduce the expense of the patent process and of patent infringement litigation, enabling innovators to put the money saved to research, development and the creation of new industries and jobs. Time will tell who is right.
The Act will eventually eliminate patent interference practice because the earliest filing date of competing applications will establish priority. Consequently, to address claims that a patentee copied his or her claimed invention from an earlier inventor, the Act creates a new category of "derivation" petitions. Derivation petitions allow an alleged first inventor to file a petition with the PTO – or a civil action in US District Court – within one year of a patent’s issue date or one year of a patent application's publication date, seeking to have the patent or patent publication deemed derivative.
The second significant change comes in the form of two new post-grant opposition proceedings. The first – "inter partes review" – will replace the inter partes reexamination process. It allows any person (except the patent owner) to challenge an issued patent within the first nine months following its issuance on grounds of anticipation or obviousness. The PTO standard for allowing the review to proceed is "that there is a reasonable likelihood that the requester would prevail with respect to at least one of the claims challenged in the request." Discovery is available. Although the existing ex parte reexamination process is left intact, a patent owner dissatisfied with the result of an ex parte reexamination may appeal only to the Federal Circuit; it no longer may do so in district court.
"Post-grant review," the second new mechanism, allows a party to oppose a patent within the first nine months following issuance on any invalidity ground (including any requirement under Section 112 of the Patent Act other than best mode).
Prior Commercial Use
Section 273 of the Patent Act has provided alleged infringers of business method patents with a "prior commercial use" defense. The Act’s third significant change is its expansion of this defense to infringement claims involving any type of patent. Doing so will protect innovators who have chosen to maintain inventions or processes as trade secrets against infringement claims brought by later claimed inventors.
The rash of recent false marking cases that have flooded district courts over the past two years will soon be gone. The Act eliminates the private enforcement of false marking claims except as to those who can show a competitive injury. Because the Act expressly covers all cases pending on the Act’s effective date, we expect all but a very few cases around the country will be dismissed.
The Good and Bad News Regarding PTO Fees
After siphoning off the funds collected by the PTO over the years, Congress heeded the PTO’s call to cease doing so. The Act thus allows the PTO to keep essentially all of the fees that it collects, which presumably will be used to hire more personnel and reduce the ever-increasing backlog of pending applications, reexaminations and PTO appeals. That’s the good news.
The bad news is that on September 26 (10 days after the Act’s effective date), all patent fees – including filing fees, national fees, examination fees, issue fees, disclaimer fees, appeal fees, maintenance fees, patent search fees and continued examination fees – rise by 15 percent. The Act also introduces a "prioritized examination" mechanism that, for an additional fee of US$4,800, will accelerate examination of an application deemed "important to the national economy or national competitiveness."
Tuesday, September 13, 2011
In 2004 eight states, New York City and several private land trusts filed suits in the US District Court for the Southern District of New York against five major electric power companies alleging that the defendants were the "largest emitters of carbon dioxide in the United States," and their emissions substantially and unreasonably interfered with public rights in violation of the federal common law of interstate nuisance or, alternatively, state nuisance law. The plaintiffs alleged that these emissions were a public nuisance for contributing to global warming and sought injunctive relief requiring the defendants to cap and reduce GHG emissions by specific percentages each year for at least a decade.
The district court dismissed both suits as involving non-justiciable political questions. On appeal the Second Circuit reversed and found that plaintiffs had stated a claim under the federal common law of nuisance because US EPA had not promulgated any rule regulating GHGs. The Second Circuit found that until US EPA exercised its authority to regulate GHGs, displacement of the claim by the Clean Air Act could not occur.
The US Supreme Court was divided on whether the plaintiffs had standing to bring this claim and affirmed the lower court’s exercise of jurisdiction by default. The Court was united, however, in its conclusion that "the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants." In Massachusetts v. EPA, the US Supreme Court clearly identified carbon dioxide as "air pollution." The Clean Air Act directs US EPA to identify categories of sources that contribute significantly to air pollution and are reasonably expected to endanger public health or welfare. Once US EPA identifies those categories, it must regulate the existing sources and establish performance standards for emissions from new and modified sources in each category. The Court found that these provisions of the Act provide an adequate avenue for the plaintiffs to petition US EPA to initiate rulemaking and to seek judicial review of US EPA’s regulatory decisions. Under this framework, the Clean Air Act "speaks directly" to the issue of carbon dioxide emissions from power plants, displacing federal common law public nuisance suits and leaving no room for courts to issue ad hoc decisions through common law suits.
The Court disagreed with the Second Circuit’s conclusion that federal common law could not be displaced until US EPA had actually exercised its jurisdiction over carbon dioxide emissions by issuing regulations. The Court found that it was Congress’s delegation of authority to US EPA that displaces federal common law, not US EPA’s exercise of that delegation. Citing the Massachusetts decision, the Court concluded such a delegation had occurred here for GHG emissions, thus placing the burden of balancing regulatory policies on US EPA, not the courts. If US EPA decides against regulating a particular source category in making these policy choices, the courts may not step in and force regulation under common law theories.
While the Supreme Court’s decision removes federal nuisance law as a mechanism for plaintiffs to seek to impose emission controls on GHG emitters, the decision leaves open the possibility for that relief under state nuisance law. The Court indicated that the availability of state law claims would depend upon the preemptive effect of the Clean Air Act, an issue that remains open on remand. Disposition of these issues will provide yet another important indication of the role courts will play in the continuing regulation of greenhouse gas emissions, if any.
Thursday, September 8, 2011
CONSOL Energy Inc. (NYSE: CNX) announced this morning that it sold a fifty-percent JV interest in nearly 200,000 Ohio Utica Shale acres to Hess Corporation (NYSE: HES) for $593 million. This equates to $6,000 per acre (without a discount applied). The purchase price includes an up front payment of $59 million and $534 million in a “drilling carry” whereby HESS pays for half of CNX's share of investment.
Is this transaction value unique to the acreage or do you believe it is representative of pricing on future Utica transactions?