Patent protection on petroleum vessels

Thesis by

Rikard Mikalsen

in partial fulfilment of the requirements for the degree of

Master of Laws

I

Abstract

The thesis analyses the international legal situation for patent protection of inventions aimed for use

in the maritime industry, in particular for offshore petroleum related activities. Due to the highly

international nature of the industry and the traditionally strictly territorial nature of patent rights, it

is shown how it can be particularly challenging for developers of maritime technology to obtain

effective protection for new developments. The thesis discusses maritime territorial jurisdiction in

offshore areas under international law, i.e. the extent to which a coastal state is empowered to give

national patent law effect in this area. The national law of three countries with major offshore

activities, namely Norway, the UK and the USA, is reviewed and it is considered whether (and to

what extent) these countries have given national patent law effect offshore. Finally, the Paris

Convention's "temporary presence exception" (Art. 5ter) is analysed, i.e. the defence against patent

infringement for visiting foreign vessels, and to what extent this defence can be invoked for

petroleum vessels operating in such offshore areas.

It is found that under international law of the sea, the rights of the coastal state to apply national

law in the exclusive economic zone and on the continental shelf are limited. However, the extent to

which coastal states give national patent law varies significantly, with the UK, US and Norway having

adopted different positions. It is concluded that UK law extends beyond what is permitted under

international law. The varying national positions create uncertainty for operators and IP rights

holders, and certain proposals are made to rectify this situation. It is found that for the temporary

presence exception the situation is clearer, in that it would generally not be possible for a petroleum

vessel to claim the “temporary presence” defence when carrying out operations in foreign waters.

II

III

Contents

1 Introduction .................................................................................................................................... 1

1.1 Background and rationale ....................................................................................................... 1

1.1.1 The patent system........................................................................................................... 2

1.1.2 Patent protection in the maritime space ........................................................................ 4

1.2 Problem statement and research objectives .......................................................................... 6

1.2.1 Maritime jurisdiction and the territorial reach of patents ............................................. 7

1.2.2 The temporary presence exemption for foreign vessels ................................................ 8

1.3 Practical and legal relevance................................................................................................... 9

1.3.1 Relevant inventions and their use .................................................................................. 9

1.3.2 Effects of patent law extra-territorial effects ............................................................... 13

1.3.3 Practical implications .................................................................................................... 16

1.4 Contribution and broader relevance .................................................................................... 17

1.5 Structure of the thesis .......................................................................................................... 18

2 Maritime jurisdiction under international law ............................................................................. 19

2.1 Maritime territorial jurisdiction ............................................................................................ 19

2.2 Internal waters and territorial sea ........................................................................................ 22

2.3 The exclusive economic zone and continental shelf ............................................................. 23

2.3.1 Rights of the coastal state in the EEZ / on the continental shelf .................................. 23

2.3.2 Jurisdiction under UNCLOS Articles 56(1)(a) and 77 ..................................................... 25

2.3.3 Jurisdiction under UNCLOS Articles 60 and 80 ............................................................. 31

2.3.4 Rights under Article 81 .................................................................................................. 40

2.3.5 Conclusions, jurisdiction on the EEZ and continental shelf .......................................... 40

3 Territorial reach of patents offshore ............................................................................................ 43

3.1 Territoriality of patent law .................................................................................................... 43

3.2 Relevant national positions ................................................................................................... 44

3.2.1 United Kingdom ............................................................................................................ 44

3.2.2 United States ................................................................................................................. 48

3.2.3 Norway .......................................................................................................................... 53

3.2.4 Further countries' positions .......................................................................................... 55

3.2.5 Summary on national positions .................................................................................... 57

4 The temporary presence exception .............................................................................................. 59

4.1 Background and scope of application ................................................................................... 60

IV

4.2 Conditions and their applicability to petroleum vessels....................................................... 63

4.2.1 “Vessels of other countries” ......................................................................................... 64

4.2.2 “Temporary or accidental entry” .................................................................................. 67

4.2.3 “Use exclusively for the needs of a vessel”................................................................... 71

4.3 The temporary presence exception offshore ....................................................................... 74

4.3.1 The temporary presence exception in the EEZ / on the continental shelf ................... 74

4.4 Summary and conclusions .................................................................................................... 77

5 Discussion and conclusions ........................................................................................................... 79

5.1 Policy considerations ............................................................................................................ 79

5.2 Actual situation ..................................................................................................................... 80

5.3 Practical implications ............................................................................................................ 80

5.3.1 Category A: Fixed or moored installations .................................................................... 81

5.3.2 Category B: Installation / intervention vessels ............................................................. 81

5.3.3 Category C: Support / supply vessels ............................................................................ 82

5.4 Proposals and recommendations ......................................................................................... 82

6 References .................................................................................................................................... 85

1

1 Introduction

This work analyses the international legal situation for patent protection of inventions aimed for

use in the maritime industry, in particular for offshore petroleum related activities. Due to the

highly international nature of the industry and the traditionally strictly territorial nature of

patent rights, it can be particularly challenging for developers of maritime technology to obtain

effective protection for new developments. The research aims to improve the understanding of

the intellectual property framework currently faced by industry players and discuss some

particular challenges and uncertainties observed.

This first chapter will outline the background for the research questions and introduce the

particular aspects discussed, including maritime territorial jurisdiction in offshore areas and the

temporary presence exception for visiting foreign ships. The broader practical and legal

relevance will be discussed, and three different types of petroleum vessels will be introduced

which will be used to aid the analysis in the following chapters and illustrate the practical

implications of the findings.

The following chapters will then discuss these aspects in more depth. This will include an

analysis of maritime territorial jurisdiction in offshore areas under international law (i.e. the

extent to which a coastal state is empowered to give national patent law effect in this area), the

actual situation in some relevant countries (with Norway, the UK and the USA used as

examples), and the Paris Convention's "temporary presence exception" (Art. 5ter) and to what

extent this defence can be invoked for petroleum vessels operating in such offshore areas.

1.1 Background and rationale

Technology development in the maritime industries and effective means to protect innovation

are crucial for a number of reasons.1 A desire to reduce costs through new or improved technical

solutions is ever-present, as it is in most other industries. The awareness of the environmental

impact of shipping is increasing, with both international bodies (such as the International

Maritime Organization) and national governments working actively to control and reduce

various types of emissions2. Further, the oil and gas industry is moving into ever-deeper waters

and harsher conditions (e.g. in the Arctic), which sets high requirements on the technical and

engineering solutions in order to provide efficient and safe operations. All these factors, and

numerous others, drive innovation and technology development.

1 See, for example, Armstrong and Black (2009) and Glenn (2000) for examples of the types of IP relevant in the maritime context, and also the report of Houthoff Buruma (2007) to the European Commission, noting that the full benefits of such innovation cannot be fully reaped without sufficient means to protect the innovation adequately.

2 See for example MARPOL Annex VI: Prevention of air pollution by ships (Emission Control Areas), or the US National Invasive Species Act 1996 for controlling the introduction of invasive species by ship ballast water.

2

1.1.1 The patent system

The objectives for granting patent monopolies have, since the late Middle Ages, been to

encourage industrial development and technological progress3. While the motives for granting

patent privileges in medieval Europe were varied and not always unbiased,4 the earliest modern

patent legislation ensured that patents would only be granted to the “first and true inventor of a

new manufacture”.5 The First Congress of the United States passed a patent statute in 1790,

while France enacted early patent legislation in 1791.6 In the early 19th Century, a plethora of

countries followed and implemented national patent law.7

The justifications for patent law has been analysed according to several “different lines”,8

however the role of patents in incentivising innovation has been a key argument for maintaining

the patent system.9 In Asahi10, Lord Oliver of Aylmerton stated that

[t]he underlying purpose of the patent system is the encouragement of improvements

and innovation. In return for making known his improvement to the public the inventor

receives the benefit of a period of monopoly during which he becomes entitled to prevent

others from performing his invention except by his licence.

Also among the most recited justifications for the patent system in modern times is that the

public disclosure requirement encourages publication of inventions which may otherwise have

been kept secret.11 For example, Kitch (1977) noted that "[…] firms can learn of the innovative

work of the patent holder and redirect their work so as not to duplicate work already done".

Kitch even points at the possibility that patents may encourage disclosure beyond that done by

means of the patent specification itself, in that "[…] the patent gives its owner an affirmative

incentive to seek out firms and inform them of the new technology […] if the most efficient […]

way to exploit the invention is to license it." Patents may therefore encourage earlier disclosure

of new developments, an effect which may be particularly relevant in fast-moving technical

3 See e.g. MacLeod (1988) and Machlup and Penrose (1950).

4 See Flint (2004) and Davies (1934).

5 UK Statute of Monopolies 1624.

6 Drahos (2010).

7 For example, Austria (1810), Russia (1812), Prussia (1815), Belgium and the Netherlands (1817), Spain (1820), Brazil (1830), Sweden (1834), Chile (1840); see Drahos (2010).

8 Machlup and Penrose (1950).

9 See Hettinger (1989), who notes that it is not a question of whether patents incentivise innovation, as the answer to that is clear, they can, but whether the incentive effect is greater than the negative effects of the monopoly.

10 Asahi Kasei Kogyo KK's Application [1991] RPC 485, 584.

11 See MacQueeen et al. (2008), who stated that "The public disclosure requirement in patent law should not be underestimated." This is commonly referred to as the “bargain” between the state and the inventor; the inventor gets a limited monopoly in exchange for the public disclosure of an idea.

3

fields. Similarly, companies may be more willing to allow presentation of new developments at

industry conferences and offer a technology more openly to the marketplace if they know that

patent protection exists. Patents may thus contribute to dissemination of technology and

technology transfer going beyond what is contained in the patent document itself.

In the alternative, "[u]nder a regime of trade secrecy, the competitive firm might never learn of a

competitor's processes […]".12 In light of this, and to ensure that the inventor keeps his/her part

of the “bargain” (see footnote 11), the requirement that a patent specification enable others to

reproduce the invention (without undue experimentation or further inventive activity) has

become a key requirement for patent grant and validity13 and the importance of this has been

repeatedly reiterated by courts.14

Other, traditional, arguments in favour of a patent system include that the monopoly provides a

reward for innovation, and that inventors under their natural rights are entitled to a just reward

for their inventive activity. However, these arguments are less prominent in today's policy

debate.15 Others have pointed at the signalling effect of patents, such as the possibility that

patents may convey information which is correlated with other, less measurable firm attributes,

such as innovative and productive capacity of the patent holder.16

In today’s commercial environment, the role of patent rights to enable investment in technology

development is probably also a key factor. Bently and Sherman (2009) note that patent

protection "[…] means investors will be more willing to fund research and development."17 The

time it takes for carrying out innovation projects and bringing a product to market will vary

between industries, however usually significant development and refining beyond the core idea

is required to produce a workable solution.18 A greater certainty that a developer will be able to

recover large R&D investments, if the product is successful, may be secured by means of patent

12 Kitch (1977)

13 See, e.g., European Patent Convention Art. 83: "The European patent application shall disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art." and 35 U.S. Code § 112(a): "The specification shall contain a written description of the invention […] to enable any person skilled in the art […] to make and use the same […]".

14 See e.g. Aldous LJ in American Home Products v. Novartis Pharmaceutical [2001] RPC 159, 179: "I do not believe that the patent system should be used to enable a person to monopolise more than that which he has described in sufficient detail to amount to an enabling disclosure." The US standard was set out by the Supreme Court in Minerals Separation Ltd. v. Hyde, 242 U.S. 261, 270 (1916), with the core question being "is the experimentation needed to practice the invention undue or unreasonable?" This is still the standard that the Federal Circuit applies; see In re Wands, 858 F.2d 731, 737, 1988.

15 MacQueen et al. (2008) and Hettinger (1989).

16 See Long (2002) and WHO (2006).

17 From the author's experience in the oil & gas industry, this is a key function of the patent system.

18 See e.g. Berkun (2007). For example, development of the photocopier to a market-ready product required 15 years of development and investment by Xerox Company; see Jaffe and Lerner (2007).

4

protection. This applies in particular in areas where reverse-engineering costs are low, a notable

example being biotechnology.19 This effect may be available for prospective investors in large

technology developments also before any invention has been made at all, by employing

strategic inventing throughout a project.20

1.1.2 Patent protection in the maritime space

While the societal benefits of having a patent system, and how it should operate, remain

debated,21 industrial intellectual property rights are arguably of critical importance for

technology-intensive businesses today. For example, Wagner and Parchomovsky (2005),

studying patent value, concluded that "[r]ational firms will, therefore, typically seek to obtain a

large quantity of related patents […]", and that "[t]he result—which we find widely recognized in

commercial circles—is that the modern patenting environment exhibits (and requires) a high-

volume, portfolio-based approach […]".

One concrete indicator for the increasing commercial importance of patent rights can be seen

from patent filing statistics. As an example, Figure 1 shows the development in the number of

inventions subject to patent applications world wide in selected maritime-related technical

classes22. In general, patent filing number are increasing in most countries, however the increase

in filing numbers originating in emerging economies, such as China and Korea, is particularly

noticeable.

19 See e.g. Burrone (2006) and Burk and Lemley (2009), who noted that there is "strong consensus" among innovative companies in the pharmaceutical industry that patents are critical to innovation

20 Nissing (2013).

21 A number of countries nearly abolished the patent system in the mid-1800s, with arguments that it would be better to allow free trade; see Machlup and Penrose (1950). Examples of recent criticism include Jaffe and Lerner (2007) and Drahos (2010). The issue of patent quality, i.e. that patent authorities grant low-quality patents, has also attracted widespread criticism, see e.g. Dent (2006).

22 The graph shows the number of patent applications on family level (using the DWPI database by Thomson Reuters) plotted against priority year, in the technical classes for ships and related technology (IPC class B63) and upstream oil & gas technology (e.g. drilling and production equipment; IPC class E21B).

5

Figure 1 Patent applications in technical classes for ship technology and upstream oil & gas

technology.

However, independent of the policy view taken, it is clear that a patent system can only

successfully encourage innovation if actual and effective protection can be obtained by

prospective patentees. There may be many reasons why this would not be the case, for example

long pendency time due to excessive patent examination backlogs at the patent offices23, which

may lead to a large fraction of the 20/21-year24 lifetime of a patent being “lost” in prosecution.

While some rights may exist for pending and published patent applications25, delays in the

examination clearly creates uncertainties for the applicant both in terms of whether the patent

will eventually be granted, and the scope of protection that will be conferred.

Further, there may be jurisdictions in which the legal system is ineffective or immature, thereby

in practice not providing a patentee with realistic chances of enforcing patent rights. As a

notable example, patent protection in China has been a widely discussed topic over recent years,

with concerns being expressed over aspects such as inexperienced courts and local favouritism26.

Similar concerns have been raised over other emerging and developing economies, e.g. the

Korea and the Middle East27.

23 As, for example, is a widely reported problem in Brazil; see e.g. Wolff (2014), commenting that “The delay in examination time is a growing problem in several countries, but it has achieved a different magnitude in Brazil.”

24 This 20-year limit stems from TRIPS Art. 33 and is generally harmonised world wide. Including the Paris Convention priority year, any protection would expire at the latest 21 years after the first (priority) filing.

25 For example, rights to backdated damages; see e.g. UK Patents Act S. 69. However, enforcement could usually only be commenced after grant, and other remedies, such as injunctions, would normally not be available for a pending application.

26 See e.g. Clark (2011) at 1.6, who, however, along with numerous other commentators, notes that the current situation has improved substantially.

27 See for example Fabry (2005) for the case of Korea and Carroll (2001) in relation to IP protection in the Middle East.

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There may even be cases of altogether non-existence of a patent system in relevant jurisdictions.

While this is arguably less common and certainly does not apply to major industrial

jurisdictions28, this is in fact a relevant concern in relation to certain large maritime flag states.

Section 4.1 below shows how a large fraction of ships are registered in under so-called ‘flags of

convenience’, and that many of these have, in practice, non-existing or non-functioning patent

systems. Considering that UNCLOS Art. 92 provides exclusive jurisdiction to the flag state for a

ship on the high seas (see Section 2.3.3(b)(iii) below), it would seem that no patent protection

can be obtained to cover activities carried out on such ships.

In light of such limitations, a developer of technology for use in the maritime space may

therefore face certain particular questions and challenges with regards to patent protection for

new inventions. Patents can be very expensive, in particular if seeking protection in many

countries, and it is therefore critical to apply an effective patent strategy, where protection is

sought in key countries. This will be where the exclusivity granted by a patent will have highest

value, usually core markets, important manufacturing countries, and areas where competitors or

end users normally operate. In addition to these considerations, a key question would be where

effective and enforceable protection can be obtained in order that a patent strategy can provide

strong protection.

1.2 Problem statement and research objectives

For technology used on petroleum vessels, e.g. drilling rigs, there are some questions in

international law which makes the above picture even more complex. Firstly, patents are

territorial, while such vessels may operate in many different jurisdictions and also spend a large

part of their operation on the high seas. Further, the legal structure behind such operations is

often highly international. As an example, the Deepwater Horizon drilling rig was, at the time of

the Macondo accident in 2010: (i) operating in the US Exclusive Economic Zone (Gulf of Mexico),

(ii) sailing under Marshall Islands flag, (iii) operated by a Swiss company, and (iv) under contract

to a British oil firm.29 The rig had been built in South Korea. It is very common for such rigs and

other petroleum vessels to fly a flag which is different from the operating region.

The two key research questions relate to (i) the territorial reach of patents for offshore

operations under international law and national laws, and (ii) the temporary presence exception

for foreign vessels, which is well-established in patent law. The research is mainly doctrinal in

nature and considers the international framework of the Law of the Sea and international patent

law, their implementation in national laws for some key jurisdictions, and court practice in

relation to these questions. Further, the practical implications are considered for some typical

petroleum-related operations.

28 TRIPS Art. 27 requires that “[…] patents shall be available for any inventions, whether products or processes, in all fields of technology, […]” and minimum standards for the rights conferred are set out in Art. 28.

29 See e.g. Richards (2011), who also notes various other, not specifically IP-related questions arising out of this situation, such as liability and jurisdictional authority in relation to marine pollution.

7

1.2.1 Maritime jurisdiction and the territorial reach of patents

It is a well-established principle internationally that patents are strictly territorial30, however

much offshore petroleum-related activities take place on what is legally more similar to the high

seas.31 The United Nations Convention on the Law of the Sea (1982) gives a coastal state

sovereign rights for the purpose of exploring and exploiting, conserving and managing the

natural resources32, as well as exclusive jurisdiction over […] artificial islands, installations and

structures in its Exclusive Economic Zone (EEZ) and on the Continental Shelf33. At the same time,

a cornerstone of the same convention is that a ship generally is under the exclusive jurisdiction

of the flag state34. The convention clearly differentiates between these two.

This makes the situation for various mobile petroleum rigs and vessels unclear: such units may,

depending on the circumstances, be equivalent to a ship (e.g. during self-propelled transit) or an

installation (for example, a jack-up rig will, during operation, be stationary and fixed to the

seafloor). Figure 2 shows an example of such a vessel. It is therefore necessary to consider:

To what extent can (under international law), and do (under national law), coastal states

give national patent law effect on petroleum vessels operating in its Exclusive Economic

Zone / on its Continental Shelf?

Figure 2 The MPI Discovery offshore construction jack-up vessel

30 This follows from customary international law and by inference from Paris Convention Art. 4bis.

31 See Section 2.3.1 below.

32 Art. 56(1)(a) and 77 UNCLOS.

33 Art. 60 and 80 UNCLOS.

34 See Art. 92(1) UNCLOS: “Ships shall sail under the flag of one State only and […] shall be subject to its exclusive jurisdiction on the high seas”

8

This question is addressed through a review of the underlying international legal framework for

civil jurisdiction in maritime matters as well as the interpretation of this framework by

international and national courts and tribunals. For the purpose of this study, I will focus mainly

on the UK, USA and Norway, being countries with a well-established patent system, significant

offshore activities, and a fair body of case law relating to petroleum exploration and maritime

matters. Nevertheless, other national decisions are considered where relevant, as are decisions

from international bodies, such as the International Tribunal for the Law of the Seas and the

International Maritime Organization and relevant commentary on these matters.

Having reviewed the relevant international framework for maritime jurisdiction, I then compare

this to the scope of protection conferred upon patent holders, i.e. which of the exclusive rights

of the patentee will have relevance in a maritime setting. This will include a review of

international conventions and national law relating to the territorial reach of patents, and to

what extent national courts have given patents effect on such extraterritorial activities.

1.2.2 The temporary presence exemption for foreign vessels

In addition to the Law of the Sea, which regulates rights and jurisdiction in general for maritime

matters, international patent law also comprises certain provisions relating to 'international'

aspects of the traditionally strictly territorial nature of patent rights. The Paris Convention, first

signed in 1883, is a cornerstone in international patent law, currently having 173 signatories,

including practically all developed countries. The Paris Convention's Article 5ter, the "temporary

presence exemption" regulates to which extent national patents can be enforced against foreign

vessels, aircraft and land vehicles. The provision from the Paris Convention has generally been

implemented nearly verbatim in most national laws.35

The temporary presence exemption for visiting vessels provides that a national patent cannot be

enforced against a foreign, visiting vessel if that vessel temporarily enters the waters of a

member state.36 Thus, even if a national patent may have effect for petroleum vessels and their

activities, these vessels may be ‘exempted’ if they sail under foreign flag, i.e. have a valid

defence against patent infringement in relation to activities carried out on board.

While the temporary presence exemption originally was clearly directed at international

transport (of cargo or passengers), providing the practical effect that a ship in international

traffic will not risk facing interruptions by national patent holders in the different ports it calls, it

will literally cover a number of vessel types in the petroleum industry. Many such vessels, by

their nature, operate internationally, moving between regions and jurisdictions. The applicability

of this provision to, for example, mobile petroleum rigs or service ships is unclear, and such

vessels were certainly not considered by the Paris Convention signatories in the 19th Century.

This question may be of significant importance in the current context, and I therefore also

consider:

35 See Section 4 below for examples.

36 Art. 5ter(i), Paris Convention for the Protection of Industrial Property, 1883.

9

Can petroleum vessels claim defence under Art. 5ter Paris Convention when operating in

the territorial waters or on the Continental Shelf / EEZ of a foreign state?

1.3 Practical and legal relevance

Clearly there are many different categories of inventions used in a marine or petroleum

exploration and exploitation context. To illustrate how the above issues may have an effect on

the legal situation and a technology developer’s ability to obtain strong patent protection for

new inventions, as well as to more easily show the practical relevance of the work, some

examples where these questions would apply will be presented.

1.3.1 Relevant inventions and their use

On a fundamental level, one can differentiate between apparatus inventions and method

inventions in patent law37; the relevance of this in relation to potentially infringing activities will

be discussed further below. In typical offshore petroleum related activities, apparatus inventions

may relate to structural features of installations (whether positioned on the sea floor or floating

and moored) or features in the body of a service vessel. Further, apparatus inventions may be

for equipment used on such vessels, e.g. drilling tools. The latter may also include equipment not

directly related to the petroleum activities, such as engine management or ship navigation

systems, or even things like gym equipment or entertainment electronics (e.g. video game

consoles) for the crew. Finally, inventions may be methods, which can include the method of

using a specific apparatus of any of the above categories38, or a more “stand-alone” and broader

method invention protecting, for example, a certain way of carrying out a specific activity

offshore but without reference to a specific apparatus or structure.

Further, there will be a number of different vessel types and their operations may in many cases

be very different. It will be shown below (see, in particular, Chapter 2) that this also

fundamentally affects the legal situation for many such vessels. In the following subsections,

some examples of different vessel types (or installations) are presented in order to provide a

practical context for the discussion in the following chapters. They have been classified into

three categories for ease of reference later, which are

Category Type of unit Characteristics Examples A Fixed or moored

installations Permanently or semi-permanently fixed or moored to the seafloor.

Production platforms, jack-up rigs, drilling vessels.

B Installation / intervention vessels

Temporarily connected to the seafloor or well.

Well intervention or installation vessels.

C Support / supply vessels

Mobile and not interacting with the seafloor or well

Vessels for transport, seismic, emergency response, etc.

37 See TRIPs Agreement Art. 27(1): "… patents shall be available for any inventions, whether products or processes, in all fields of technology …" (emphasis added).

38 Typically, such a method claim accompanies an apparatus claim in patents, having in effect the same scope as the apparatus claim but covering different activities.

10

1.3.1(a) Category A: Fixed or moored installations

The first category which one may consider could be fixed or moored platforms and seafloor

installations. These would include permanent installations, such as production platforms or

seafloor installations (e.g. pipelines or subsea wellhead equipment), which would typically be

placed on the seafloor or (more or less) permanently moored in place. This may also include

temporarily moored drilling rigs and jack-ups (see e.g. Figure 2), i.e. such units which will be

fixed in place over a longer period of time.

Figure 3 illustrates an example of a production platform, and Figure 4 shows an example of an

invention relevant for such Category A units, being a heave compensation system for drilling

vessels, i.e. an arrangement to compensate a lifted load (such as a drill string) for the relative

motion of the vessel in relation to the seafloor.

Figure 3 Heidrun tension leg platform (illustration courtesy of Aker Solutions AS)

Figure 4 A compensator (MHWirth AS; WO 2013/076207)

Common for such vessels or installations in this “Category A” would be that they are fixedly

placed or installed, whether permanently or temporary, i.e. resting on the seafloor or moored in

place. This will typically be beyond the territorial waters but within the Exclusive Economic Zone

or on the Continental Shelf off a coastal state39, thus there would be a question of the

geographical scope of a coastal state patent in relation to activities carried out on such a unit,

and whether this could constitute infringement.

1.3.1(b) Category B: Installation / intervention vessels

A second category may be vessels which interact in some way with the seafloor (e.g. a subsea

well or equipment on the seafloor) but are not installed or moored in place for longer periods.

Examples of this category may be installation vessels, e.g. for installing equipment on the

seafloor or pipe laying. Another example is intervention vessels, i.e. such vessels that perform

39 See Section 2.1 below.

11

well intervention and workover operations (“servicing” a subsea well by connecting to it and

carrying out operations downhole with various equipment).

Figure 5 shows an example of the latter, the AKOFS Seafarer well intervention vessel. Figure 6

shows a patented invention for such operations, a tension frame for coiled tubing operations.

(The tension frame sits in the rig tower visible in Figure 5 and holds an intervention riser, through

which equipment or tools can be transported down to the subsea well.)

Figure 5 AKOFS Seafarer (Figure courtesy of AKOFS Offshore)

Figure 6 Tension frame (AKOFS Offshore, US Patent

8,961,072)

The single main claim of US 8,961,072 is:

A system for hydrocarbon exploration and production, the system comprising: a tension frame installed on a well control unit atop at least one riser; a pressure control unit received by the tension frame and held in line with a centre of the at least one riser; said tension frame comprising a first pre-installed pressure control equipment unit and a second pre-installed pressure control unit of which the first pre-installed pressure control equipment unit is held in an active position, in which the first pre-installed pressure control unit is in line with the centre of the at least one riser, and the second pre-installed pressure control unit is kept in a parked position within the tension frame.

When the vessel is in operation, the question of infringement for activities offshore a coastal

state will, as above, depend on the geographical scope of a coastal state patent. Moreover, in

the case of such a vessel there may be a question of coastal state versus flag state rights. In the

case of AKOFS Seafarer, the flag state is Cyprus and it would be a question of whether, for

example, US law could be given effect on board a Cypriot ship. Finally, if the ship is only

temporarily within the geographical reach of a US patent, the temporary presence exemption

may provide a defence to patent infringement.

1.3.1(c) Category C: Support / supply vessels

As a third category, consider vessels that are “more independent”, i.e. operating on the sea

surface without, or with only minimal, interaction with the seafloor, wells or subsea equipment.

12

For example, this may include tugs, anchor handling vessels, supply ships, emergency response

ships, and seismic vessels.

Figure 7 Seismic vessel (photo courtesy of WesternGeco LLC)

Figure 8 Tracking and positioning system for towed seismic arrays (US Patent 6,691,038, WesternGeco LLC)

Figure 7 shows an example of such a seismic vessel, and Figure 8 shows an example of a

patented invention for seismic surveying. The patent shown, US Patent 6,691,038, was litigated

in the US40 and will therefore be discussed in somewhat more detail below. The patent protects

a tracking and positioning system and method for seismic arrays, where active streamer

positioning devices control the position of individual streamers in the array. Two of the

independent claims are:

1. A seismic streamer array tracking and positioning system comprising: a towing vessel for towing a seismic array; an array comprising a plurality of seismic streamers; an active streamer positioning device (ASPD) attached to at least one seismic streamer for positioning the seismic streamer relative to other seismic streamers within the array; and a master controller for issuing positioning commands to each ASPD to adjust a vertical and horizontal position of a first streamer relative to a second streamer within the array for maintaining a specified array geometry.

26. A method for tracking and positioning a seismic streamer array comprising: for [sic] towing a seismic array comprising a plurality of seismic streamers; attaching an active streamer positioning device (ASPD) each seismic streamer for positioning the seismic streamer relative to other seismic streamers within the array; and issuing vertical and horizontal positioning commands to each ASPD for maintaining a specified array geometry.

40 WesternGeco, discussed further below; see Section 3.2.2(b).

13

As can be seen, Claim 1 covers a towing vessel with the tracking and positioning system,

whereas Claim 26 covers the method of tracking and positioning a seismic streamer array.

Clearly the method claim will only be infringed when the seismic streamer array is actually in

use41 and this may potentially only occur outside a country’s territorial waters (i.e. on or above

the continental shelf) since, when in port, the streamers will not be in use. As noted above, it is

not clear to what extent national patent law, under international law, can and does extend

beyond a coastal state’s sea territory.

Further, if the towing vessel flies a foreign flag, it may be able to claim defence under the

temporary presence exception, potentially both for the surveying activity and when going to

port in the coastal state. Thus, in the latter case, even having an otherwise infringing seismic

streamer tracking and positioning system according to the above invention on board may

potentially not constitute infringement.

1.3.2 Effects of patent law extra-territorial effects

In addition to the questions around to what extent patent law has effect in the exclusive

economic zone and on the continental shelf, it would also be necessary to evaluate the

implications of such extension of the traditionally strictly territorial rights. This includes both the

aspects of the scope of the patentee’s exclusivity and which third party activities would

constitute infringement, but also potential other effects of giving patent law effect in these

areas, such as prior use rights.

1.3.2(a) Scope of protection and territorial relevance

The minimum scope of protection that shall be granted patent holders under the TRIPs

agreement’s Article 28 are exclusive rights to make, use, offer for sale, sell, or import a patent-

protected product, and to use a patent-protected process, as well as to make, use, offer for sale,

sell, or import the direct product of such a process.

1.3.2(a)(i) Make, offer for sale, sell

It is believed that infringement in the form of making, offering for sale or selling an invention is

less relevant in the context of petroleum vessels and their typical operations, as these activities

would normally be carried out onshore. These forms of infringement will therefore not be

discussed further here, however they could, in principle, be subject to the same considerations

as the other types of infringement mentioned here if taking place offshore.

1.3.2(a)(ii) Use

Using, or keeping42, an invention is probably the most relevant form of infringement for the

current questions, and will therefore be the main focus here and the discussions below. Hence,

41 The method claim requires, among other things, the step “towing a seismic array” to be carried out. It is well-established US law that for a method claim to be infringed, every step in the claimed method must be carried out. See, for example, Akamai Technologies, Inc. v. Limelight Networks, Inc. (US Federal Circuit (en banc) 2015) and Nutrinova Nutrition Specialists & Food Ingredients v. Sanchem UK [2001] FSR 797.

42 Keeping a patent-protected product is not specified in TRIPs Art. 28 but is an independent infringing act in many countries; see e.g. UK Patents Act Section 60(1)(a), Norwegian Patentloven §3, and Australian Patents Act Section 13.

14

petroleum vessels are generally fitted out with certain equipment, and for their operations this

equipment and its use will pose the main questions in relation to patent infringement.

Defining what constitutes use in this context is seldom problematic. Infringement of a process

claim occurs when someone carries out all the steps in that process. Infringement of an

apparatus claim occurs for any use of a device falling within the scope of a claim.43

1.3.2(a)(iii) Import

Infringement through import may be relevant and raise different questions in a maritime and

offshore context, including (i) the territorial aspects around when a product or device is

“imported” and whether this can take place e.g. when a product enters the Exclusive Economic

Zone44, and (ii) whether keeping a product or device on a ship visiting or carrying out operations

in a coastal state would constitute import.

Generally, there is not much case law or commentary around patent infringement in the form of

import. Two reasons for this may be:

In most practical circumstances, the question of when a product is imported into a

country would be clear and unambiguous. Import would be carried out by bringing

the product across the country’s borders, and those borders are clearly defined.

An import of a commercial product would usually be accompanied by other acts

which would also, equally, constitute patent infringement, such as use, offer to

sell/sale, or keeping the product for those purposes. Thus, a commercial45 importer

would expectedly face allegations also of other types of infringement, so that

distinguishing on the exact meaning of ‘import’ would be less relevant in practice.

However, UNCLOS Art. 60(2) provides that the coastal state shall have "[…] exclusive jurisdiction

over […] installations and structures [in the EEZ], including jurisdiction with regard to customs

[…]".46 Thus, in the current context, the question of whether import of a patent-protected item

could take place in the exclusive economic zone, at least in relation to installations and

structures, may be relevant.

43 Notably, the use in question need not be that envisaged by the patentee. For the US position, as applied by the Court of Appeals for the Federal Circuit, see e.g. Hewlett-Packard Co. v. Bausch & Lomb, Inc. (909 F.2d 1464, 14680): “[A]pparatus claims cover what a device is, not what a device does.” Similarly: Paragon Solutions, LLC v. Timex Corp. (566 F.3d 1075, 1090): “[…] any use of a device that meets all of the limitations of an apparatus claim written in structural terms infringes that apparatus claim”. (Emphasis added.)

44 Compare, for example, with the US Court of Appeals for the Federal Circuit in Zoltek v. United States (672 F.3d 1309, 1326): “[i]mportation occurs when the product crosses the United States’ border […].” (Emphasis added.)

45 In many countries, acts done purely for private purposes would not amount to patent infringement (see e.g. UK Patents Act Section 60(5)(a), Norwegian Patentloven §3 last paragraph), and disputes relating to private use would in any case probably be very rare, so it can be expected that these considerations would usually apply.

46 See Section 2.3.3 below.

15

1.3.2(a)(iv) Indirect / contributory infringement

Most major jurisdictions have provisions to allow a patent holder to prevent acts which would

assist, enable or induce another person to infringe the patent.47 TRIPS is, however, silent on such

indirect (or ‘contributory’) infringement, which would include, for example, providing means,

relating to an essential element of the invention, for putting the invention into effect,48 even if

that activity would not itself fall directly within the scope of the claims.

However, it is established law that indirect infringement requires that related acts of direct

infringement also take place in the same country.49 Thus, in the current context, there may be

questions around whether activities onshore in a coastal state could constitute indirect or

contributory infringement when the related acts that would constitute the direct infringement

take place offshore and/or on board a foreign vessel.

For example, for the seismic invention shown above (Section 1.3.1(c)), the act of providing the

“master controller for issuing positioning commands” would, on its own, not be a direct

infringement of the apparatus claim, since the claim also requires, among other things, “a

towing vessel”.50 Nevertheless, the master controller might well be considered an essential

element of the invention, and therefore supply of this unit, individually, might be considered

indirect infringement. Such special cases will, however, not be discussed further here.

1.3.2(b) Secondary aspects of the territorial scope of patent law

The question of the territorial scope of patents may also influence certain other questions in

patent law which are not directly related to infringement and scope of protection. They are

included here in brief, in order to illustrate other, more particular, questions which may also

arise in parallel from this question. This may, for example, relate to the use of an invention in the

exclusive economic zone or on a ship outside the patent country’s borders.

1.3.2(b)(i) Prior use, as defence to infringement

The right for a third party to continue any activities carried out in that country prior to a patent’s

filing date, independent of any later-granted patent rights, is well-established in most

countries.51 Thus, secret prior use, or effective and serious preparations for such use, will not be

hindered by another person’s subsequently granted patent rights. For example, a person who

has come up with a new and improved industrial process and started using this (internally and in

secret) will not be limited by a later-filed patent by another party.

47 See S. 60(2) UK Patents Act 1977; 35 U.S. Code § 271 (b) and (c); Patentloven (Norway) § 3 second paragraph.

48 S. 60(2) UK Patents Act 1977

49 Trimble (2012) at 111.

50 It is well-established law that infringement of a patent requires all the elements, or ‘integers’, of a claim to be present in the infringing device or method; see e.g. Cornish (1999) at 6-03.

51 See S. 64 UK Patents Act 1977 (Right to continue use begun before priority date); 35 U.S. Code § 273 (Defense to infringement based on prior commercial use); and Patentloven (Norway) § 4.

16

This right is, however, generally restricted to the country in which that activity had commenced

(or was in preparation). Hence, in the current context, there may be questions as to whether

prior use (or preparations for such use) taking place, e.g. on a vessel in the exclusive economic

zone would qualify for a right to continued use in that country.

1.3.2(b)(ii) Prior use as a bar to patentability and prior art effects

While most relevant countries practice a standard of absolute novelty52 for patents, certain

exceptions exist. For example, under the pre-AIA (America Invents Act of 2011) rules, public use

outside the US is not novelty-destroying for a US patent.53 This may present the question of

whether public prior use on (i) a US ship in international waters, or (ii) a US or foreign ship in the

US exclusive economic zone or above the US continental shelf, would be considered “outside the

US” for this purpose.

Further, it may even be the case that secret prior use is a bar to patentability; for example,

Paragraph 18(1)(d) of the Australian Patents Act 1990 requires that the invention

[…] was not secretly used in the patent area before the priority date of that claim by, or

on behalf of, or with the authority of, the patentee or nominated person or the

patentee’s or nominated person’s predecessor in title to the invention.

Provisions like this may, similarly, raise the question of the territorial scope of the law.54

1.3.3 Practical implications

The practical implications for technology developers and patent holders of a scenario where

coastal state patents don't have effect on petroleum vessels operating offshore may be

significant. For example, a drilling rig or service vessels will typically be equipped and classed for

operation according to one coastal state’s regulations, e.g. Norway for operation on the

Norwegian Continental Shelf. Depending on the conclusion to the questions above, the practical

effect of the international legal framework may possibly be that such a vessel could operate in

e.g. the Norwegian North Sea for its entire service life, including going to port in Norway for

maintenance and repairs, without being subject to any patent rights. This would be the case if:

(a) national Norwegian patents do not have effect on the Continental Shelf/EEZ; (b) the vessel

can claim the temporary presence defence when in Norwegian territorial waters; and (c) a

patent in the flag state is not available or not enforceable (which is often the case, as such rigs

are commonly registered under convenience flags).

While an invention relating to the vessel construction itself, or key equipment, could be patent-

protected in the country of manufacture, and thereby catch infringement when the vessel is

52 I.e. that any disclosure of the invention, in any form and anywhere in the world, prior to the effective (priority) date would be citable as prior art against the patent.

53 See 35 U.S.C. §102.

54 Incidentally, in the case of Australia the “patent area” is positively defined to include the continental shelf and exclusive economic zone, see Section 3.2.4(a). Nevertheless, questions may still arise in the case of such use on foreign ships in this area.

17

built,55 for a number of inventions this may not be realistically possible. Method patents, for

example the seismic streaming method described above, will only be infringed when the method

is actually in use. Such use may occur only when the vessel is operating in an offshore area.

Other examples of such methods may include new ways of carrying out specific operations, such

as installation of subsea equipment, well intervention methods, condition monitoring and

maintenance planning, etc. In such cases, if a coastal state patent does not cover that particular

activity, a technology developer may be left with effectively no opportunity to protect that

invention via patents.

The same may be the case for smaller equipment or tools, i.e. such equipment which does not

have to be supplied with the vessel from the yard but can be installed when the vessel is at sea.

In such cases, the components or the equipment or tools can be supplied to the ship from a

country where no patent protection exists. A particularly relevant example of this is software-

based inventions, which, for example, may consist of standard mechanical components but

where the invention lies in the control software. Such software may be supplied to the vessel

from almost anywhere, and may even be removed from the vessel if going to port or into an

area where patent protection exists.

Such a situation, where a technology developer has no real prospect of obtaining effective

patent protection, may reduce the incentive to invest in development of new solutions. A

technology developer or investor may consider it too risky and less attractive to fund technology

development if there is uncertainty whether the results can be effectively protected and

whether a return on the investment can be secured based on exclusivity in the marketplace. This

may, in particular, be the case for offshore and subsea developments, where large investments

are usually required.

Moreover, in such a situation companies will have more incentive to rely on trade secret

protection, thus the body of technical information available to the public may be reduced.

Hence, this affects the public notice function of patents and may lead to companies being less

willing to share information, and to more duplicate development efforts between competitors.

This may in particular affect smaller players, who perhaps may wish to commercialise new and

unconventional solutions, but who may lack the background know-how and would find it more

difficult to convince a larger player to share this, in order to implement these solutions

successfully.

1.4 Contribution and broader relevance

This work takes a practical approach to address the underlying question around the scope of

protection for offshore petroleum-related patents, how to obtain strong patent protection for

developers of maritime technology, and how to approach freedom-to-operate questions for

third parties operating in offshore regions. This is done through a review and discussion on the

current international legal framework and its interpretation by certain national courts. This is a

55 For example, by protecting an invention in Korea, China and Singapore one would cover a large majority of the market for offshore drilling vessels and the most significant yards with the capability of delivering such vessels.

18

topic of high relevance in the petroleum and maritime industries, where patent activity is

increasing and operations are shifting towards increasingly technologically challenging areas

offshore, which drives innovation and technology development. Additionally, but not considered

in detail here, the same questions will be relevant for activities relating to, for example, offshore

renewable energy, aquaculture, and deep sea mining.

There exists some case law on civil and criminal jurisdiction on petroleum rigs operating

offshore, both stationary and mobile, however none directly relating to patent law. A number of

cases have considered whether a petroleum rig can be considered equivalent to a ship for

different purposes, with varying conclusions, and there is also some commentary on this

question. It seems unclear to what extent these decisions can be applied in the context of patent

law. To my knowledge, the question of whether (and in which circumstances) petroleum vessels

will fall under the temporary presence exemption has not been reported previously.

The current work focusses on offshore petroleum exploration and exploitation, however the

findings will be transferable to several other fields, which face very similar questions. One

example is renewable energy generation offshore, for example wind or wave power. Significant

research and development activities are ongoing in this area, and commercial projects are

starting to be realised. This technology will have a similar situation to petroleum activities, in

that there may be fixed installations carrying out the actual natural resources exploitation, while

there will be a number of related activities (providing supplies, installation activities, servicing,

etc.) which will be similar in nature to those of petroleum activities. See e.g. Caine (2014) and

Roeben (2013) for a discussion around legal aspects of offshore renewable energy and coastal

state vs. flag state rights in relation to the laying of subsea pipelines and cables for renewable

energy generation offshore

Another example is aquaculture, in which the trend is going away from the traditional small-

scale, near-coast operations towards larger units farther from shore; see Firestone et al. (2004)

for aspects of aquaculture regulation. Yet another field which may face similar questions is

deepsea mining; see Silverstein (1978).

1.5 Structure of the thesis

The following chapters will discuss, in depth, the different aspects outlined above and analysed

in this work. Chapter 2 discusses maritime territorial jurisdiction in offshore areas under

international law, i.e. the extent to which a coastal state is empowered to give national patent

law effect in this area. Chapter 3 considers three relevant countries which have major offshore

activities, namely Norway, the UK and the USA, and looks at whether (and to what extent) these

countries have given national patent law effect offshore. Chapter 4 discusses Paris Convention's

"temporary presence exception" (Art. 5ter), i.e. the defence against patent infringement for

visiting foreign vessels, and to what extent this defence can be invoked for petroleum vessels

operating in such offshore areas. Finally, Chapter 5 provides conclusions and recommendations.

19

2 Maritime jurisdiction under international law

To what extent is a coastal state, under international law, empowered to extend its national patent law to petroleum vessels?

As a background to addressing the above question, it is necessary to understand the basics of

jurisdiction in maritime matters, i.e. the extent to which states are entitled under international

law to give national law effect and enforce this in relation to activities the different maritime

areas. This chapter therefore first provides an overview of maritime jurisdiction for civil law

matters56, which will be necessary to explore the situation for patent law in particular, and then

discusses the implications of this for typical petroleum-related activities and vessels.57

2.1 Maritime territorial jurisdiction

Maritime territorial jurisdiction under the international law of the sea is codified in the 1982

United Nations Convention on the Law of the Sea (UNCLOS) which has (at the time of writing)

157 signatories, and is widely considered to represent customary international law.58 UNCLOS

itself does not directly regulate any matters relating to intellectual property or patents,59

however the convention defines the relevant zones for a nation’s offshore jurisdiction, including

whether national patent law may be given effect in these areas. The most relevant of these for

the questions discussed here are internal and territorial waters, the exclusive economic zone and

continental shelf, and the high seas (or international waters), as well as jurisdiction over ships

and vessels (when operating in any of the above zones).

Further maritime zones regulated by the international law of the seas include for example

straits, archipelagic waters (relevant for nations comprising a group of islands), the contiguous

zone (an extension of the territorial waters in which a coastal state has some, in particular

56 A note on criminal law is due here: In many countries patent infringement is an offence as well as a civil wrong, see e.g. Norwegian Patents Act §57 (wilful patent infringement punishable with fines or up to three months imprisonment), Brazil (see Title V of the Industrial Property Law, Sections 183-186) and Germany (§142 Patentgesetz, providing up to 5 years imprisonment or fines). To the understanding of the author, other countries with similar criminal provisions include Spain, Denmark, France, Japan, Netherlands, and Portugal. This is relevant here because criminal jurisdiction in maritime matters and the extent to which states are prepared to interfere with a foreign ship may be wider than in civil matters (see e.g. Tanaka (2012) and Churchill and Lowe (2014)). However, prosecution of patent infringement is in practice extremely rare, and it is arguably the civil remedies that are of greatest importance for patent holders in industry. Criminal provisions for patent infringement and jurisdiction in relation to this will therefore not be discussed further here.

57 See Section 1.3.1 above.

58 See e.g. Ringbom (2015)

59 The only major debated question directly in relation to UNCLOS and intellectual property relates to IP protection of marine resources exploited from areas beyond national control and which (through Art. 136 UNCLOS) are defined as the common heritage of mankind; see e.g. Prows (2006) and Trevisanut and Bonfanti (2012). These discussions provide little guidance to the questions considered here.

20

enforcement, rights), and the Area (the seabed beyond the control of any nation state). These

are not directly relevant for this work and will not be discussed further here; for details see e.g.

Tanaka (2012).

Figure 9 Maritime territorial and jurisdictional zones.60

Figure 9 illustrates the maritime zones relevant here for the questions considered here. Details

of how these are calculated, with the number of exceptions and provisions for particular cases

that exist61, are not important for the current work. Thus, only a summarised form of how these

operate in practice will be presented here; this is sufficient to analyse and discuss the details of

the rights of nation states in these areas, presented in the following sections below.

The baseline is the low-water line along the coast of a coastal state62 and provides the basis for

calculating most of the above maritime zones. Waters on the landward side of the baseline (e.g.

fjords, ports and harbours) are internal waters of the relevant state63. Seawards of the baseline

is the territorial sea, extending up to 12 nautical miles64.

The exclusive economic zone (EEZ) extends from the seaward limit of the territorial sea (i.e.

generally 12 nautical miles from the baseline) to a maximum of 200 nautical miles from the

baseline65. The continental shelf is defined in Art. 76 UNCLOS as “the seabed and subsoil of the

60 Source: Land Information New Zealand: http://www.linz.govt.nz/sea/nautical-information/maritime-boundaries/maritime-boundary-definitions

61 For example, countries with islands along the coast or large bays, or provisions where maritime zones of neighbouring countries would overlap. See Tanaka (2012) for details.

62 Art. 5 UNCLOS.

63 Art. 8 UNCLOS.

64 The maximum breadth of the territorial sea is specified in Art. 3 UNCLOS. A small number of states have claimed a territorial sea of less or more than 12 nautical miles, however this does not include any countries discussed here. Tanaka (2012) states that “[o]verall, it seems that the twelve nautical miles maximum breadth of the territorial sea is now established in customary international law.”

65 Art. 55 and 57 UNCLOS.

21

submarine areas that extend beyond its territorial sea throughout the natural prolongation of its

land territory to the outer edge of the continental margin”, or to 200 nautical miles where the

outer edge of the continental margin is less than this distance from the baseline. Thus, there is

an overlap with the EEZ, but the continental shelf can extend farther than 200 nautical miles, as

in the illustration in Figure 9. For the purposes here, this is however not of major significance.

Clearly, a large fraction of offshore oil and gas activities would take place in the EEZ / on the

continental shelf, thus the legal situation for these operations is of critical importance for

operators and technology developers. For example, Figure 10 shows the maritime boundaries

for Norway along with a superimposed map of the main petroleum fields. As noted above, a

large number of petroleum vessels may spend the majority of their operating life in the blue

area, and may not enter Norwegian territorial or internal waters at all. (For example, if they

operate out of the UK or arrive from abroad only to carry out some operation on the Norwegian

continental shelf.)

Figure 10 Illustration of Norwegian maritime boundaries with main offshore petroleum fields.

Grey: land territory and internal waters; Yellow: territorial waters; Blue: exclusive economic zone

/ continental shelf.

The high seas include "all parts of the sea that are not included in the exclusive economic zone, in

the territorial sea or in the internal waters of a State"66, and UNCLOS Art. 89 provides that "[n]o

State may validly purport to subject any part of the high seas to its sovereignty." For the purpose

66 UNCLOS Art. 86.

22

here, the only relevant exception to this is flag state jurisdiction over vessels67. Hence, a coastal

state has no jurisdiction or rights in relation to foreign vessels (or any other units) on the high

seas, and the question of coastal state rights on the high seas will therefore not be discussed

further here.

2.2 Internal waters and territorial sea

Internal waters, i.e. waters inside of the baseline, and the territorial sea are considered legally

equivalent to a state’s land, and the state enjoys full sovereignty and jurisdiction over these, as

well as over the seabed and subsoil68. Churchill and Lowe (2014) noted that “[b]y entering

foreign ports and other internal waters, ships put themselves within the territorial jurisdiction of

the coastal state”. Similarly, Ringbom (2015) states that "[…] the jurisidiction over foreign ships in

this area must be assumed to be complete." Also, in relation to the territorial sea, Churchill and

Lowe state that: “It is also well established in state practice that ships not engaged in innocent

passage, either because they are not passing, or are passing but are not innocent, are subject to

all coastal State laws.”

There are few restrictions to a state’s jurisdiction in internal waters and the territorial see, the

most notable being the right to innocent passage through the territorial sea69 and in exceptional

circumstances through internal waters70. Thus, a coastal state is prevented under international

law from giving patent law effect on innocently passing vessels in the territorial sea and (if

applicable) internal waters.71

Beyond these exceptions, there is nothing in international law fundamentally preventing the

coastal state from exercising its full jurisdiction in internal waters and in the territorial sea.

Nevertheless, in practice coastal states, as a matter of comity, usually refrain from exercising

such jurisdiction in relation to purely internal matters on foreign vessels, unless the matter

disturbs the peace of the coastal state, involves a non-crewmember, or where coastal state

intervention was requested by the master or the flag state.72

Hence, with the exception of innocent passage of foreign vessels, a coastal state may, under

international law, give patent law general effect for any activity in internal or territorial waters,

67 UNCLOS Art. 92(1) and 94(1).

68 Art. 2(1) UNCLOS.

69 See Art. 17 UNCLOS: “[…] ships of all States, whether coastal or land-locked, enjoy the right of innocent passage through the territorial sea.” Also, Art. 28(1) UNCLOS: “The coastal State should not stop or divert a foreign ship passing through the territorial sea for the purpose of exercising civil jurisdiction […].”

70 Art. 8(2) UNCLOS

71 The same is also provided for, independently, by the “temporary presence exception” in the Paris Convention; see Section 4 below.

72 For example, the U.S. Supreme Court in Spector 545 U.S. 119 (2005), holding that as a general rule, "[…] statutes may not apply to foreign-flag vessels insofar as they regulate matters that involve only the internal order and discipline of the vessel, rather than the peace of the port." See also Gregory (1904), Tanaka (2012) at 78 and Bardin (2002).

23

also for activities carried out by foreigners or on board foreign vessels. For most activities

considered here, i.e. those of petroleum vessels, the rights of innocent passage would arguably

not apply; for example Yang (2006) considered that even activities such as “hovering or cruising

around and sailing in zigzags, as well as unnecessary stopping and anchorage” would take a ship

outside the sphere of innocent passage as envisaged in UNCLOS. For a petroleum vessel carrying

out some kind of work or operation in this area, any rights of innocent passage will therefore

clearly not apply. This will also be the case for a vessel in transit to or from an operating area, as

that will arguably fall outside the definition of innocent passage.73

2.3 The exclusive economic zone and continental shelf

The concepts of the exclusive economic zone (EEZ) and the continental shelf has a fairly short

history in international law, starting with President Truman’s declaration of 29 September 1945

concerning rights claimed by the USA to “… natural resources of the subsoil and seabed of the

continental shelf beneath the high seas but contiguous to the coasts of the United States…”74 At

present, key aspects of international law relating to the EEZ and continental shelf are codified in

UNCLOS.

UNCLOS Part V concerns the EEZ and Part VI the continental shelf, including their definition,

geographical extent, etc. Under UNCLOS Articles 56 and 77, in the exclusive economic zone and

on the continental shelf the coastal State has sovereign rights for the purpose of exploring and

exploiting natural resources. UNCLOS Articles 60 and 80 regulate the jurisdiction of the coastal

state in relation to installation and structures in the EEZ / on the continental shelf for the

purpose of exploring and exploiting natural resources. These provisions provide the boundaries

in international law for national jurisdiction and the extent to which coastal states can give

national law effect in these areas.

2.3.1 Rights of the coastal state in the EEZ / on the continental shelf

There are no provisions in international law giving coastal states general, or territorial-like,

jurisdiction competence over its exclusive economic zone and continental shelf.75 Tanaka (2009)

76 notes that:

“It is important to note that the sovereign rights of the coastal State over the EEZ are

essentially limited to economic exploration and exploitation (limitation ratione

materiae).”

73 UNCLOS Art. 18 defines 'passage' as "[…] navigation through the territorial sea for the purpose of: (a) traversing that sea without entering internal waters or calling at a roadstead or port facility outside internal waters; or (b) proceeding to or from internal waters or a call at such roadstead or port facility."

74 See Tanaka (2012) for historical details around this.

75 See UNCLOS Art. 55: “The exclusive economic zone is an area beyond and adjacent to the territorial sea, subject to the specific legal regime established in this Part, under which the rights and jurisdiction of the coastal State and the rights and freedoms of other States are governed […]”

76 Tanaka (2009) at pages 127 and 142.

24

“The sovereign rights are thus characterised by the lack of comprehensiveness of

material scope. On this point, the sovereign rights must be distinguished from territorial

sovereignty.”

Importantly, UNCLOS Art. 58(1) provides that:

In the exclusive economic zone, all States [enjoy] the freedoms referred to in article 8777

of navigation and overflight and of the laying of submarine cables and pipelines, and

other internationally lawful uses of the sea […]

Article 78 UNCLOS provides similar limitations for the coastal state rights on the continental

shelf. The limited powers of the coastal state are also demonstrated by UNCLOS Articles 56(2)

and 73, which further restricts the enforcement and legislative powers of the coastal state in a

way which would appear incompatible with a territorial-type, unlimited jurisdiction: Art. 56(2)

requires that

[i]n exercising its rights and performing its duties under this Convention in the exclusive

economic zone, the coastal State shall have due regard to the rights and duties of other

States and shall act in a manner compatible with the provisions of this Convention,

whereas Art. 73 provides that

penalties for violations of fisheries laws and regulations in the exclusive economic zone

may not include imprisonment […] or any other form of corporal punishment.

Thus, it is clear that the EEZ and continental shelf are not akin to an extension of the coastal

state’s territory, but rather to be considered equivalent to the high seas with the exception of

the sovereign rights and specific jurisdiction explicitly provided to the coastal state under

international law.78 This is also supported by the decision of the International Tribunal for the

Law of the Sea79 in the M/V Saiga case, discussed further below in Section 2.3.2(b), in which the

tribunal held that UNCLOS does not empower a coastal State to give its customs laws general

effect the exclusive economic zone.

It can be concluded that there is no right in international law for coastal state to give national

law general effect, i.e. for any purpose or activity, in the EEZ or on the continental shelf.

Klabbers (2013) states that “a serious argument can be made that the EEZ and other maritime

77 Article 87 UNCLOS relates to the freedom of the high seas.

78 See also Beckman and Davenport (2012), who noted that “[t]he key point is that the coastal State has no residual jurisdiction to regulate matters in its EEZ. Since the EEZ is not subject to its sovereignty, its jurisdiction is limited to that set out in the provisions in UNCLOS.” Also, Marten (2014): "[…] in most scenarios the vessels in this maritime zone enjoy the same rights as they would on the high seas."

79 The International Tribunal for the Law of the Sea (ITLOS) is an intergovernmental organization created by the mandate of the Third United Nations Conference on the Law of the Sea, and with the power to settle disputes between party states. There are currently 160 member states. See www.itlos.org.

25

zones still qualify as high seas”.80 Oxman (1978) commented that "[w]hether the high seas

regime is in effect the applicable regime when one crosses into an economic zone depends on

what one is doing", while Attard (1987) states in relation to the same question that "[t]he

applicable legal regime is no longer dependent on the geographic area in question; rather, it is

the activity in question that will determine the operative regime."

Churchill and Lowe (1999) argue that the EEZ does not have a residual high seas character but

must be considered a sui generis zone having three principal elements:81

(1) the rights and duties which the Law of the Sea Convention accords to the coastal

State;

(2) the rights and duties which the Convention accords to other States; and

(3) the formula provided by the Convention for regulating activities which do not fall

within either of the two previous categories.

On either basis,82 the conclusion and the underlying premise for the following discussion must

be that coastal states do not have inherent powers or jurisdiction to give national law effect in

the exclusive economic zone and on the continental shelf beyond those positively provided

under international law.

2.3.2 Jurisdiction under UNCLOS Articles 56(1)(a) and 77

UNCLOS Article 56(1) provides that

[i]n the exclusive economic zone, the coastal State has:

(a) sovereign rights for the purpose of exploring and exploiting, conserving and

managing the natural resources, whether living or non-living, of the waters

superjacent to the seabed and of the seabed and its subsoil, and with regard to

other activities for the economic exploitation and exploration of the zone, such

as the production of energy from the water, currents and winds;

(b) jurisdiction as provided for in the relevant provisions of this Convention with

regard to:

(i) the establishment and use of artificial islands, installations and

structures;

(ii) marine scientific research;

(iii) the protection and preservation of the marine environment;

80 See Klabbers (2013) at page 242.

81 See Churchill and Lowe (1999) at 166.

82 Noting that Churchill and Lowe's point (3) will not be relevant since the rights associated with natural resources exploration and exploitation are extensively regulated within UNCLOS.

26

(c) other rights and duties provided for in this Convention.

For the continental shelf, Art. 77(1) UNCLOS similarly provides that “[t]he coastal State exercises

over the continental shelf sovereign rights for the purpose of exploring it and exploiting its

natural resources”.83

Unlike the provisions for exclusive jurisdiction in Art. 60(2)84, Articles 56(1)(a) and 77 provide

“sovereign rights” and qualify these to be limited to the purpose of exploring exploiting its

natural resources. Thus, the rights are limited functionally, as opposed to the more general

provisions for coastal state jurisdiction in Art. 60(2). Other activities in the EEZ or on the

continental shelf, e.g. laying submarine cables or pipelines (cf. UNCLOS Art. 79(1)) or activities

for other purposes, will therefore not be affected or limited by the provisions of Articles 56(1)(a)

and 77.

2.3.2(a) The scope of Articles 56(1)(a) and 77

The rights of the coastal state based in Articles 56(1)(a) and 77 must be interpreted in light of

the definitions in Articles 60 and 80. This would follow from the fact that Articles 60 and 80 are

the more specific provisions, and provided in addition to Art. 56(1)(a) and 77. Moreover, Art.

56(1)(b) explicitly lists jurisdiction over installations and structures in addition to the “sovereign

rights” provided by Art. 56(1)(a), implying that such jurisdiction would not automatically follow

from Articles 56(1)(a) and 77. Thus, it would seem logical to assume that any jurisdiction

competence that follows from 56(1)(a) and 77 would be for such units and activities which do

not fall under Articles 60 and 80.

It is clear that Articles 56(1)(a) and 77 potentially have a much wider scope than Articles 60 and

80, in that they will encompass any unit or activity with the purpose of exploring or exploiting

natural resources. This may include a wide range of vessels, such as support ships, transport, and

seismic vessels. Moreover, it may be plausible that for example a drilling rig which falls under

Art. 60/80 only when drilling (see Section 2.3.3(c)), could fall under Art. 56(1)(a) or 77 when in

transit, and that the distinction on which units fall under installation or structure definition of

Articles 60 and 80 would be less important for the coastal state’s rights in practice.

2.3.2(b) Sovereign rights and jurisdiction

In its plain wording, Articles 56(1)(a) and 77 imply (i) rights of the coastal state to the natural

resources themselves, and (ii) the right to regulate their exploration and exploitation.

Enforcement powers for the coastal state in relation to these rights are clearly foreseen.85 It is

clear that there is a functional requirement for Articles 56(1)(a) and 77 to apply; for these coastal

state rights to be relevant in relation to a ship, that ship must be actually engaged in exploring

83 It is noted that the provision under Art. 77 of “sovereign rights for the purpose of exploring” the continental shelf is not limited to exploring natural resources, but will apply to any exploration. However for the purpose of this discussion, the distinction is not important.

84 See Section 2.3.3 below.

85 See UNCLOS Art. 73: “Enforcement of laws and regulations of the coastal State.”

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and exploiting natural resources. This follows from Art. 58(1)86, and was exemplified by

Nordquist et al. (1995), who stated that "[n]avigation by a fishing vessel in the zone is, as a

matter of right, the same as navigation by a fishing vessel beyond the zone."

A key question would be what the extent of any jurisdiction competence under Articles 56(1)(a)

and 77 is. If the functional requirement is fulfilled, so that a unit or activity falls under Art.

56(1)(a) or 77, would the coastal state have: (i) full jurisdiction, i.e. in relation to all matters

concerning that unit or activity, or (ii) jurisdiction only in relation to the aspects or activities

relating to exploring or exploiting natural resources?

The Convention wording (“for the purpose of exploring and exploiting”) would appear to suggest

the latter, i.e. that coastal state jurisdiction exists only in relation to those matters that fall under

the functional requirement. The same would follow from a comparison of Articles 56(1)(a) and

77 with Articles 60 and 80; if complete and unlimited jurisdiction competence is provided

through 56(1)(a) and 77 then Articles 60 and 80 would be superfluous. (As such installations and

structures with the purpose of exploring and exploiting natural resources would arguably fall

under the “sovereign rights” of Articles 56(1)(a) and 77.) Thus, the rights of jurisdiction for the

coastal state on installation and structures granted by Articles 60 and 80 must have been

intended to be different and more extensive compared to the rights provided by 56(1)(a) and

7787.

The expression 'sovereign rights' in UNCLOS Articles 56(1)(a) and 77 mirrors the language of Art.

2 of the 1958 Convention on the Continental Shelf. In relation to the choice of this language, the

International Law Commission noted88 that it

desired to avoid language lending itself to interpretations alien to an object which the

Commission considers to be of decisive importance, namely, the safeguarding of the

principle of the full freedom of the superjacent sea and the air space above it. Hence it

was unwilling to accept the sovereignty of the coastal State over the seabed and subsoil

of the continental shelf. On the other hand, the text as now adopted leaves no doubt that

the rights conferred upon the coastal State cover all rights necessary for and connected

with the exploration and exploitation of the natural resources of the continental shelf.

Such rights include jurisdiction in connexion with the prevention and punishment of

violations of the law. The rights of the coastal State are exclusive in the sense that, if it

86 Art. 58(1) UNCLOS: "In the exclusive economic zone, all States […] enjoy, subject to the relevant provisions of this Convention, the freedoms referred to in article 87 of navigation and overflight and of the laying of submarine cables and pipelines, and other internationally lawful uses of the sea related to these freedoms, such as those associated with the operation of ships, aircraft and submarine cables and pipelines, and compatible with the other provisions of this Convention."

87 See also Fleischer (1983), who notes that the Convention clearly differentiates between the provisions for installations and those for other, general petroleum-related activity on the continental shelf.

88 See Report of the International Law Commission on the Work of its Eighth Session, 4 July 1956, Official Records of the General Assembly, Eleventh Session, Supplement No. 9 (A/3159) Yearbook of the International Law Commission, 1956 , Vol. II.

28

does not exploit the continental shelf, it is only with its consent that anyone else may do

so. (Emphasis added.)

It appears clear that the Commission intended this wording to limit the scope of rights only to

those necessary for the coastal state to explore and exploit natural resources, and to avoid a

more expansive interpretation of this provision.

The scope of Articles 56(1)(a) and 77 is also very clearly illustrated by two similar cases that have

been heard by the International Tribunal for the Law of the Seas (ITLOS). Both related to the

bunkering of, i.e. the provision of fuel oil to, fishing vessels from a foreign-flagged ship in the

exclusive economic zone. In the Saiga case89, the Tribunal held that bunkering of fishing vessels

in the EEZ falls within the sovereign rights of the coastal state under Art. 56. This view was

confirmed by the Tribunal in the more recent Virginia G90 case. Thus, the tribunal has held that

not only the fishing vessels but also vessels performing support functions for these will fall under

the scope of this provision. This would be directly transferrable to the type of activities

considered here, as both fisheries and petroleum-related activities are regulated by Art. 56(1).

However, one key difference between the Saiga and Virginia G cases gives an informative

indication into what the Tribunal considers to be the limitation of the coastal state powers in the

EEZ: In Saiga, the dispute related to an alleged violation of Guinean customs laws by, and

subsequent arrest of, the Saiga when supplying gas oil to fishing vessels within the EEZ. The

question before the tribunal was whether Guinea was acting in conformity with UNCLOS and

international law when applying its customs laws to the Saiga, which flew the flag of Saint

Vincent and the Grenadines, in that situation.91 This was answered succinctly, and in line with

the submission of St. Vincent and the Grenadines,92 by the tribunal, holding that:

In the exclusive economic zone, the coastal State has jurisdiction to apply customs laws

and regulations in respect of artificial islands, installations and structures (article 60,

paragraph 2). In the view of the Tribunal, the Convention does not empower a coastal

State to apply its customs laws in respect of any other parts of the exclusive economic

zone not mentioned above.93 (emphasis added)

Those "any other parts" would thus include any vessel which is not an artificial island,

installation or a structure, and the Tribunal's conclusion was consequently that “[…] by applying

its customs laws to a customs radius which includes parts of the exclusive economic zone, Guinea

acted in a manner contrary to the Convention”.94 The fact that Guinea arrested the Saiga on the

89 The M/V Saiga (No. 2) case, Saint Vincent and the Grenadines v. Guinea. ITLOS judgement of 1 Jul 1999.

90 The M/V Virginia G case, Panama v. Guinea-Bissau, Case No. 19. ITLOS judgement of 14 Apr 2014.

91 See the judgment at paragraph 126.

92 See Memorial of St. Vincent and the Grenadines at 121ff.

93 Judgment at paragraph 127.

94 Judgment at paragraph 136.

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basis of customs laws, and not fisheries legislation95 was given considerable importance, in

particular in relation to the powers of the Tribunal for awarding interim measures.96 Before the

Tribunal, Guinea maintained that the intervention was indeed based on national customs laws,

which led the Tribunal to this clear decision.

Similarly, in the Virginia G case, an oil tanker flying the flag of Panama was arrested by the

authorities of Guinea-Bissau for carrying out refuelling operations for vessels fishing in Guinea-

Bissau’s exclusive economic zone. The question before the tribunal in this case was:

“[…] whether Guinea-Bissau, in the exercise of its sovereign rights in respect of the

exploration, exploitation, conservation and management of natural resources in its

exclusive economic zone, has the competence to regulate bunkering of foreign vessels

fishing in this zone”97

The tribunal held that “the regulation by a coastal State of bunkering of foreign vessels fishing in

its exclusive economic zone is among those measures which the coastal State may take in its

exclusive economic zone to conserve and manage98 its living resources under article 56 of the

Convention” (my emphasis). It further noted99 that only those activities with a direct connection

to fishing may be regulated, but that bunkering of fishing vessels fulfilled this criterion since the

bunkering enables the fishing vessels to continue their activities without interruption at sea.

Thus, the charging of a fee for bunkering by Guinea-Bissau, not guided by fiscal interests but

established for services rendered in connection with the authorisation of bunkering, was within

the coastal state rights and obtaining such an authorisation was not unduly burdensome for an

applicant.100

These rights of the coastal state do, however, not extend to the regulation of bunkering

activities in general.101 The tribunal hence concluded that the relevant Guinea-Bissau legislation

in question did not extend beyond that permitted under international law, as it sufficiently

clearly established that it only related to activities that directly supported fishing activities in the

exclusive economic zone.102

95 See e.g. the Judgement at paragraph 81, where the Tribunal pointed out that: "[a]t no point has Guinea alleged violations of any fisheries laws (whether directly or indirectly)."

96 See Lowe (1999) and De La Fayette (2000) for discussion and criticism on this aspect of the case.

97 See the judgment at paragraph 208.

98 I.e. those rights which follow from UNCLOS Art. 56(1)(a).

99 See the judgment at paragraph 215.

100 See also Scovacci (2015)

101 Judgment at paragraph 223.

102 Judgement at paragraph 229.

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An equivalent question was discussed by Marten (2014), in relation to Australia's Fair Work Act

2009 and its applicability to foreign vessels in this area. Marten concludes that "UNCLOS simply

does not extend coastal state jurisdiction to include authority over the employment standards of

foreign-flagged vessels within the EEZ. As a result, it would appear that the attempt to apply the

Act to ships in the EEZ or waters above the continental shelf […] contravenes UNCLOS."

It would follow that the rights of the coastal state provided in Articles 56(1)(a) and 77, generally

speaking, relate to the authorisation and regulation of the rights to explore or exploit natural

resources in the EEZ and on the continental shelf, and the conditions under which such activities

may be carried out. It does not follow that Art. 56(1)(a) and 77 give the coastal state general

jurisdiction over e.g. vessels performing such activities. Rather, this is expressly regulated by

Articles 60 and 80, which give the coastal state full jurisdiction for structures and installations

(see below, Section 2.3.3). The fact that the Convention does not contain any express provisions

relating to jurisdictional competence of the coastal state for units (e.g. vessels) falling outside

the definitions in Articles 60 and 80 may be taken as an indication that no such provisions were

intended.

For the question considered here, there would seem to be no material difference in the

argumentation regarding giving patent law general effect in the EEZ compared to that used in

relation to customs laws by ITLOS in Saiga. The Tribunal has expressed a clear view that the

coastal state is empowered to regulate the exploitation of natural resources in the EEZ, including

ancillary activities to such exploitation, however that the coastal state does not have basis in

international law to give other national legislation effect in this area. In the current context, the

above would imply that petroleum legislation, i.e. such laws aimed at regulating petroleum

activities, can be given effect and enforced, however that other national law, such as patent law,

cannot.

It is submitted that patent law is no more directly or indirectly103 connected with such regulation

than customs laws. If anything, patent law, having the purpose of encouraging innovation and

technological progress,104 is less related to this than customs law. Customs law has the purpose

of generating income (i.e. tax) from commercial activities for the benefit of the state and society

at large, and may also function to control or influence such commercial activities.105 Clearly, it

would be possible for a coastal state to indirectly influence offshore activities by imposing taxes

on certain activities and thereby achieve a certain degree of regulation.106 While ITLOS

acknowledged that such indirect effects may be relevant in relation to the scope of Art. 56(1)(a)

103 See footnote 95 above.

104 See Section 1.1 above.

105 See Asakura (2003). For example, a government may impose tax on a product or activity in order to discourage its use or encourage use of alternatives.

106 For example, a state may impose a high tax on certain types of fuels, for example less environmentally friendly heavy fuel oils. This may, in practice, have the same effect as directly regulating the types of fuel permitted.

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and 77,107 there is no indication that it considered customs laws to be relevant in this respect.

The potential effects of patent law in any such regulation are arguably much lower. The clear

position taken by ITLOS on the matter of customs law, as expressed by the Saiga and Virginia G

decisions, must be taken as a strong presumption that patent law should also not fall under the

scope of Articles 56(1)(a) and 77.

2.3.3 Jurisdiction under UNCLOS Articles 60 and 80

In relation to installations in the EEZ and on the continental shelf, UNCLOS Article 60 provides

that

1. In the exclusive economic zone, the coastal State shall have the exclusive right to

construct and to authorize and regulate the construction, operation and use of:

(a) artificial islands;

(b) installations and structures for the purposes provided for in article 56 and

other economic purposes;

(c) installations and structures which may interfere with the exercise of the rights

of the coastal State in the zone.

2. The coastal State shall have exclusive jurisdiction over such artificial islands,

installations and structures, including jurisdiction with regard to customs, fiscal, health,

safety and immigration laws and regulations. […]

UNCLOS Art. 80 provides that “Article 60 applies mutatis mutandis to artificial islands,

installations and structures on the continental shelf”, so there would be no differentiation

between the exclusive economic zone and the continental shelf on this question.

For the purpose here, Art. 60(1)(b) is the most relevant clause. The referenced Art. 56108 gives

the coastal state “[…] sovereign rights for the purpose of exploring and exploiting, conserving and

managing the natural resources […] of the waters superjacent to the seabed and of the seabed

and its subsoil […]”, however Art. 60(1)(b) also applies to “other economic purposes”. As most

relevant activities in the EEZ / on the continental shelf (at least for the questions considered

here) would have economic purposes, the provisions in Art. 60 would seem to apply generally,109

however petroleum-related activities are clearly covered, falling under exploring and exploiting,

conserving and managing […] natural resources.

Article 60(2) clearly gives the coastal state authority to give national law effect on such

installations and structures, and, as noted by Ringbom (2015), it appears from the wording that

the jurisdiction over the installation relates to the activities on the installation itself. Marten

107 See the Saiga judgement at paragraph 81

108 Outlined in full in Section 2.3.2 above.

109 An exception might be for example military activities, which are not considered here.

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(2014) noted that "[…] UNCLOS affords coastal states very limited scope to regulate vessels

within the EEZ generally, and in the context of offshore platforms the most relevant aspect is the

ability to establish navigation restrictions (e.g. safety zones) around such structures". This is

provided by Art. 60(4), which gives the coastal state the right to

"[…] where necessary, establish reasonable safety zones around such artificial islands,

installations and structures in which it may take appropriate measures to ensure the

safety both of navigation and of the artificial islands, installations and structures."

Reading Art. 60(2) in light of Art. 60(4) indicates that the right to establish such safety zones

would not follow from Art. 60(2), and thus that the rights conferred by Art. 60(2) are limited to

the artificial island, installation or structure itself. Some commentators have likened the

jurisdiction over artificial islands, installations and structures to the flag state jurisdiction over

vessels.110

Nevertheless, for activities taking place on such installations and structures, the coastal state

jurisdiction would arguably include patent law. This follows from the use of the word 'including',

indicating that the listed areas (customs, fiscal, …) do not form an exhaustive list, and the fact

that the listed areas include a wide range of legal areas.111 Oude Elferink (2014) and Esmaeili

(2001) reached the same conclusion, with Esmaeili commenting that "[t]he first phrase of the

Article gives the coastal State the right to exclusive jurisdiction over installations in all legal

matters in its continental shelf and EEZ. The second part of the Article gives a number of very

important examples of coastal State jurisdiction over and in relation to oil rigs and other

installations" (emphasis added). The main question in relation to the interpretation of this

provision would thus be the definition of installations and structures.

2.3.3(a) The ordinary meaning of ‘installations and structures’

The definition of installations and structures in UNCLOS Art. 60(1)(b) will be of key importance

for the extent to which coastal states can exercise jurisdiction in relation to petroleum-related

activities. Clearly, with the numerous different types of petroleum vessels and activities, the

situation would need to be established individually for different types of petroleum-related

units, e.g. platforms, ships and other vessels, according to whether they would fall under this

definition.112

110 See Honein (1991) and Papadakis (1977).

111 This also follows implicitly from reading UNCLOS Art. 208 in conjunction with Art. 60: Art 208 requires coastal states to "[…] adopt laws and regulations to prevent, reduce and control pollution of the marine environment […] from artificial islands, installations and structures under their jurisdiction, pursuant to articles 60 and 80 " (Emphasis added.) Art. 208 thus implies that Art. 60/80 encompasses jurisdiction over marine environmental matters, which are not listed in Art. 60(2).

112 See Section 1.3.1 above.

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The meaning of installations and structures is not immediately clear from the convention

wording, and these terms are not defined. The ordinary meaning of these words113 would

indicate that predominantly fixed units are meant, as it might not be natural to refer to ships and

conventional, movable vessels as an installation or a structure. Moreover, the wording of the

article’s point 1 (“[…] right to construct […]”) and the reference back to that from point 2 would

seem to indicate that the provision is aimed at installations and structures which have been

constructed or erected in the EEZ (or on the continental shelf).114 That would seem to narrow its

scope of coverage considerably, and to a large extent exclude “freely moving” vessels which

operate in that area.

The preparatory works for UNCLOS are also not concerned with these definitions115, and they

appear to have been uncontroversial. Proposed draft articles by the United States116 suggested

including a definition that "[f]or the purposes of this chapter, the term "installations" refers to all

off-shore facilities, installations, or devices other than those which are mobile in their normal

mode of operation at sea." This proposal was, however, not adopted. Rather, at the third session

(1975) the Informal Group of Judicial Experts (the Evensen Group) proposed the wording of Art.

60(2) which was adopted unchanged in the Convention.117 It would appear that the Conference

felt that the plain wording of this article was sufficiently clear.

Nevertheless, there may be numerous units for which this differentiation would not be

immediately clear, see for example the jack-up vessel shown in Figure 2 above. Furthermore, the

underlying purpose of the provision is to bring units engaged in petroleum-related activities

under the jurisdiction of the coastal state118, which may support a broader interpretation.

Considering the wording and intention of Art. 60, it would seem clear that installations and

structures which are fixed on or permanently moored to the seafloor must be covered. (I.e.

certain of the “category A” units described in Section 1.3.1.) This would arguably include

113 Under international law, the ordinary meaning of a term in the relevant context is of significance for the interpretation of a treaty, where the definition is absent; see Art. 31(1) of the Vienna Convention on the Law of Treaties. The Oxford Dictionary defines ‘installation’ as “a large piece of equipment installed for use” or “a military or industrial establishment”, and ‘structure’ as “a building or other object constructed from several parts”

114 The 1958 Geneva Convention on the Continental Shelf, which was superseded by UNCLOS, uses similar wording: “[…] the coastal State is entitled to construct and maintain or operate on the continental shelf installations and other devices necessary for its exploration and the exploitation of its natural resources […]”.

115 See Nordquist et al. (1995) at 573ff.

116 See documents A/AC.138/SC.II/L.35 and A/CONF.62/C.2/L.47 from the United Nation Conferences on the Law of the Sea, available at http://legal.un.org/diplomaticconferences/index.html

117 Nordquist et al. (1995) at 578.

118 See Beckman and Davenport (2012), citing preparatory works from the International Law Commission leaving “[…] no doubt that the rights conferred upon the coastal State cover all rights necessary for and connected with the exploration and exploitation of the natural resources of the continental shelf.”

34

permanently placed platforms (for production, drilling, accommodation, etc.), as well as

equipment placed on the seafloor or permanently moored offshore. A more complicated

situation would arise for movable units and vessels. Some of these may be temporarily or semi-

permanently placed on the seafloor. There is, however, no requirement in Art. 60 that an

installation or structure be permanently placed in order to be covered. Thus, it would seem that

also temporarily placed structures and installations can be covered, for example a jack-up

drilling rig.

It would further seem clear that most ships or vessels cannot be considered an installation or

structure under this interpretation, and would therefore not ordinarily fall under Art. 60/80. For

example, seismic vessels or supply/transport ships would clearly fall outside this definition. More

debatable may be support vessels which carry out more direct oil & gas-related activities on site,

such as equipment installation, anchor handling, well workover, or ROV support.119 It would

need to be established whether such units could be considered installations or structures when

they are, for example, moored in position for such activities.

2.3.3(b) Interpretation in light of UNCLOS and international law

UNCLOS clearly distinguishes between ships (or vessels120) and installations and structures; it is

notable that the convention, being occupied with provisions concerning ships throughout, uses

the terms “Artificial islands, installations and structures” in Art. 60 and 80. Clearly, there is an

intention to differentiate these from ships.121 To interpret the meaning of installations and

structures, it is therefore also necessary to understand what ‘ship’ means; if a petroleum vessel

falls under the definition of ship, then that may be a prima facie indicator that it is not an

installation or structure. (However, this does not exclude the possibility that these categories

may overlap in certain cases, and that a petroleum vessel can be both a ship and an installation

or a structure. Again, a useful example is the jack-up vessel shown in Figure 2 above.)

2.3.3(b)(i) Petroleum vessels as ships

There is no generally accepted definition of ‘ship’ in international law, however many authors

have had to deal with this question in different contexts.122 The most notable case is probably

the International Court of Justice case of Passage Through the Great Belt123, in which it was

debated whether oil rigs and mobile drilling units can be considered ships for the purpose of

innocent passage. This case was settled out of court and so the court did not have to decide on

119 See Section 1.3.1 above.

120 For the purpose here, I will assume that ‘ship’ and ‘vessel’ are equivalent. See for example Caron (1989): “the terms ‘ship’ and ‘vessel’ are generally regarded as equivalent, although ‘ship’ is the primary term used in treaties in this area”. UNCLOS uses the terms ‘ship’ and ‘vessel’ interchangeably.

121 See also e.g. Yang (2005) at 12: ”[…] the concepts of ship and vessel […] distinguish themselves from other objects such as artificial islands, installations, structures or other devices.”

122 See e.g. Park (2013), Esmaeili (2001) and Yang (2005).

123 1991 ICJ, ILR (1994) vol. 94 at 446.

35

the question. However, in general, there is agreement that for the purpose of innocent passage

and navigation drilling rigs or other self-propelled units are treated equivalent to ships.124

Where the borderline between ship and installation or structure is drawn more generally and for

petroleum-related operations is, however, of significant importance for the current question.

The definition of ‘ship’ is not clear in either municipal law or international law, and the large

body of national law relating to different aspects of shipping use the term inconsistently125, but

generally adopting a broad definition of ship.126 One writer noted in relation to the definition of

ship, that “a ship is a ship. What is more clear than that? Everyone knows what a ship is:

something built by men, going in the water and carrying persons and goods”.127 In more

structured analyses of this definition, some common key criteria include (i) the ability to

navigate, (ii) capability of transporting goods or persons, and (iii) means of propulsion. All of

these would apply to most types of petroleum vessels. Moreover, such units, also drilling rigs,

generally fly a flag and is registered in a shipping register (commonly the same registers as other

types of ships; see Table 1 at page 62 below). Conversely, fixed rigs or platforms, without the

capability of navigation, would fall outside the definition of ship.128

Referring back to Section 1.3.1, it is clear that most types of petroleum vessels could fall under

the generally accepted definition of ship under international law, and that for the purposes of

navigation and transit, that they would probably be considered to be ships in most cases. The

only exception to this would be Category A units of the fixed installation type.129 Self-propelled

units in this category, e.g. drilling rigs, at least when in transit, would, however, probably be

considered as ships in most circumstances.130 Category B and C vessels are clearly within the

124 Notably, Finland, one of the parties to the Great Belt case, sent a questionnaire to a number of major coastal states, asking how mobile oil drilling rigs would be treated in national law for the purpose of passage through straits and the territorial sea. In all cases mobile drilling rigs, such as drill ships, semisubmersibles and jack-ups were treated in exactly the same way as merchant ships of conventional design. See Esmaeili (2001) at 3.2.5.

125 See Esmaeili (2001).

126 For the US position, see 33 C.F.R. § 140.10, which defines mobile offshore drilling units under ‘vessels’. Also, the US District Court of Eastern District of Louisiana in Claborn McCarty v Service Contracting, Inc. (1971 AMC 90), noting in relation to drilling barges that “there is now simply no question but that such craft are ‘vessels’ within the import of both the Jones Act and General Maritime Law”. A number of other US courts have concluded equivalently; see Costonis (2011) at I.A.

127 Lazaratos (1969).

128 Save for exceptional cases e.g. under towing where there are some examples of towed objects having been considered ships for certain purposes. However this would not be of large practical importance and will not be considered further here.

129 See e.g. Esmaeili (2001) who notes that “[i]n almost all international conventions, fixed oil platforms are excluded from the definition of ‘ships’”.

130 See the discussion relating to the Great Belt case above.

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definition of ship in international law, and would be treated as such for most purposes, also

when operating in a petroleum setting.

2.3.3(b)(ii) Petroleum vessels as installations / structures

Nevertheless, the above does not rule out the possibility that petroleum vessels can be

considered installations or structures for certain purposes or operations. As noted earlier,

UNCLOS does not give a definition of installations and structures, beyond the convention

wording.

Other international conventions dealing with maritime matters have, however, dealt with the

same questions and thus may provide some guidance.131 The 1976 Convention on Civil Liability

for Oil Pollution Damage Resulting from Exploration and Exploitation of Seabed Mineral

Resources defined ‘installation’ as “[…] any well or other facility, whether fixed or mobile, which

is used for the purpose of exploring for, producing, treating, storing, transmitting or regaining

control of the flow of crude oil from the seabed or its subsoil […]” but with the express exception

that “[…] a ship as defined in the International Convention on Civil Liability for Oil Pollution

Damage, done at Brussels on 29 November 1969 shall not be considered to be an installation.”

The latter definition of ‘ships’ is “[…] any sea-going vessel and any seaborn craft of any type

whatsoever, actually carrying oil in bulk as cargo”, thus only oil carriers and pure transport

vessels would be excluded. This appears to give scope for a broad interpretation of ‘installation’,

notably including fixed or mobile facilities used for oil exploration. This would include most

vessels in the example categories in Section 1.3.1 when they are operating; when in transit it

would appear not to be “used for” that purpose.

The 1990 International Convention on Oil Pollution Preparedness, Response and Co-operation

defined both ‘ship’ and ‘offshore unit’:

"Ship" means a vessel of any type whatsoever operating in the marine environment and

includes hydrofoil boats, air-cushion vehicles, submersibles, and floating craft of any

type.

"Offshore unit" means any fixed or floating offshore installation or structure engaged in

gas or oil exploration, exploitation or production activities, or loading or unloading of oil.

It is clear from the very broad definitions that these would not be mutually exclusive; for

example both a drilling rig and a drillship could fall under both definitions. The distinction would

seem to be more a purposive one, with any ‘unit’132 engaged in petroleum activities falling under

131 Under Art. 31(1) of the Vienna Convention on the Law of Treaties, "[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." Previous and concurrent agreements between the parties or rules of international law may be used to establish such context and basis for interpretation. Further, under Art. 31(3), any subsequent agreement or practice, or relevant rules of international law in the relation between the parties, shall be taken into account when interpreting a treaty. As most subsequent 'maritime' agreements operate within the boundaries of UNCLOS, they may provide some guidance.

132 Notably, during drafting the term was changed from “offshore platform” to “offshore unit”, arguably broadening this category. See Esmaeili (2001) at 3.4.

37

the second definition. Similarly as above, this would seem to cover most petroleum vessels, at

least while they are in operation.

The 1988 Convention for the Suppression of Unlawful Acts against the Safety of Navigation

defined ‘ship’ as “a vessel of any type whatsoever not permanently attached to the seabed,

including dynamically supported craft, submersibles, or any floating craft”. Conversely, the 1988

Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms Located on

the Continental Shelf defined ‘fixed platform’ as “an artificial island, installation or structure

permanently attached to the seabed for the purpose of exploration or exploitation of resources of

for other economic purposes”. Thus, the Convention and the Protocol draw a clear line between

‘ship’ and ‘fixed platform’, i.e. providing them as two mutually exclusive groups based on

whether or not there is a permanent attachment to the seafloor. However, they provide little

guidance on the meaning of ‘installation and structure’ per se, only that such installations or

structures which are permanently attached to the seabed are considered ‘fixed platforms’.

The 1989 International Convention on Salvage defined ‘vessel’ as “any ship or craft, or any

structure capable of navigation”. Thus, the ‘vessel’ definition would apply to most petroleum

vessels as exemplified in Section 1.3.1, also to e.g. drilling rigs, as long as they are capable of

navigation. The wording, moreover, implies that a structure can be capable of navigation. A

further notable point is that the Convention in its Article 3 excludes “fixed or floating platforms

or mobile offshore drilling units when such platforms or units are on location engaged in the

exploration, exploitation or production of sea-bed mineral resources”, thus also distinguishing

between the type of activity, not strictly on the details of the vessel. Hence, a mobile offshore

drilling unit could be considered a vessel for the purpose of the Convention when in transit, but

would be excluded from application when engaged in drilling activities on location.

The IMO133 has followed the same line, considering mobile drilling units, as a general matter, to

be vessels,134 but considering them as installations when operating on a drilling site. IMO

Resolution A.671(16) Safety Zones and Safety of Navigation Around Offshore Installations and

Structures 1989 states:

For the purposes of this resolution mobile offshore drilling units (MODUs) used for exploratory

drilling operations offshore are considered to be vessels when they are in transit and not

engaged in a drilling operation, but are considered to be installations or structures when

engaged in a drilling operation. (Emphasis added.)

Thus, when not operating fixed, on site, such units would be considered vessels, and have the

same obligations as any other vessel. Although not mentioned in the IMO resolutions, it would

133 The International Maritime Organization (IMO) is a specialised agency of the United Nations with 171 Member States.

134 IMO Resolution A.1023(26) Code for the construction and equipment of mobile offshore drilling units states at 1.3.40 that "Mobile offshore drilling unit (MODU) or unit is a vessel capable of engaging in drilling operations for the exploration for or exploitation of resources beneath the seabed such as liquid or gaseous hydrocarbons, sulphur or salt." (Emphasis added.)

38

seem that a parallel to this could be drawn for other types of vessels which operate similarly,

e.g. well intervention vessels (see Section 1.3.1(b) above). In other words, these would, as a

basic principle, be considered to be vessels, however could temporarily change status to an

installation when carrying out certain operations. (And, during that time, ceasing to be a vessel.)

2.3.3(b)(iii) Relation between coastal state and flag state jurisdiction

UNCLOS provides certain rights and obligations to both coastal states and to flag states, in

certain circumstances relating to the same activity or the same vessel. Clearly, UNCLOS cannot

be interpreted in any manner which would be self-contradictory or ambiguous.

It is notable that UNCLOS, in Art. 60/80 and Art. 92, provides exclusive jurisdiction to the coastal

state and the flag state, respectively. Thus, it would be clear that a vessel cannot fall under both

Art. 60/80 and Art. 92, at least not at the same time. Thus, to the extent that the EEZ can be

assimilated to the high seas,135 a vessel can only either be subject to coastal state jurisdiction

under Art. 60/80, or to flag state jurisdiction under Art. 92. Clearly UNCLOS cannot be

interpreted to provide ‘exclusive jurisdiction’ to two different states for the same vessel at the

same time.

In the EEZ, the freedoms of the high seas are subject to the coastal state rights, and thus the

exclusive jurisdiction of the flag state under Art. 92 is not unqualified136, as it is on the high seas.

It may therefore be limited by any rights provided to the coastal state. However, for a vessel or

unit falling under Art. 60/80, the coastal state is provided exclusive jurisdiction, thus the flag

state would not have any rights in relation to that vessel or unit. (At least for the time that Art.

60/80 jurisdiction applies.)

Art. 94 UNCLOS provides a number of duties for the flag state, and Art. 58(2) gives the provisions

of Art. 94 effect also in the EEZ, “in so far as they are not incompatible with” the coastal state

rights in this area. These obligations include “assum[ing] jurisdiction under its internal law over

each ship flying its flag and its master, officers and crew in respect of administrative, technical

and social matters concerning the ship”137; “tak[ing] such measures […] as are necessary to

ensure safety at sea with regard, inter alia, to […] the manning of ships, labour condition [and]

the use of signals, the maintenance of communications and the prevention of collisions”138. In

order to comply with these duties, the flag state needs to have appropriate rights over the

vessel. There are no provisions obliging the coastal state to take over these duties. This would

therefore seem to provide a further indication that for any unit operating as a ship, the flag state

shall retain jurisdiction and obligations onboard, also in the EEZ, and that such units therefore

135 See Section 2.3.1 above, and UNCLOS Art. 58 which applies a number of the freedoms of the high seas also to the EEZ.

136 Unqualified for the purposes considered here, but note that there are certain other provisions affecting the flag state’s exclusive jurisdiction for special cases, for example UNCLOS Art. 109 in relation to unauthorised broadcasting from the high seas.

137 UNCLOS Art. 94(2)(b)

138 UNCLOS Art. 94(3)

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cannot fall under Art. 60/80. Since several of the key obligations of the flag state relates to the

seaworthiness, manning and navigation of ships,139 a natural conclusion may be that for

petroleum vessels which are mobile and navigating, i.e. not moored or otherwise held in a fixed

position, these flag state obligations must remain in force, and thus preclude such vessels from

falling under Art. 60/80.

2.3.3(c) Summary and conclusions

Several international conventions have defined ‘installation’ broadly, even including the

Category C vessels as exemplified above in Section 1.3.1. Similarly, the definition of 'ship' is

generally sufficiently wide to encompass most types of petroleum vessels, including drilling rigs,

at least when in transit.

However, although petroleum vessels may fall under the definition of 'installation' in other

international conventions, these do not have the ‘constructed’ or ‘erected’ language of

UNCLOS140, thus cannot necessarily be employed directly. It would seem that in the context of

Art. 60/80 there needs to be read in some degree of stationary characteristics for a unit to fall

under the definition.

It is further notable that a number of international conventions have distinguished on the type of

activity rather than on specific design features of a unit. Esmaeili (2001) concluded that “The

generally accepted position in international treaties has been to regard oil rigs as ships when

they were navigating from one drilling location to another or when they were carrying rigs or

other offshore facilities, but not when they were operating on location.” In relation to drilling

rigs, the definition adopted in IMO Resolution A.671(16)141 would appear to be an appropriate

one and in line with UNCLOS142, namely that such units are considered vessels when they are

engaged in transit, and installations/structures when drilling on site.

In terms of the other types of vessels exemplified in Section 1.3.1, for those which operate

stationary on site, such as a well intervention ship (see Figure 5; as for a drilling rig, such a ship

will position itself over a well and remain stationary for the well intervention operation), a

similar line of reasoning could be used. Thus, such vessels could be argued to fall under the

definition of installation or structure in Art. 60/80 during such operations, at least where these

operations have some degree of permanency.143

For vessels which are normally not stationary under operation, or which are not interacting

directly with the well or the seafloor, it would seem difficult to argue that they should fall under

139 See UNCLOS Art. 94(3)

140 See Section 2.3.3(a) above.

141 See Section 2.3.3(b)(ii) above.

142 Crucially, Art. 58 UNCLOS, which ensures the freedom of navigation in the exclusive economic zone.

143 However this can clearly not be any length of time operating stationary at one position, as that would apply to all petroleum vessels.

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the definition of installation or structure under UNCLOS Art. 60/80. One practical distinction

could therefore be between installations and structures on the one hand, and units which are

not attached to the seabed144 or which are mobile in their normal mode of operation at sea145 on

the other hand. This would include the Category C vessels in Section 1.3.1, e.g. anchor handling

vessels, emergency response ships and seismic vessels. The conclusion is that such vessels will

not fall under Art. 60/80 UNCLOS.

2.3.4 Rights under Article 81

Finally, UNCLOS Art. 81 provides that “The coastal State shall have the exclusive right to

authorize and regulate drilling on the continental shelf for all purposes.” This would appear to be

even narrower than Art. 56(1)(a) and 77, clearly being aimed at regulatory aspects. It would,

moreover, not seem that the narrower definition in Art. 81 would imply or could be used to

support a broader interpretation of Art. 77, as the latter is limited to exploring and exploiting

natural resources, whereas Art. 81 applies to drilling “for all purposes”. Thus, for the same

reasons as in the previous section, it is concluded that this does not give the coastal state

jurisdiction over foreign vessels operating in this area.

2.3.5 Conclusions, jurisdiction on the EEZ and continental shelf

It has been shown above that most petroleum vessels may be considered to be ships in

international law, also drilling rigs, at least when such are in transit or navigating. UNCLOS Art.

92(1) provides that "[s]hips shall sail under the flag of one State only and, save in exceptional

cases expressly provided for in international treaties or in this Convention, shall be subject to its

exclusive jurisdiction on the high seas.” A ship on the high seas is therefore subject only to the

jurisdiction of the flag state. Art. 58 extends the freedoms of the high seas and internationally

lawful uses of the sea to the exclusive economic zone, but in that case subject to the coastal

state’s rights.146 Thus, the basic premise is that a ship in the EEZ is subject to flag state

jurisdiction only, but with the exception for rights explicitly provided to the coastal state in

international law. (See Section 2.3.1 above.)

Patent law generally has as its objective to stimulate innovation and advance technical

development through providing limited exclusive rights for inventors to their ideas.147 It is not

generally concerned with the authorisation and regulation of activities in the sense that Art.

56(1)(a) and 77 must be interpreted, and particularly so in light of the very clear case law from

the International Tribunal for the Law of the Sea in the Saiga and Virginia G cases. UNCLOS Art.

56(1)(a) and 77 therefore do not empower the coastal state to give national patent law effect in

relation to foreign vessel beyond its internal or territorial waters.

144 "Attached to the seabed" is a key criterion adopted in US national law; see Section 3.2.2(b) below.

145 This was the wording proposed by the United States to the U.N. Seabed Committee in relation to the issue of artificial islands and installations on the continental shelf preceding UNCLOS; see Soons (1974).

146 See e.g. Boczek (2005) at 278.

147 See Section 1.1 above.

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Nevertheless, UNCLOS Art. 60/80 may still apply to those units falling under the definition of

installation and structures in that article. For such units, UNCLOS Art. 60(2) provides the coastal

state with exclusive jurisdiction and full jurisdictional competence to give any national law effect

on such units.

Category Type of unit Characteristics Examples A Fixed or moored

installations Permanently or semi-permanently fixed or moored to the seafloor.

Production platforms, jack-up rigs, drilling vessels.

B Installation / intervention vessels

Temporarily connected to the seafloor or well.

Well intervention or installation vessels.

C Support / supply vessels

Mobile and not interacting with the seafloor or well

Vessels for transport, seismic, emergency response, etc.

In addition to the types of petroleum vessels mentioned in Chapter 1.3.1, as summarised in the

table, it is clear that the type of activity may also play a role in the interpretation of coastal state

rights under UNCLOS. From a practical offshore petroleum context, there would be four key

scenarios that would be relevant: (i) A petroleum vessel navigating in the EEZ, without being

involved in petroleum-related activities. This may be vessels of categories B or C, or movable

units of category A (e.g. jack-up drilling rigs). (ii) A service vessel operating ‘freely’, but in support

of petroleum exploration / exploitation, i.e. category C vessels. (iii) A service or intervention

vessel interacting directly with the well or installations on the seafloor, i.e. category B vessels.

(iv) Rigs or other units placed in position, at least semi-permanently, i.e. category A units when in

operation.

For scenario (i), it is clear that a coastal state does not have authority under international law to

give its legislation effect on board a foreign vessels merely navigating in the EEZ. UNCLOS Art. 58

secures any state the right of navigation in this area148, and the vessel remains under the

exclusive jurisdiction of the flag state. Thus for the question considered here, a coastal state

could not give its patent law effect for such operations.

Equally clear, it would seem, is scenario (iv). For rigs which are placed on the seafloor (e.g. jack-

ups), UNCLOS Articles 60 and 80 clearly give the coastal state authority to apply its laws for

activities taking place on board that rig, UNCLOS even gives the coastal state exclusive

jurisdiction in this case.149 It seems clear that this must also apply to moored, floating units (or

those held semi-permanently in place by other means), not only to such units which rest on the

sea floor. Thus the coastal state may apply its patent law on board such vessel for these

operations.

148 Note that this is not limited to “innocent passage”, as in the territorial sea (see Section 2.2), hence this would apply to any form of navigation, also e.g. between petroleum operating sites in one country’s EEZ.

149 Notably, a necessary implication of this is that a vessel, e.g. a drilling rig, goes from being under the exclusive jurisdiction of the flag state during transit to the site, to being under the exclusive jurisdiction of the coastal state during operations. Thus, in the latter case the flag state will have no rights on board the vessel.

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More unclear are scenarios (ii) and (iii), and the question of where the borderline is drawn for

which units and types of vessels that will fall under UNCLOS Art. 60/80 must be considered

partly unsettled. For 'freely operating' service or support vessels, e.g. ships for emergency

response, transport, or seismic surveying, the coastal state clearly has the right to regulate their

activities150, however UNCLOS or international law do not provide the coastal state with

jurisdiction (i.e. legislative competence) to apply its patent laws on board such vessels.151

On the other hand, intervention or service-type vessels which connect to the wellhead may be

argued to fall under the installation or structure definition in Art. 60/80, and thereby provide the

coastal state with jurisdiction. Such vessels may perform many activities which are

fundamentally very similar to those of a drilling rig, however the length of such operations may

be considerably shorter. Moreover, the nature of the connection to the seabed may vary

significantly; from a 'fixed' connection through a riser and a drill string extending down into the

well, to simply being a ROV152 operated from the vessel briefly engaging a valve handle or a

switch on subsea equipment. With the wide range of vessels and types of activities performed in

offshore oil & gas exploration, it would seem very difficult to arrive at a generic definition of

which such vessels and operations should fall under Art. 60/80.

150 See above, Section 2.3.2.

151 This follows from the fact that these vessels do not fall under Art. 60/80, and that Art. 56(1)(a) and 77 must be construed narrowly, mainly providing authorisation and regulatory rights, and do not provide such legislative competence; see above Sections 2.3.3 and 2.3.2.

152 Remotely operated vehicle, an underwater vehicle with its own propulsion, controlled from the vessel via cable and remote control.

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3 Territorial reach of patents offshore

To what extent do coastal states give national patent law effect in relation to petroleum vessels?

Following from the previous chapter, it is necessary to analyse to what extent states actually do

give patent law effect in 'offshore' matters, and whether these are within the boundaries

permitted by international law. This is done in this chapter, by looking at national law for some

key offshore petroleum producing countries.

3.1 Territoriality of patent law

Patents are generally considered strictly territorial153, hence a patent must be obtained in each

jurisdiction where protective rights are desired and a patent will normally not have effect

beyond the territory of the issuing country. This usually follows directly from the relevant

statute154, and national courts have repeatedly confirmed this fundamental principle,

predominantly considering it as a geographical limitation.155

The question of application of patent law abroad has, however, come up in various

circumstances, in particular relating to international commerce and arguably driven by the

increasingly global marketplace in many industries.156 Also the subject mainly focussed on here,

effect of patents during exploitation of natural resources off the coast of a state, has come up in

a handful of national cases, as will be shown below. Thus, while in principle the territorial reach

of patents is clearfollowing a country’s territorial bordersthere are in practice a number of

circumstances in which these boundaries can be more diffuse.

153 This follows indirectly from Art. 4bis Paris Convention, and established principles. See e.g. Benyamini (1993) who states that “… the universally accepted principle is that patent rights are confined to the territory of the granting state”.

154 E.g. 35 U.S. Code §271(a): “…whoever without authority makes, uses, […], within the United States or imports into the United States […] infringes the patent”; UK Patents Act S.60(1): “… a person infringes a patent [if] he does any of the following things in the United Kingdom…”; and the Norwegian Patentloven equivalently using the term “in this country” (norw.: “her i riket”).

155 The 'territoriality principle' was established already in 1856 by the US Supreme Court in Brown v. Duchesne, 60 U.S. (19 How.) 183, 195 (1856), holding that patent law was “…not intended to operate beyond the limits of the United States”. The Norwegian Høyesterett (Supreme Court) stated in the Akre-Vickery decision that the Patents Act “… is assumed to have a natural territorial limitation” and “… intended to protect the patentee against others exploiting the invention within the borders of this country” (my translations and emphasis).

156 See for example the notable recent US case Transocean v Maersk (617 F.3d 1296, 1308-11), where the Federal Circuit court held that an offer to sell taking place in Norway but contemplating use of the allegedly infringing product in the US constituted infringement of a US patent.

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3.2 Relevant national positions

This section will discuss and summarise national law for three relevant offshore petroleum

related jurisdictions: the United States, Norway and the United Kingdom. Also, national law of

some other relevant countries will be presented in summarised form. The intention is to

establish to what extent these countries give national patent law effect offshore, beyond the

territory and territorial waters, i.e. in the exclusive economic zone and/or the continental shelf.

3.2.1 United Kingdom

The controlling statute is the 1977 Patents Act. The scope of protection of a patent is defined in

Section 60, “Meaning of infringement”, which reads in part (with emphasis added):

(1) […] a person infringes a patent for an invention if, but only if, while the patent is in

force, he does any of the following things in the United Kingdom in relation to the

invention without the consent of the proprietor of the patent, that is to say

(a) [makes, disposes of, offers, uses or imports a patent-protected product];

(b) [uses or offers for use a patent-protected process];

(c) [disposes of, offers, uses or imports a product directly obtained by a patented

process].

Section 132 of the Act explicitly sets out its territorial extent, with S. 132(3) specifying that the

Patents Act applies in UK territorial waters:

For the purposes of this Act the territorial waters of the United Kingdom shall be treated

as part of the United Kingdom.

Thus, any activities taking place in the territorial waters would be treated equivalently to those

onshore.157 Further, the extension of the Patents Act to the UK Continental Shelf is explicitly

provided for in S. 132(4):

This Act applies to acts done in an area designated by order under section 1(7) of the

Continental Shelf Act 1964, or specified by Order under section 10(8) of the Petroleum

Act 1998 in connection with any activity falling within section 11(2) of that Act, as it

applies to acts done in the United Kingdom.

3.2.1(a) Scope of statute law

The designations under the Continental Shelf Act comprise those areas which the UK have

claimed sovereign rights for the exploration and exploitation of natural resources, with the exact

limits having been set out in a number of orders made under Section 1(7) since 1964. The most

recent update is in Statutory Instrument 2013 No 3162: The Continental Shelf (Designation of

Areas) Order 2013. These areas now cover most of the UK continental shelf.158

157 The same would clearly apply to internal waters; see Section 2.2 above.

158 See e.g. http://www.dbd-data.co.uk/bb2001/uk.htm for a graphical overview.

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The provision in S. 132(4) that the Patents Act further covers an area specified by Section 10(8)

of the Petroleum Act 1988 goes even further than this: Section 10(8) provides that an order may

specify an area which “[…] (a) is in a foreign sector of the continental shelf; and (b) comprises

any part of a cross-boundary field […]”. (My emphasis.)

3.2.1(a)(i) First alternative: area designated under the Continental Shelf Act

1964

The first alternative in S. 132(4) is notable in that it covers any act "[…] done in an area

designated by order under section 1(7) of the Continental Shelf Act 1964 [..]".159 Hence, the

clause gives UK patent law general effect on the UK continental shelf for all purposes, i.e. not

restricted, for example, to activities related to natural resources exploration or exploitation. This

is clearly contrary to international law, among other things the freedom of navigation or laying

of submarine cables and pipelines under UNCLOS Art. 58, since the coastal state does not have

any territorial-type jurisdiction to apply national law in this area.160

It appears that this effect was unintended and introduced by error during amendment of the

Patents Act. The original, enacted, version of the 1977 Patents Act read:

This Act applies to acts done in an area designated by order under section 1(7) of the

Continental Shelf Act 1964, in connection with the exploration of the sea bed or subsoil or

exploitation of their natural resources, as it applies to acts done in the United Kingdom.

I.e., the originally enacted statute included a qualification that the Act only applied to activities

relating to natural resources exploration and exploitation. The current wording (see above) is a

result of amendment enacted through the Oil and Gas (Enterprise) Act 1982 (see Sch. 3 para.

39), and subsequently through the Petroleum Act 1998 (see Sch. 4 para. 14).

Clearly, the Oil and Gas (Enterprise) Act 1982 and Petroleum Act 1998 were not intended to

make material changes to UK patent law, and certainly not to radically expand its application

beyond petroleum-related matters. Rather, these amendments were made to align the Patents

Act to developments in UK’s petroleum legislation. The legislative intent therefore appears to be

that this clause shall apply only “[…] in connection with the exploration of the sea bed or subsoil

or exploitation of their natural resources […]”. For this reason, it seems probable that the first

alternative in S. 132(4) must be interpreted in light of this, as the alternative would go so clearly

against the UK’s international obligations under UNCLOS as to be untenable.

3.2.1(a)(ii) Second alternative: order under the Petroleum Act 1988

For the second alternative in S. 132(4), i.e. areas specified under the Petroleum Act 1988, the

application of the Patents Act is limited to certain activities only. This activity qualifier is based

159 Under normal rules of punctuation, the later, qualifying clause, […] in connection with any activity […], would apply only to orders under the Petroleum Act 1988.

160 See Section 2.3.1 above. Art. 58 applies a number of the freedoms of the high seas to the exclusive economic zone.

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on Section 11(2) of the 1998 Petroleum Act, which specifies the activities relevant for this

provision as:

(a) activities connected with the exploration of, or the exploitation of the natural

resources of, the shore or bed of waters to which this section applies or the subsoil

beneath it; and

(b) without prejudice to the generality of paragraph (a), activities carried on from, by

means of or on, or for purposes connected with, installations to which subsection (3)

applies.

The referenced 'subsection (3)' specifies, broadly speaking, any installation for the exploitation,

exploration, storage or transport of mineral resources, and the provision of accommodation for

persons who work on or from such installations. “Installation” is defined in the Act as including

“any floating structure or device maintained on a station by whatever means”. However, due to

the generality of 11(2)(a), the more limited subsection (b) would be less relevant here.

Equivalently to the provision based on the Continental Shelf Act 1964 (see above), this gives

national patent law effect in these areas for all petroleum-related activities on or above the UK

continental shelf. This means that UK patents is given effect on, e.g., petroleum vessels under

foreign flag, navigating above the UK continental shelf.

As to the potential effect of section 10(8) of the Petroleum Act 1998, whereby an area in a

foreign sector of the continental shelf can be specified and on which UK patent law is given

effect, this would undoubtedly go beyond that permitted under international law (in the

absence of an agreement with the foreign state in question).161

3.2.1(a)(iii) Legislative basis and history

The provision that UK patent law should apply offshore, i.e. in the exclusive economic zone and

on the continental shelf, was introduced in the 1977 Patents Act; the preceding 1949 Patents Act

had no equivalent provision.

The Bill incorporating the provision which would become Section 132(4) does not appear to have

been subject to extensive debate by the UK lawmaker. The provision was adopted based on the

fact that the then-signed (but subsequently never ratified) 1975 Community Patent Convention

(CPC)162 comprised an equivalent provision. As per the House of Lords debate,

so far as an area designated under the Continental Shelf Act is concerned, a Community

patent will have effect in such an area, by virtue of Article 97(8) of the Community Patent

161 It is unknown to the author whether any such designations have been made.

162 76/76/EEC: Convention for the European patent for the common market (Community Patent Convention), available at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:41975A3490

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Convention. For these reasons it is desirable that the Bill should apply directly in the two

cases concerned […; the second case being the UK territorial waters]163

The apparently only reservation was voiced by Lord Lloyd of Kilgerran,164 noting that

[i]t is not […] merely a matter of exercising jurisdiction over inventions used on the oil

rigs. It may also apply presumably to foreign ships involved in the exploitation or

exploration of the Continental Shelf. For instance, if a foreign ship is engaged in pipe

laying, inventions involving the making of joints, valves and so on, may be exercised on

board; but would it not be preferable to eliminate this clause from the Bill and wait until

there has been an agreement within the EEC countries on what may be a troublesome

matter?

This concern was seemingly not further discussed, and the provision does not appear to have

been subject of debate in the House of Commons.

The Community Patent Convention did, indeed, include a provision regarding the effect of

coastal state patents offshore, with Art. 97(8) providing that

FOR THE PURPOSES OF IMPLEMENTING THIS CONVENTION , THAT PART OF THE

CONTINENTAL SHELF ADJACENT TO A TERRITORY [of a signatory state] SHALL BE

DEEMED TO BE INCLUDED IN THIS TERRITORY, WITHIN THE LIMITS OF THE SOVEREIGN

RIGHTS OF COASTAL STATES AS LAID DOWN IN THE GENEVA CONVENTION ON THE

CONTINENTAL SHELF OF 29 APRIL 1958 , OR ANY OTHER CONVENTION AMENDING OR

REPLACING THAT CONVENTION FOR THE CONTRACTING STATES .

However, and notably, the latter part of Art. 97(8) CPC explicitly limits the effect of coastal state

(community) patents to that permitted under the International Law of the Sea. (At that time, the

1958 Geneva Convention on the Continental Shelf, which would be superseded by UNCLOS of

1982.) As shown above, no such qualification is provided in the UK Patents Act 1977.

It is unclear whether the UK lawmaker consciously adopted a wording of Section 132(4) of the

Patents Act which is broader than the provision in the CPC on which it was based. It would

appear that the intention was to adopt an equivalent provision, and that any non-compliance

with international law would have been unintended.

3.2.1(b) Relevant case law

There are not many UK cases which have considered Section 132(4) of the Patents Act. In

Rockwater v Coflexip165, the extension under Section 132(4) to cover offshore oil fields on the UK

continental shelf was not discussed or disputed. However, the infringement related to the use of

a patented invention on the ship Toisa Perseus which, at the time of the alleged infringement,

163 See Hansard, HL Deb 29 March 1977 vol. 381 cc 815-80.

164 See Hansard, HL Deb 24 January 1977 vol. 379 cc 234-315.

165 Rockwater Ltd v Coflexip SA [2003] EWHC 812 (Pat)

48

appears to have flown UK flag.166 Thus, UK law would probably have been directly applicable

anyway through the flag state jurisdiction, and, if that was the case, there would have been no

need for the court to consider the scope of S. 132(4) or reasons for the parties to challenge it.

Equivalently, in Texas Iron Works Inc.’s Patent,167 the Court of Appeal stated that “[f]or this

purpose, the United Kingdom is taken to include territorial waters and any area designated under

section 1(7) of the Continental Shelf Act 1964 or section 22(5) of the Oil and Gas (Enterprise) Act

1982: cf. section 132 of the Patents Act 1977.” The scope of application of the UK Patents Act

adopted by the court was not challenged.

3.2.1(c) Conclusions, effect of UK patent law offshore

Independent of the detailed interpretation of S. 132(4) of the 1977 Patents Act (i.e. whether the

clause must be qualified to only apply to activities relating to natural resources exploration or

exploitation; see Sections 3.2.1(a)(i) and 3.2.1(a)(ii) above), it is clear that UK patent law goes

beyond what is permitted under international law.

As shown above (see Section 2.3.5), a coastal state is only entitled under international law to

give national law effect on board foreign vessels in the exclusive economic zone and on the

continental shelf in limited circumstances. Current UK patent law is applied to any petroleum-

related activity offshore, and this will include a number of activities carried out on board foreign

vessels on which the UK cannot legally assert jurisdiction to the extent of giving patent law

effect; see, for example, the Category C vessels above (Section 1.3.1(c)).

In the United Kingdom, the dualist view is predominant,168 hence the fact that UK law extends

beyond what is permitted under UNCLOS would not change the scope or interpretation of the

UK statute.

Incidentally, it would seem that if the entire S. 132(4) of the Patents Act were limited by Section

11(2)(b) of the 1998 Petroleum Act (i.e. the less general, narrower clause), this would bring UK

patent law well aligned with international law in its scope of application. (See Section 2.3.5

above.) This would limit its application to activities relating to specific types of installations on

the continental shelf.

3.2.2 United States

In US law, patent infringement is defined in 35 U.S. Code § 271 – “Infringement of patent”:

(a) Except as otherwise provided in this title, whoever without authority makes, uses,

offers to sell, or sells any patented invention, within the United States or imports into the

166 According to the author’s findings, and based on the DNV Exchange Vessel Info database, available at: https://exchange.dnv.com/exchange/main.aspx

167 Texas Iron Works Inc.’s Patent [2000] RPC 207

168 See, for example, House of Lords in Australia & New Zealand Banking Group Ltd et al. v. Australia et al., ILM 29 (1990), where Lord Oliver of Aylmerton noted that “[t]reaties, as it is sometimes expressed, are not self-executing. Quite simply, a treaty is not part of English law unless and until it has been incorporated into the law by legislation.”

49

United States any patented invention during the term of the patent therefor, infringes

the patent.

[…]

(c) Whoever offers to sell or sells within the United States or imports into the United

States a component of a patented machine, manufacture, combination or composition,

or a material or apparatus for use in practicing a patented process […] shall be liable as a

contributory infringer.

In addition, 35 U.S. Code § 271 (f) and (g) define that a person shall also be liable as an infringer

if he:

[Supplies] in or from the United States all or a substantial portion of the components of a

patented invention […],

[Supplies] in or from the United States any component of a patented invention that is

especially made or especially adapted for use in the invention […], or

[…] imports into the United States or offers to sell, sells, or uses within the United States

a product which is made by a process patented in the United States

3.2.2(a) "Within the United States"

The territoriality principle of patents is well-establied in US law; the presumption that U.S.

patents "do not, and were not intended to, operate beyond the limits of the United States" was

established by the U.S. Supreme Court already in 1856.169 In a recent decision, Microsoft v.

AT&T, the same court upheld the "presumption that United States law governs domestically but

does not rule the world applies with particular force in patent law".170 This has been followed by

lower courts; citing precedent, the court in WesternGeco171 noted how "[w]ithouth express

statutory instruction, courts are reluctant to extend the geographical reach of a patent right".

The term “United States” is defined in the patent statute to include the “United States of

America, its territories and possessions”.172 This wording was taken up in the statute text in 1952

to replace the previous “United States and the Territories thereof”.173 Federico (1993) stated in

this respect that “[…] the territorial scope of the patent is now more broadly and more definitely

stated”, however little further background can be found for this choice of wording. The notes in

the legislative history provide no further guidance, except that the definition “was added to

169 Brown v. Duchesne, 60 U.S. (19 How.) 183, 195 (1856).

170 Microsoft v. AT&T, 550 U.S. 437, 441 (2007). For commentary, see e.g. Fernandes (2008) and DeFranco (2006).

171 WesternGeco L.L.C. v. Ion Geophysical Corp. Case No. 4:09-cv-01827. US District Court, S.D. Texas (2011).

172 35 U.S.C. § 100(c)

173 Federico (1993)

50

avoid the use of long expressions in various parts of the revised title”.174 Winston (2015) noted

the “[…] ambiguity inherent in defining the United States patent boundaries only as ‘the United

States of America, its territories and possessions’” when Congress does not further delineate the

physical aspects of these.

While the meaning of the terms ‘United States’ and ‘its territories’ would be relatively clear by

their plain wording as areas where the United States has territorial sovereignty,175 the term

‘possessions’ would require further analysis. There is no explanation given for the use of the

word in the statute.176 In WesternGeco, the court noted that

“[a]ll we can gather from the legislative history is that the term ‘possessions’ was an

affirmative addition to the statutory language. As such, it must be given a definition separate

and distinct from that of ‘territory’”.

However the court did not arrive at a specific definition of the term 'possessions'.

The closest definition from separate legislation is from 48 U.S. Code, which defines “Territories

and Insular Possessions” as including, among others, Puerto Rico, the US Virgin Islands, Guam,

and American Samoa. Winston (2015) noted how, in this context, other case law had treated

guano islands as 'possessions' of the United States,177 and concluded that

[…] the United States patent boundaries extend to all United States possessions, guano islands

that may yet be discovered, and territories, including “the Commonwealth of Puerto Rico, the

United States Virgin Islands, American Samoa, Guam, and the Northern Mariana Islands.

There does not appear to exist any more specific interpretation of the term, and the question of

what is the exact scope of 'United States possessions' for the purpose of US patent law must be

considered to be unsettled.

3.2.2(b) Effect in exclusive economic zone / on continental shelf

In relation to offshore activities, the US Outer Continental Shelf Lands Act (OCSLA)178 provides

that

174 Winston (2015)

175 “US territories” are considered to mean overseas territories, such as Puerto Rico, Midway Islands and American Samoa, which are not part of the United States as such; see United States v. Courtney, 240 F.Supp. 2d 1038, 1048-1049 (W.D. Mo. 2002).

176 Winston (2015)

177 Guano is "a natural manure composed chiefly of the excrement of sea birds, found especially on islands near the Peruvian coast", see http://www.dictionary.com. 48 U.S. Code Ch. 8 (the Guano Islands Act) provides that "[w]henever any citizen of the United States discovers a deposit of guano on any island, rock, or key, […] such island, rock, or key may, at the discretion of the President, be considered as appertaining to the United States."

178 43 U.S.C. § 1333(a)(1)

51

[t]he Constitution and laws and civil and political jurisdiction of the United States are

extended to the subsoil and seabed of the outer Continental Shelf and to all artificial

islands, and all installations and other devices permanently or temporarily attached to

the seabed, which may be erected thereon for the purpose of exploring for,

developing, or producing resources therefrom, or any such installation or other device

(other than a ship or vessel) for the purpose of transporting such resources, to the same

extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction

located within a State […]

A key consideration during the drafting of the bill was that "governance of the civil and criminal

activities of thousands of expected platform workers was a must"179 Thus, for activities on the

continental shelf US law applies in its entirely, including patent law. A literal reading of the

above statute wording would appear to suggest that for installations and other devices it would

be a requirement that they be both (i) permanently or temporarily attached to the seabed, and

(ii) erected thereon for the purpose of exploring or exploiting natural resources. This may raise

questions as to whether, for example, a drillship is erected on the continental shelf. This was

however addressed in Demette v. Falcon Drilling180, finding that the legislative history of the Act

expressly states an intention to include “drilling ships, semi-submersible drilling rigs, and other

water craft, when they are connected to the seabed by drill string, pipes, or other appurtenances

on the OCS for exploration development or production purposes” within this provision. Similarly,

U.S. courts have held that "a vessel ceases to be a vessel the moment it attaches itself to the

Shelf".181 Also, 33 CFR 140.10 specifies “Outer Continental Shelf facility” as meaning “[…] any

artificial island, installation, or other device permanently or temporarily attached to the subsoil

or seabed of the Outer Continental Shelf, erected for the purpose of exploring for, developing, or

producing resources therefrom […]”, and that ”[this] term includes mobile offshore drilling units

when in contact with the seabed of the OCS for exploration or exploitation of subsea resources.”

Thus, it appears clear that the distinction is on whether there is a connection to the seabed, and

that US patent law will have effect for all such 'connected' vessels or installations.

The OCSLA expressly provides that it “[…] shall be construed in such a manner that the character

of the waters above the outer Continental Shelf as high seas […] shall not be affected”182. Thus,

the above provision would not apply in general to the EEZ and vessels operating there. In

WesternGeco183, the court was faced with this situation. The case related to the use of seismic

streamers deployed behind ships to explore subsurface natural resources,184 and the particular

179 Costonis (2011) at II.C. See also, generally, Wicker (1969).

180 Demette v. Falcon Drilling Co. 280 F.3d 492, 496 (5th Cir. 2002).

181 EEX Corp. v. ABB Vetco Gray, Inc. 161 F.Supp. 747, 751 (S.D. Tex. 2001)

182 43 U.S.C. § 1332(2)

183 WesternGeco, see note 171 above .

184 See an example of a seismic vessel in Section 1.3.1(c) above.

52

activities in question had taken place in the Chukchi Sea, above the outer continental shelf off

the coast of Alaska and within the EEZ of the United States.

It was clear that this activity had not taken place in the United States. The court’s analysis turned

on the wording in the statute and whether the Chukchi Sea could be considered the territory or

a possession of the United States. It noted that the Presidential Proclamation establishing the US

EEZ expressly stated that “[…] the Exclusive Economic Zone remains an area beyond the territory

and territorial sea of the United States […]”, and that “[c]ustomary international law and

UNCLOS reaffirm the principle that a country’s EEZ retains its character as outside the territory of

that country […]”.185 The question of whether the EEZ would be a possession of the United States

was also dismissed, the court noting the lack of a specific definition of this term but nevertheless

finding that the limited control over certain economic activity in the EEZ did not amount to the

EEZ being considered a possession of the US.186

In further support of its findings, the court noted the strong judicial reluctance to extend the

geographic reach of patent rights without express statutory instruction and acknowledged that

“… a loophole would appear to exist here…”, however that this loophole would be for congress

to close and “[…] extend the reach of U.S. patent law […] as countries such as Australia and

United Kingdom have done”.187 The characterisation by the judge as “a loophole” is interesting,

considering that customary international law and UNCLOS had been considered by the court. As

shown above (see Section 2.3.5), the rights afforded to coastal states under the international law

of the sea would preclude “closing” of the loophole and give national patent law effect in the

way that Australia and the United Kingdom have done.188 Clearly, the US Congress has the power

to interpret and implement international law into US legislation, however it would appear that

current US statute law closely follows international law in this question. In practice, the

requirement for an “attachment to the seabed” closely follows, and will give an effect very

similar to, the distinction between “installations and structures” and other units or activities in

UNCLOS.189

3.2.2(c) Conclusions, effect of US patent law offshore

Based on the above, it is clear that US patent law has effect on vessels used in petroleum-related

activities on the continental shelf in cases where the vessel is attached to the seabed, but not on

vessels in the EEZ or above the continental shelf where there is no connection to the seabed.

Clearly, this would be relevant for a number of petroleum vessel types, in particular service-type

ships (as exemplified in Category C in Section 1.3.1(c)). Activities on a foreign ship of this type in

the EEZ would thus not be affected by a US patent, as was held by the WesternGeco court. As

185 Case Document 144 at pages 37-38.

186 Case Document 164 at pages 8-20.

187 Case Document 144 at pages 40-41.

188 See Sections 3.2.1 and 3.2.4(a) for a discussion on national law in these countries.

189 Art. 60/80 and 56(1)(a)/77 UNCLOS; see Sections 2.3.2 and 2.3.3 above.

53

noted above, there may exist cases in a grey area between these definitions. For example, the

distinction on “attached to the seabed” may be an artificial one between vessels which are

conventionally moored (i.e. ‘attached’) and a vessel carrying out the same function but using

dynamic positioning190 to remain in place. Nevertheless, the requirement for a 'connection to

the seabed' provides a clear delimitation of the scope of US patent law offshore, which for most

practical purposes would be unambiguous. As noted above, the concept that units operating

above the continental shelf comes under US jurisdiction when connected to the seabed is well-

established and should therefore not present any problems particular to patent law.

This, and the result reached by the WesternGeco court, appears to be very well aligned with the

boundaries of international law, as presented above in Section 2.3.5. The requirement for a

'connection to the seabed' would seem to justify a classification of such units as 'installations

and structures' and therefore permit the application of national law in relation to these units

(see Section 2.3.3(c) above). Unlike what the WesternGeco court noted, that “[…] a loophole

would appear to exist here […]”, it seems that US law is very much in line with the boundaries of

international law and UNCLOS on the matter of coastal state law effect offshore. Closing this

alleged loophole in US patent law would be contrary to international law, as the coastal state

does not have jurisdiction to apply its patent laws in relation to, for example, the seismic

activities which were the basis of that dispute.191

3.2.3 Norway

The Norwegian Patents Act (Patentloven) uses the term "in this country" (norw.: her i riket); its

geographical scope is however not specified further in the statute. The generally accepted

interpretation of her i riket is that it encompasses only Norwegian territory (i.e. land and sea

territory).192 The Norwegian Supreme Court (Høyesterett) applied the same interpretation in

Akre-Vickery, 193 holding that the Patents Act “… is assumed to have a natural territorial

limitation” and is “… intended to protect the patentee against others exploiting the invention

within the borders of this country” (my translations and emphasis). This is also the accepted

position in legal theory.194

The Norwegian Petroleum Act Section 1-5 however extends the application of Norwegian law (in

general) to all petroleum-related activities on the continental shelf, with the exception of

transport of petroleum in bulk by ship, unless otherwise provided for by national law/regulation,

international law, or agreement with a foreign state. An exception to this, however, follows in

Section 1-5, second paragraph:

190 Dynamic positioning is a computer-controlled system to automatically maintain a vessel's position and heading by using its own propellers and thrusters.

191 See Section 2.3.5 above.

192 Matningsdal (2005).

193 Akre-Vickery. Rt. 1933, p. 529. The dispute related to an allegedly infringing product which was manufactured abroad and sold abroad, not having been with Norwegian borders at all.

194 See Stenvik (2006).

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[…] other Norwegian law [than the Petroleum Act itself] shall not apply to mobile

facilities under foreign flag other than those that are permanently placed, unless

otherwise stipulated by an Act or by a decision made by the King in Council.

Through the Petroleum Act, Norwegian patent law would therefore have effect offshore (in the

exclusive economic zone and on the continental shelf), unless the particular activity or unit is

covered by one of the exceptions.

What is meant by ‘facility’ is defined in Section 1-6 of the act as “installation, plant and other

equipment for petroleum activities, however not supply and support vessels or ships that

transport petroleum in bulk. Facility also comprises pipeline and cable unless otherwise

provided.”

From the wording, the statute differentiates between two criteria, namely facilities that are: (1)

permanently placed or not permanently placed, and (2) mobile or not mobile. The exception

would only apply to the combination of not permanently placed and mobile195, and only for such

facilities that are under foreign flag. For all other categories, the Norwegian Patents Act would

apply automatically.

The reference in the exception to “foreign flag” would further indicate that this is aimed to apply

predominantly to vessels, however not to those excluded from the definition of ‘facility’, i.e.

supply and support vessels196 and ships that transport petroleum in bulk. As these are “excepted

from the exception”, this would mean that the Patents Act (and other Norwegian law)

automatically would have effect on such vessels and ships under Section 1-5 of the Petroleum

Act. This effect was criticised by Rostveit (2009), who noted that such vessels, for example

seismic ships, may not fall under UNCLOS Art. 60/80, and therefore UNCLOS would not give the

coastal state basis to exercise full jurisdiction in relation to these197.

The legal tradition in Norway is generally dualist,198 however Norway operates what is known as

“sector monism” in which the national implementation of a treaty may include a clause as to

how that law shall be interpreted in relation to the treaty in question. The Petroleum Act

195 The preparatory works to the Norwegian Petroleum Act state that movable, not permanently placed facilities are meant to include drill ships, drilling rigs, floatels (offshore accommodation units), workshop platforms, pipe laying vessels, etc. See Odelstingsproposisjon no. 72 (1982-1983).

196 As per the preparatory works, examples of this include emergency response vessels, anchor handling vessels, construction, completion or repair vessels, or seismic ships. See Odelstingsproposisjon no. 43 (1995-1996).

197 See Sections 2.3.2 and 2.3.3 above.

198 This does not follow explicitly from statute but follows indirectly from various provisions in the Norwegian Constitution. This is most commonly exemplified by the Supreme Court judgement in Finanger I (Rt. 2000, p. 1811), in which there was a clear conflict between an EU/EEA directive and the corresponding domestic law implementation due to a misinterpretation by the Norwegian Government. The Supreme Court gave precedence to the Norwegian legislation even though it was in conflict with EEA legal provisions that Norway was bound to respect, because they had not been properly transposed into Norwegian law

55

contains such a clause, namely that Norwegian law shall not be given an effect that goes beyond

that permitted by international law. On this basis, Rostveit concludes that Norwegian patent law

nevertheless would not have effect on such vessels unless they fall under Art. 60/80 UNCLOS.

What is meant by “permanently placed” was also discussed in the preparatory works for the

Norwegian Petroleum Act (see footnote 195), where it was stated that it was not sufficient that

a movable facility be placed in a given position over a longer period for it to be considered

permanently placed. However, if the facility is built for the purpose of servicing a certain

petroleum field, or if it is placed for service over the majority of a field’s lifetime, then it would

be considered permanently placed. Thus, in the current context it would seem that the

requirement of “not permanently placed” in the exception in Section 1-5, second paragraph, is

not of material significance.

For facilities that do fall under the exception, i.e. those that are mobile, not permanently placed,

and not a supply, support or bulk transport vessel under Section 1-6, other Norwegian law does

not apply unless provided for in the act itself, other law, or by a decision by the King in Council.

The Norwegian Patents Act does not contain any such provision.199 Thus, Norwegian patent law

would therefore not automatically apply to this type of vessels. This is significant because this

exception would encompass a number of vessel types, a notable example being drilling rigs, of

which many would typically sail under foreign flag.200 In summary, and again referring back to

the example vessels in Section 1.3.1, Norwegian patent law would apply only to certain types of

Category A units, i.e. those which are permanently placed (in practice, those units known as 'oil

platforms').

It is notable that Norwegian law according to the above goes significantly shorter than what

would be permitted under international law. As discussed in Section 2.3.3 above, there is clearly

basis in UNCLOS to give Norwegian patent law, and thereby Norwegian patents, effect on

installations on the continental shelf or in the exclusive economic zone, even if not permanently

placed. However it is plausible that this is a desired position in light of Norway's being a large

flag state; Brunsvik (1977) noted how the Norwegian maritime law commission advised that the

Norwegian government "show caution in terms of regulating matters on board foreign drilling

platforms on the Norwegian continental shelf. Otherwise one cannot expect that foreign coastal

states will respect the Norwegian flag." (My translation.)

3.2.4 Further countries' positions

Clearly, the above investigation can be carried out for numerous other countries in addition to

those discussed above. In this section, some other relevant countries' positions will be

summarised for comparison, and predominantly based on the law text and without going into

detail. The countries below are relevant because they, like the US, the UK and Norway, have

significant offshore petroleum-related activities.

199 Rostveit (2009), Stenvik (2006)

200 A rough estimation made by the author on drilling rigs operating on the Norwegian continental shelf indicates that only 6 out of 37 rigs sail under Norwegian flag. (Data per Oct 2014, from offshore.no rig database, available at http://www.offshore.no/Prosjekter/riggdata.aspx.)

56

3.2.4(a) Australia

The Australian Patents Act 1990 defines the scope of that act positively in Section 12 as

extending to: (a) each external Territory; and (b) the Australian continental shelf; and (c) the

waters above the Australian continental shelf; and (d) the airspace above Australia, each

external Territory and the Australian continental shelf.

Section 13 of the same act further specifies that “A patent has effect throughout the patent

area” and ‘patent area’ is defined to mean: (a) Australia; and (b) the Australian continental shelf;

and (c) the waters above the Australian continental shelf; and (d) the airspace above Australia

and the Australian continental shelf. The definition of the ‘continental shelf’ for the purpose of

the Patents Act follows from Section 3(1) of the Australian Sea and Submerged Lands Act 1973,

which adopts the definition of UNCLOS directly, so that "continental shelf has the same meaning

as in paragraph 1 of Article 76 of the Convention."

From this it follows that Australia has given its patent law full effect on the continental shelf,

equivalently to on Australian territory. This position is similar to that of the UK, and, for the

same reasons as outlined in 3.2.1 above, appears to be contrary to international law.

3.2.4(b) Canada

The Canadian Oceans Act Section 20(1) provides that:

"[…] federal laws apply […] on or under any marine installation or structure from the time

it is attached or anchored to the continental shelf of Canada in connection with the

exploration of that shelf or the exploitation of its mineral or other non-living resources

until the marine installation or structure is removed from the waters above the

continental shelf of Canada […]"

The 'attached to the continental shelf' requirement is equivalent to the US position (see Section

3.2.2 above) and well-aligned with international law, but with the additional provision that

national law applies 'until the marine installation or structure is removed from the waters above

the continental shelf of Canada'. This produces the notable effect that a unit, for example a

drilling rig, would not be subject to Canadian law when navigating into location to carry out an

operation, but would be after having left the location and during navigation to a different

location or away from Canada's continental shelf.

As noted above (see Section 2.3.5), the coastal state does not have jurisdiction under

international law to give national law effect on vessels navigating in this area. Thus it would

seem that this particular provision goes beyond that permitted under international law.

However, Section 20(2) of the same act provides that "[…] federal laws shall be applied "[…]in a

manner that is consistent with the rights and freedoms of other states under international law

and, in particular, with the rights and freedoms of other states in relation to navigation and

overflight." The latter may provide a defence against the application of Canadian patent law in

relation to navigating vessels above its continental shelf.

3.2.4(c) The Netherlands

The Dutch Patents Act of 1995 provides in its Art. 74 that it:

57

"[…] shall also apply in, on and above that part of the continental shelf contiguous to the

Netherlands or the Netherlands Antilles […] over which the Kingdom has sovereign rights,

but exclusively to the extent that such acts are associated with and are performed during

exploration for or the recovery of natural resources."

Unless further qualified elsewhere, the requirement for only an 'association' with natural

resources exploration or recovery would give the same effect as the UK law (see Section 3.2.1),

thus giving patent law effect beyond that permitted under international law.

3.2.5 Summary on national positions

It can be seen from the preceding sections that national law varies in terms of how it deals with,

and determines, the effect of patent law beyond internal and territorial waters. In the case of

UK, Australia and the Netherlands, the geographical scope of the patent law is defined positively

in the statute itself, thus it is uncomplicated to establish the lawmaker’s intention. In the case of

Norway and USA, the scope of patent law is determined indirectly through other statute

regulating the applicability of national civil law in offshore areas.

There are also significant variations in the scope of application of patent law in these areas. UK

law (and, apparently, also Dutch and Australian law) gives patents and patent law general effect

on and above the continental shelf (or even beyond that), which, I argue, goes beyond what is

permitted under international law and UNCLOS. US law appears to be very much in line with

UNCLOS, as is Canadian law. Norwegian law provides that the statute shall be interpreted in light

of international law, and is therefore aligned with UNCLOS, however seems to give Norwegian

patent law a markedly narrower scope of application that what would be permitted under

international law.

These varying national positions do create uncertainty for technology developers and operators.

In some cases, there may be a question of to what category a unit or a vessel would belong. I.e.

for the US case, how far would the “attached to the seabed” requirement reach, while in

Norway the differentiation would be on whether or not something is ‘mobile’ and ‘permanently

placed’. In other cases, such as the UK, Australia or Netherlands, there may be questions as to

whether the law can be given its full effect in light of international law or whether, for example,

an argument that the law is contrary to the coastal state's international obligations could be

brought as a defence by someone adversely affected by these provisions.

Category Type of unit Characteristics Examples A Fixed or moored

installations Permanently or semi-permanently fixed or moored to the seafloor.

Production platforms, jack-up rigs, drilling vessels.

B Installation / intervention vessels

Temporarily connected to the seafloor or well.

Well intervention or installation vessels.

C Support / supply vessels

Mobile and not interacting with the seafloor or well

Vessels for transport, seismic, emergency response, etc.

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With reference to the example vessel types described in Section 1.3.1, Table 3 shows an

overview and summary of the extent to which national patent law has been given effect on

certain types of vessels and units in the exclusive economic zone and on the continental shelf.

The table also shows, based on the analysis presented in Chapter 2, the extent to which the

coastal state is permitted under international law to give patent law effect in relation to these

vessels and units.

Category A Category B Category C Production

platform Mobile

drilling rig Well service / intervention

Pipelaying vessel

Service / transport

Seismic vessel

a

Coastal state jurisdiction

under UNCLOS?

b

Table 3 National patent law effect offshore for a vessel under foreign flag.

The evaluations shown in Table 3 are based on the analysis presented above, and for some of

these there may be some uncertainty. The most notable are denoted with subscripts in the table

and include: (a) The interpretation of the US requirement of an 'attachment to the seafloor' in

relation to certain vessels which would seem to fall in a grey area in this respect, such as

pipelaying vessels (see Section 3.2.2 above); and (b) The exact scope of the 'installations and

structures' wording of UNCLOS and whether certain vessels which would normally be classified

as ships but are operating semi-permanently on site would fall under this category (see Section

2.3.3(c) above).

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4 The temporary presence exception

If national patent law has effect for the relevant operation, can a petroleum vessel claim defence under the Paris Convention’s “temporary presence exception”?

The Paris Convention for the Protection of Industrial Property, first signed in Paris in 1883,

currently has 173 contracting members, including practically all industrialised countries. For the

maritime industry, the Paris Convention provides an important exception in its Article 5ter,

which is that, generally speaking, a patent in a member country cannot be enforced against a

visiting ship belonging to another member country. (There are also similar provisions for aircraft

and land vehicles.) The actual wording of Article 5ter of the Paris Convention is:

In any country of the Union the following shall not be considered as infringements of the

rights of a patentee:

(i) the use on board vessels of other countries of the Union of devices forming the subject

of his patent in the body of the vessel, in the machinery, tackle, gear and other

accessories, when such vessels temporarily or accidentally enter the waters of the said

country, provided that such devices are used there exclusively for the needs of the vessel;

[…].

The provision is generally adopted in national statute law more or less verbatim, e.g. UK Patents

Act S. 60(5):

An act which, apart from this subsection, would constitute an infringement of a patent

for an invention shall not do so if […]

(d) it consists of the use, exclusively for the needs of a relevant ship, of a product or

process in the body of such a ship or in its machinery, tackle, apparatus or other

accessories, in a case where the ship has temporarily or accidentally entered the internal

or territorial waters of the United Kingdom;

Similarly, 35 U.S. Code § 272 codifies the temporary presence exception similarly, but without

the “structure” language,201 provides that

[t]he use of any invention in any vessel, aircraft or vehicle of any country which affords

similar privileges to vessels, aircraft or vehicles of the United States, entering the United

States temporarily or accidentally, shall not constitute infringement of any patent, if the

invention is used exclusively for the needs of the vessel, aircraft or vehicle and is not

offered for sale or sold in or used for the manufacture of anything to be sold in or

exported from the United States.

201 I.e. “in the body of the vessel, in the machinery, tackle, gear and other accessories”. As will be discussed below (see Section 4.2.3), this difference is probably unimportant for the purposes considered here.

60

Other national law uses very similar wording.202

4.1 Background and scope of application

The above provision of the Paris Convention was taken up in 1925203 however the question of

patent infringement on foreign, visiting vessels had come up before national courts even long

before that. Already in 1851, an English decision204 holding that a patent could be enforced

against a foreign vessel had been deemed so inconvenient that a statute was promptly passed

declaring that such use shall not be prevented by a UK patent205. In the US, the Supreme Court,

in 1857, came to the same conclusion, holding that a patent for an improvement in the

construction of the gaff in sailing vessels could not be enforced against a French schooner

visiting a US port.206 Nevertheless, only a handful cases exist which have considered the

temporary presence exception; for example the Stena207 case from 2003 was the first UK case

which had to interpret the meaning of “temporary or accidental” entry under this provision,208

and the first time the US Court of Appeals for the Federal Circuit had to deal with this provision

was in 2004.209

The exception has the objective to ensure that territorial patent rights do not hinder

international commerce and that private citizens do not have the power to interfere with foreign

trade, thus ensuring “… the public interest in maintaining freedom of transport”.210 The

temporary presence exception “provides for certain limitations on the exclusive rights conferred

by a patent in cases where the full exercise of such rights would cause too much prejudice to the

public interest in maintaining freedom of transport. Its effect is, in principle, that if ships. aircraft

or land vehicles temporarily visit foreign countries, their owners are not required to obtain

licenses on patents in force in these countries in order to avoid infringing such patents.”211

202 See, for example: German Patents Act S. 11(4); Norwegian Patents Act § 5; Dutch Patents Act S. 54(a); Danish Patents Act S. 5(1); Australian Patents Act S. 118(a); Canadian Patents Act S. 23; and Chinese Patents Act Art. 69(3).

203 See Bodenhausen (1969), p. 82

204 Caldwell v. Van Vlissingen, Court of Chancery (1851), 9 Hare 425. In this case a visiting Dutch ship using a propeller patented in England was held to infringe, and an injunction was granted against the vessel.

205 Patent Law Amendment Act 1852. See also Ladas (1975), p. 416ff.

206 Brown v. Duschesne, 60 US 183, Supreme Court 1857. See Field (2006) for a comprehensive summary and analysis of this case.

207 Stena Rederi AB v. Irish Ferries Ltd. First instance case reported as [2002] R.P.C. 50, the appeal as [2003] EWCA Civ 66.

208 Sharma and Forrest (2003)

209 Field (2006). The case was National Steel Car Ltd. v. Canadian Pacific Railway F.3d 1319, 1326 (Fed. Cir. 2004)

210 Bodenhausen (1969).

211 Bodenhausen (1969).

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This followed from the considerations and problems identified in the earlier US and UK cases.

Already the Brown v Duchesne court had, in 1857, noted that giving patentees rights which could

affect international transport could “[…] seriously embarrass the commerce of the country with

foreign nations”, and “confer on patentees not only rights of property, but also political power”.

The same considerations have been reiterated in later decisions applying the temporary

presence exception; see, for example, the discussion in Cali,212 noting the “excessive burdens

that would result [if vessels] had to conform to the patent laws of all nations that the vessel or

vehicle visited during its lifetime”, and how this “would likely place an excessive drag on

international commerce”; the UK Court of Appeal in Stena: “The purpose of [the temporary

presence exception] was to prevent national patents impinging upon foreign vessels coming into

and out of territorial waters temporarily and also permanently if the cause was accidental”; and

the Hamburg District Court in Rolltrailer213: “[…] the purpose of the [temporary presence statute],

which is intended to protect international transport trade from claims arising from patents”.

Notably, the exception covers only the use of an invention, and it thereby protects ship owners

involved in international transport during the normal operation of their fleet. Without the

exception, a ship owner would risk facing different claims of patent infringement in the different

ports that a ship enters, as well as potential search and seizure of the vessel if a national patent

owner brings legal action. Thus, the provision reduces the risk for ship owners and operators, in

that patent searches and freedom-to-operate analyses will not have to be carried out for each

country which a ship would be likely to visit during its operations.

Conversely, for an owner of maritime IP, this provision has the implication that the invention

would have to be protected in the flag state of a vessel to prevent unauthorized use on board

the ship, even for a ship operating worldwide. A technology developer could strategically choose

large flag states in order to obtain broad protection for his or her inventions at reasonable cost,

eliminating the need to patent in every country worldwide. However, if the flag state has a non-

functioning patent system, then the protection of such technology could become virtually

impossible: internationally the ship falls under the Paris Convention exception while in the home

country a patent cannot be obtained or cannot be enforced.

With the emergence of open ship registries and ‘flags of convenience’, this loophole is indeed

real, and one of major concern, a fact which has been pointed out by some commentators.

Sharma and Forrest (2008) noted how "infringers have the ability to register in "flag of

convenience" states such as Panama or countries with specious patent protection", and that

"[e]ven if such a vessel were never to enter within the waters of the country in which it is

registered, it will still enjoy perpetual exemption from patent infringement." Anderson (2008)

found that "owners can select the nationality of their conveyance in such a way as to completely

eliminate patent infringement liability", and that "[t]his reduction in infringement liability is

available to a degree not contemplated by the framers of the temporary presence exception."

212 Anthony J. Cali v, Japan Airlines, Inc. et al. 380 F.Supp. 1120 (1974)

213 Rolltrailer, Landgericht Hamburg 11.07.1973 15 O 473/72, reported as GRUR Int. 1973, 703.

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Flag state # patent filings 2014

1 Panama 287

2 Liberia -

3 Marshall Islands -

4 Hong Kong (no data)

5 Singapore 10312

6 Bahamas 113

7 Greece 764

8 Malta 72

Table 1: World’s largest shipping flags and patent filing rates in the same states.

In practice, in the current international legal structure a ship owner is able to freely select their

vessels’ nationality.214 This nationality selection, combined with the temporary presence

exception, has in practice rendered large parts of the international merchant shipping fleet

immune to patent infringement. Table 1 shows the world’s current top 8 ship registers (by

tonnage)215 as well as the number of patent applications filed in the same countries in 2014216. It

is clear that most of these countries do not have a working patent system, thus obtaining or

enforcing a flag state patent in a large number of cases will not be possible. Nevertheless, these

countries are Paris Convention members217, and ships of these countries could therefore claim

defence under the temporary presence exception when visiting a foreign port.

The only option left for a technology developer may in such a situation be to protect in the

country of manufacture, as building the vessel would be an infringing activity.218 Thus, a

patentee could target the major shipbuilding countries, i.e. those with major yards, and thereby

obtain strong protection. While constructional aspects of the vessel and core equipment (i.e.

214 See e.g. Mansell (2009).

215 Source: Lloyd’s List Intelligence: http://info.lloydslistintelligence.com/

216 Data from WIPO statistical country profiles database: http://www.wipo.int/ipstats/en/statistics/country_profile/ For comparison, the number of patent applications filed at the US Patent and Trade Mark Office in 2014 was more than 500,000.

217 The only exception to this is Marshall Islands, which does not appear to be member to the Paris Convention, nor a WTO member. Thus, it is possible that enforcement against a visiting Marshall Islands ship could be successful. However, this may depend on the specific situation; note, for example, that the US law only requires reciprocity, not necessarily Paris Convention membership, so 35 U.S. Code § 272 would apply if Marshall Islands has a similar provision relating to US ships.

Moreover, there may be a question of whether the temporary presence exception is established international law, and therefore should apply to ships also from non-members of the Paris Convention. Considering the size and importance of Marshall Islands as a flag state, this question may warrant further investigation, however will not be treated in any more detail here.

218 Noting that infringement in the form of an offer to sale or a sale is easy to avoid by carrying out those acts in a country where there is no patent protection, and infringement through import will not be relevant here.

63

such equipment which will have to be delivered with the vessel) could be protected in this way,

anything which does not have to be delivered with the vessel may not. This may apply to smaller

equipment, which may be supplied to the ship after delivery, even on the open sea, and

retrofitted on board. Also, any modification to a vessel while in operation, which would bring an

otherwise non-infringing vessel within the scope of a patent, could not be prevented by a patent

owner.

A particularly relevant aspect of this relates to software-based inventions, in which the system's

physical components may be a combination of known elements, but in which the novelty may

lay in the software, for example the control algorithm. Providing, or upgrading, the software may

be done when the ship is in operation, and the invention therefore need not be supplied with

the ship from the yard. A similar situation will occur for method-based inventions (for example,

the method described in section 1.3.1(c) above). In such a case, the method claim may only

actually be practiced once the ship is in operation.

4.2 Conditions and their applicability to petroleum vessels

The temporary presence exception has not been frequently litigated, and only a handful of cases

which have dealt with this provision (for vessels, or dealing with the equivalent provisions for

aircraft or land vehicles) have been reported. Notably, all cases that have considered the

temporary presence exception have interpreted the exception’s scope broadly.219 For example,

in Cali, the court found clear congressional intent that the exception was meant to have a broad

scope, even in cases where a patent holder stands to suffer significant monetary loss from the

unenforceability of his rights.220 Thus, a prima facie look at the Paris Convention text and the

implementation in relevant national law indicates that petroleum vessels may potentially be

covered by this provision.

None of the reported cases dealing with the temporary presence exception dealt with issues

relating to petroleum vessels or other types of offshore service ships. As Article 5ter and the

corresponding national statutes stand, a literal interpretation would seem to cover a number of

petroleum vessel types. A large fraction of such vessels will sail under foreign flag,221 and, as will

be clear from Section 1.3.1 above, many petroleum operations are temporary in nature. Often

such operations require speciality vessels, which may move between jurisdictions according to

where work can be obtained. Examples of this include speciality lifting or transport vessels, pipe

laying or intervention vessels, or even drilling rigs carrying out exploration drilling.222

In order to determine the impact of this provision in relation to offshore petroleum vessels and

activities, it is necessary to analyse it in more detail and to look at case law in which courts have

219 See the discussion below. This finding was also noted by Anderson (2008).

220 Cali at 1126.

221 See e.g. footnote 200.

222 Although drilling rigs are typically classified for operation in a given jurisdiction for e.g. a 5-year period, it would seem possible to argue that such a period is also temporary if the rig then leaves for operation elsewhere.

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applied this exception. Reference will again be made to the three example categories described

in Section 1.3.1.

Category Type of unit Characteristics Examples A Fixed or moored

installations Permanently or semi-permanently fixed or moored to the seafloor.

Production platforms, jack-up rigs, drilling vessels.

B Installation / intervention vessels

Temporarily connected to the seafloor or well.

Well intervention or installation vessels.

C Support / supply vessels

Mobile and not interacting with the seafloor or well

Vessels for transport, seismic, emergency response, etc.

The main questions that need to be addressed are as follows.

1. Are petroleum vessels within the ‘vessel’ definition of the temporary presence

exception?

2. In which cases does such a vessel temporarily or accidentally enter the waters of

another country?

3. Which components are used exclusively for the needs of the vessel (and which are

not)?

All these include questions of fact, thus possibly providing courts with greater flexibility to

distinguish between cases of petroleum vessels and those of general shipping, in a case where

binding precedent exists. To the knowledge of the author, no court or arbitration tribunal has to

date dealt with these particular questions in relation to petroleum vessels.

4.2.1 “Vessels of other countries”

4.2.1(a) Definition of vessel

The background for the Paris Convention does not provide any clues as to the exact boundaries

of what should fall under the vessel definition in this context. At the time it was drafted, it was

clearly intended to cover merchant vessels223; the question of petroleum vessels as we know

them today will not have been on the minds of the drafters.

In general, even if not significantly different in design or technical characteristics, the activities of

most petroleum vessels will be fundamentally different from those of ship engaged in

international transport. (Save, perhaps, for some exceptions, e.g. a tanker loading cargo offshore

vs. at an onshore terminal.) The same may apply for provision of supplies to offshore platforms,

such that for example a vessel servicing a platform on the Norwegian sector of the North Sea but

operating out of a UK port could fall under the provision. Nevertheless, for most types of vessels

a clear practical distinction could be drawn to cargo- or transport related vessels.

223 This was the situation in the cases preceding the Paris Convention statute.

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The definition of ship or vessel under international law was discussed in Section 2.3.3(b)(i) above

and will not be repeated here. It is clear that under international law, most types of petroleum

vessels will fall under the 'vessel' definition; this will clearly be the case for Category B and C

vessels, but also for certain units in Category A (e.g. drilling rigs).

The Rolltrailer court relied on a broad definition of “vehicle” from German case law: “any object

which is arranged to travel the earth, in water or in the air”. Similarly, both the US Federal Circuit

(in National Steel Car) and the US Court of Federal Claims (in Hughes Aircraft224) relied upon the

broad definitions in the US Dictionary Act when interpreting ‘vehicle’225 for the purpose of

applying the temporary presence exception (35 U.S.C. § 272), with the Federal Circuit expressly

stating that the Dictionary Act “controls our interpretation of […] section 272”. The definition of

‘vessel’ is equally broad:

The word “vessel” includes every description of watercraft or other artificial contrivance

used, or capable of being used, as a means of transportation on water.226

For the US position, Field (2006) commented that this “[…] should clearly apply to any type of

ship or boat”, and “[…] to even a raft, a kayak, a small rowboat, or a JET SKI® watercraft.” Also,

notably, the argument that a ‘vehicle’ would need self-propulsion, was expressly rejected by

both German and US courts227.

There are no indications that the definition of 'vessel' in the temporary presence exception was

intended be read any differently, or narrower, than the generally accepted meaning of this term

at the time. While it would be possible to argue for a purposive construction to exclude certain

modern vessel types, national practice has gone in the opposite direction and applied very broad

definitions. Therefore, the definition of vessel in the temporary presence exception should be

read broadly, meaning that it will probably encompass most types of petroleum vessels,

including (at least) Category B and C vessels as described in Section 1.3.1.

4.2.1(b) Vessel nationality

The Paris Convention itself does not provide any further guidance on how to determine a ship's

nationality beyond the convention text. Only very few countries have explicitly defined how to

determine a vessel’s nationality for the purpose of the temporary presence exception in national

224 Hughes Aircraft Co v. United States, 29 Fed. Cl. 197 (1193).

225 1 U.S. Code § 4, stating in full: “The word “vehicle” includes every description of carriage or other artificial contrivance used, or capable of being used, as a means of transportation on land.” In National Steel Car, this led the court to conclude that an individual rail car was also, itself, a vehicle under this definition.

226 1 U.S. Code § 3 – ‘“Vessel” as including all means of water transportation’

227 See Rolltrailer (in relation to rolltrailers): “[…] it is not crucial how the vehicle moves and whether it has its own driving force”, Nat Steel Car (in relation to rail cars) and Hughes Aircraft (for a non-self-propelled spacecraft).

66

law; these include India, New Zealand and South Africa228, where it is expressly provided that the

vessel’s registry is the country of nationality for this purpose. UK law specifies that a 'relevant

ship' for the exception is "a ship […] registered in, or belonging to, any country, other than the

United Kingdom, which is a party to the [Paris Convention]".229 Here, 'registered in' would

presumably refer to the ship's flag state registration.

Nationality has also not been discussed much in the existing case law on the temporary presence

exception. The court that came closest to dealing with this question was the Nat. Steel Car court,

which had to consider the question in relation to railcars transporting goods between Canada

and the US. It was held that the railcars were Canadian, regardless of which locomotive powered

them (which also were US ones), thus implying that the nationality of the rail cars depended

upon the nationality of its owner. This may, however, not be directly transferrable to vessels, as

railway cars do not have the same system of registration.230

It is clear that vessels must have a nationality in order to enjoy protection, due to the reciprocity

requirement; generally only vessels of other countries of the union can claim such defence.231

Thus, in order to determine whether the temporary presence exception applies, the nationality

of a vessel must be determined, or at least it must be established that it is in fact “a foreign

vessel”. A nationless vessel could not claim protection, nor could a facility without nationality

(such as a platform structure which is not a vessel).

In the 1920s, when the temporary presence exception was drafted, determining the nationality

of a ship was a fairly simple matter; most ship registries were ‘closed’, that is, they would only

accept registration by nationals of the registry country.232 Thus, the shipping flag and the

owner’s nationality would be the same. It is only the more recent emergence of “flags of

convenience” and "international registers"233 which effectively allows a ship owner to select

their vessels’ nationality.

Although there exist some differing opinions as to what determines the nationality of a ship,234

UNCLOS provides that the registry is decisive.235 The same follows from the 1986 United Nations

228 See Indian Patents Act 1970 S. 49; New Zealand Patents Act 2013 S. 144; South Africa Patents Act 1978 S. 71. This was followed in South African Supreme Court of Appeal case Schlumberger Logeco v Coflexip, holding that a ship flying South African flag is South African, even if its home port is elsewhere.

229 UK Patents Act S. 60(7).

230 It is also worth noting that the mentioned Indian, New Zealand and South African acts clearly differentiate between vehicles and vessels.

231 The US is a notable exception to this, where only reciprocity is required (not Paris Union membership; see page 43 above), however this would not make any difference to the current analysis.

232 Mansell (2009).

233 International registers are open registers offered by some traditionally large registry countries, with somewhat laxer requirements than the regular national registers, in order to combat flags of convenience. One example of this is the Norwegian International Ship Register (NIS).

234 See Churchill and Lowe (1999) for a detailed discussion.

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Convention on Conditions for Registration of Ships. The International Tribunal for the Law of the

Sea has expressed the same view on several occasions, stating in the 2007 Tomimaru case236 that

"The State of nationality of the ship is the flag State or the State whose flag the ship is entitled to

fly," and that "ownership of a vessel and the nationality of a vessel are different issues."237 In the

Saiga case,238 the Tribunal found equivalently, holding that the flag was decisive for (in that case)

a Cypriot-owned, Scottish-managed and Swiss-chartered tanker flying the flag of St. Vincent and

the Grenadines, and that "the ship, everything on it, and every person involved or interested in its

operations are treated as an entity linked to the flag state."

There is thus a strong basis in international law for treating the flag state as the nationality of

the ship, also for such ship under flags of convenience.239 This must be the approach taken also

for applying the temporary presence exception, and must apply to petroleum vessels equally to

any other vessel.

4.2.2 “Temporary or accidental entry”

The second requirement for the temporary presence exception to apply is that there is a

temporary or accidental entry by the vessel. As noted above, taken literally this condition may

apply to a number of petroleum vessel types.

4.2.2(a) Temporary entry

The first condition, namely temporary, is not in itself determinate.240 The term indicates time-

limited entry, and there is some case law available which has analysed and interpreted this.241

235 Ship nationality based on registry follows from UNCLOS Art. 91, which regulates conditions for the grant of nationality to ships by a state and provides that: “Every State shall fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory, and for the right to fly its flag. Ships have the nationality of the State whose flag they are entitled to fly”.

236 The “Tominmaru" case (Japan v. Russian Federation) Case No. 15. International Tribunal for the Law of the Sea.

237 See the Tominmaru Judgment of 06 Aug. 2007, at 70.

238 Discussed in more detail in Section 2.3.2(b) above.

239 The main question in respect of flags of convenience is the requirement under UNCLOS Art. 91(1) that there “must exist a genuine link between the State and the ship”. While it is in principle possible for a national court to decline acknowledgement of a claim to nationality based on a missing ‘genuine link’, it appears that this is not common practice, and will therefore not be discussed further here. See Tanaka (2012) and Churchill and Lowe (1999) for a more detailed discussion. The Saiga Tribunal also expressly rejected that Art. 91(1) should "establish criteria by reference to which the validity of the registration of ships in a flag State may be challenged by other States," but that it rather was intended to "secure more effective implementation of the duties of the flag state"; see the Saiga Judgment of 01 Jul 1999 at 83.

240 Notably, the Federal Circuit in National Steel Car began its analysis by noting that the term ‘temporarily’ is ambiguous and that the plain meaning of the term, “for a brief period” or “during a limited time”, was not satisfactory.

241 Even prior to the Paris Convention provision, the US Supreme Court in Brown v Duchesne considered that the question in front of it was “whether any [patented] improvement in the construction or equipment

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The committee considering the adoption of the Art. 5ter discussed the meaning of ‘temporarily’

and ‘accidentally’ and “[…] indicated that the words ‘temporarily’ and ‘accidentally’ were chosen

to cover entries into port for more or less brief periods whether periodically or exceptionally and

whether unintentionally or not”.242

Clearly, temporary cannot mean any length of stay for any purpose, as that would include all

ships not built and dismantled in the country.243 On the other hand, defining temporary as a

specific length of time would be very difficult. The authority that came closest to a specific

definition was a German court in the Rolltrailer case,244 in which the court noted that German

domestic law relating to motor vehicles considers a stay of up to 1 year to be temporary. Based

on this, the Hamburg District Court went on to state that for a stay to be considered non-

temporary it would have to be of ‘at least several months’.

Most of the courts that have dealt with this problem have, however, adopted a different

approach in defining temporary, namely to interpret it in light of the underlying purpose of

Article 5ter. Thus, a vessel entering a country with the sole purpose of taking part in

international commerce, and then to depart, is considered to enter temporarily.245 This includes

“completing a voyage, turning about, and starting a new voyage”246, as noted by the Cali court,

but with the purpose of the visit as the key factor, and not the specific duration of the stay.

Hence, the distinction may appropriately be between international transport operations and

those that involve domestic activities.247 The US Federal Circuit pointed this out explicitly:

If the cars are entering the United States for a limited time – that is, they are not

entering permanently – and are entering only for the purpose of engaging in

international commerce – that is, they are entering to unload foreign goods and/or to

load domestic goods destined for foreign markets – they are entering “temporarily” for

of a foreign vessel […] can be used […] while she is temporarily there for the purposes of commerce […]” (emphasis added).

242 Actes of the 1925 Hague Conference at p. 435. See also Bodenhausen (1968) at p. 83.

243 As noted in National Steel Car, a literal interpretation of ‘temporary’ would “[…] lead to absurdly broad results […] without any further qualifications”, as it would only be limited by the fact that an entry was not permanent.

244 Rolltrailer, Landgericht Hamburg 11.07.1973 15 O 473/72, reported as GRUR Int. 1973, 703

245 See e.g. the reasoning of the UK Patents Court in Stena: “[…] one has to have regard to the intention of the operator of the vehicle at the time of entry. If, at that time, it is the intention that the vehicle should move in and then move out, then entry would be temporary.” (Stena at paragraph 75-76; [2002] R.P.C. 50.) Also, in Cali the court defined ‘temporary’ in relation to the international trade that the temporary presence exception was intended to protect, not in relation to the duration of the entry. This precedent was followed by the US Federal Circuit in National Steel Car.

246 See Cali at 1126.

247 See also Cali at 1124, where the court relied upon the fact that the travels of the accused aircraft were international, rather than domestic, in character.

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the purpose of section 272 regardless of the length of their stay within the jurisdiction of

the United States.248

A vessel involved in any kind of domestic operations, or the movement of goods between

domestic ports, even as part of an international route, may thus not fall under this definition of

temporary.249 Nevertheless, this interpretation would, presumably, not prevent a vessel in

international traffic from calling into consecutive ports in one country, as long as it did not

engage in the transport of goods or people between those ports.

Importantly, the definition of temporary allows regular and frequent entries. This issue was

discussed in the preparatory works for the Art. 5ter provision, such that, as described by Ladas

(1975), “[n]ot only the accidental and unintentional entry but also the intentional and regular

going into a port us within the scope of article 5ter, provided the vessel or the engine of

locomotion does not remain permanently in the territorial waters or in the territory of the

country.” 250 This situation was dealt with by UK courts in 2002 and 2003, in the Stena v. Irish

Ferries case.251 In this case, the court had to consider the temporary presence exemption being

argued as a defence to alleged patent infringement of a UK patent by an Irish ferry making three

to four scheduled daily crossings between Ireland and England. (The patent described a

structural feature of the ship hull.) However, the Patents Court found that the ferry was involved

in interstate travel and that, even though the ferry entered UK waters regularly and several

times every day, each visit was temporary. Thus, the temporary presence exemption provided a

valid defence. This was confirmed by the Court of Appeal, noting that “[w]hether a vessel visits

temporarily, in the context of Art. 5, cannot depend on frequency”. US and German courts have

concluded equivalently.252

In summary, courts have generally declined to restrict 'temporary' as a specific length of time,

and the temporary presence exception itself or its drafting history do not provide any pointers.

Thus, from a pure time perspective, if the intention of the operator when entering a country is

that a petroleum vessel will leave the country at some point, it may fall under the definition as

applied by the courts. However, the purposive approach taken by principally all courts which

have had to deal with this question gives very strong pointers to what these courts consider to

248 National Steel Car at 1331

249 See also Cali: “The distinction would be between [an aircraft] delivered to the United States for use in this country for domestic traffic […] and a foreign aircraft arriving here on an international flight only to unload, turn about, and depart”

250 See also Bodenhausen (1969): “There is freedom to use only if vessels enter the waters of a foreign country temporarily or accidentally. Temporary entry includes periodical entries.”

251 Stena Rederi AB v. Irish Ferries Ltd. First instance case reported as [2002] R.P.C. 50, the appeal as [2003] EWCA Civ 66; [2003] R.P.C. 36.

252 See Cali v. Japan Airlines relating to aircraft with regular scheduled visits. Also, in Rolltrailer the court held that the rolltrailers were temporarily present “despite the fact that they enter Germany regularly and repeatedly”.

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the be the limitations of a “temporary presence”: the requirement that the purpose of the

temporary presence is international transport (of goods or persons).

The UK Patents Court, in Stena, noted succinctly that the “primary purpose is to distinguish

between vehicles which are engaged in essentially in internal operations and those which travel

between countries”.253 The similarity in the wording to that used by the Cali court (see footnote

249 above) is notable. Although the underlying premise for the Patents Court was, as for the

other courts having dealt with this issue, that the vessel is “carrying out its role as a means of

transport used in international carriage of goods and persons”, it would seem clear that, in the

court’s view, any type of “internal operations” in a country would take the vessel outside the

scope of a “temporary presence”.

Thus, there is a clear basis in national case law to treat petroleum vessels carrying out some sort

of operation in the waters of a country as falling outside the temporary presence exception by

holding such activities as being non-temporary. This would apply to all vessel types exemplified

above as Categories A, B and C. Such a finding would be fully consistent with practically all

existing case law on this question, and arguably in line with the underlying intention of the

temporary presence exception as implemented in the 1930s. A rejection that a petroleum vessel

fulfils the “temporary” requirement therefore seems to be a highly likely outcome for most

types of petroleum vessels, should a court have to deal with this question. Probably the only

exception to this would be pure transport operations, i.e. a Category C vessel bringing supplies

or equipment from abroad for (later) use in petroleum operations, but not carrying out such

operations itself. For such pure transport vessels, there would seem to be strong arguments that

they should be treated equivalently to any other vessel engaged purely in international

transport.

4.2.2(b) Accidental entry

What would constitute an accidental entry has not been discussed much in the existing case law,

but some commentators have tried to distinguish this from a temporary entry.254 An example of

an accidental entry could be an unplanned visit, such as a ship seeking refuge in a foreign port

due to bad weather. Notably, there is no time limitation for an accidental entry (otherwise the

word accidentally in the convention text would be superfluous); hence a patent holder would in

theory not have any rights against such a vessel even if it remained in the country

permanently.255 However, it is clearly not the intention of the convention to allow a vessel to

enter a country ‘accidentally’ and then to engage in domestic operations. It would seem that a

court would be more likely to employ an interpretation which covers a ship that does not leave a

country because it is being dismantled or put out of service (and therefore it falls outside the

definition of temporary). As is illustrated by the lack of case law dealing with accidental entries,

253 See [2002] R.P.C. 50 p. 996.

254 See e.g. Field (2006)

255 See e.g. the UK Court of Appeal in Stena: “The purpose of [Article 5ter of the Paris Convention] was to prevent national patents impinging upon foreign vessels coming into and out of territorial waters temporarily and also permanently if the cause was accidental” (emphasis added).

71

it is, however, unlikely that this will have any large practical importance. For a petroleum vessel,

which will generally enter a country to carry out operations which are planned long in advance,

accidental entries would not be relevant.

4.2.3 “Use exclusively for the needs of a vessel”

Unlike for the “temporary entry” requirement (see Section 4.2.2 above), only a limited amount

of case law discusses in detail which components and devices are used “exclusively for the needs

of a vessel”. There are some clear cases; cargo is arguably not included; cargo would not on a

reasonable interpretation be “[used] in the body of the vessel, in the machinery, tackle, gear and

other accessories”.256 This was underlined by a US court in Hughes Aircraft, which held that a

spacecraft transported into the US as cargo would not fall under the temporary presence

exemption:

When a spacecraft is delivered to the US for the purpose of allowing the United States to

launch it, the spacecraft is the cargo that is brought here for an essential use, not a

“vessel” or “vehicle” which enters the US as a means of conveyance.257

Interestingly, in 1981 a separate US law took certain types of spacecraft within the definition of

‘vehicle’ for the purpose of 35 U.S. Code § 272,258 thus it was held that for spacecraft launched

before 1981 the exception would not apply, but that it would cover spacecraft launched after

1981. This distinction, i.e. that a vehicle which is transported into the country, but itself acting as

a means of conveyance, would be covered by the temporary presence exception is consistent

with the German court’s finding in Rolltrailer. In that case, rolltrailers were themselves

transported into Germany on ships; the court still held that these were means of transportation

for international commerce.

On the other hand, the machinery and associated components for vessel propulsion are

explicitly mentioned in the convention text and are clearly covered.259 Arguably, components

that are integral to the operation of the ship must be included in this definition. In addition to

256 Cargo would normally not be ‘used’ anyway, so there would be no infringement through use. In relation to the fact that in some countries merely keeping an invention may be an infringing act (see footnote 42 above), it is believed that this is generally qualified with an intention to exploit the invention commercially and thus not relevant for the mere keeping of cargo. See e.g. Norwegian Patentloven § 3 which sets this out explicitly. For the UK position, see Smith, Kline and French Labs Ltd v Harbottle, [1980] RPC 363.

Nevertheless, a distinction must be drawn to cargo which is destined for the country in question; in that case both ‘keeping’ the invention and other types of infringing acts such as import or ‘disposing of’ may be relevant. The current discussion relates to cargo which is kept on a ship temporarily entering foreign waters.

257 Hughes Aircraft at 232.

258 See 42 USC § 2457(k), cited in Hughes Aircraft at 232.

259 Art. 5ter (ii) Paris Convention: “[…] the use on board vessels of other countries of the Union of devices forming the subject of his patent in the body of the vessel, in the machinery, tackle, gear and other accessories […]” (emphasis added)

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the machinery and propulsion system, this must include components whose removal will render

the ship not seaworthy, i.e. without which the ship cannot operate safely or cannot operate at

all. Examples of this may include safety equipment, navigation systems, and provisioning

necessities for the crew. It should be noted that the needs of a vessel may differ for different

ship types; a liquefied-natural-gas tanker will need a cryogenic refrigeration system to maintain

the temperature of the cargo, whereas a sewage treatment plant may be essential on a cruise

ship.

A literal interpretation of the convention text (‘in the body of the vessel’) may indicate that

inventions used in the construction of the vessel (being the ‘body’ itself) should not be covered.

Although this is set out expressly in the equivalent provision for land vehicles260, there is no

indication that Article 5ter is intended to exclude inventions used in the construction of the ship,

e.g. the design of the hull structure. The interpretation that ‘in the body’ should include its

construction is also supported by case law from English and US courts.261

4.2.3(a) Vessel auxiliary equipment

The question of where the borderline of what is “exclusively for the needs of the vessel” must be

drawn has to date not been tested in any national court, but has been discussed by some

commentators (see below). While it seems clear that the exception must apply to anything

integral to ship operation, there will be many components for which it is not immediately clear

whether they should fall under the exception. Tools for maintenance and repairs are, for

example, needed by the vessel, although they are not a part of the machinery as such. The same

will be the case for e.g. computer-based voyage-planning or cargo management systems, despite

the fact that it is not impossible to operate the ship without them. Crucially for the questions

discussed here would be equipment specifically for carrying out petroleum-related operations.

Examples of such equipment include the compensator shown in Figure 4 (see page 10), the

tension frame shown in Figure 6 or the seismic positioning system in Figure 8. Such equipment

may be integral to the vessel structurally, however not essential for the vessel's internal

operations.

Going even further, there may be many inventions which are not used in, or strictly needed for,

the operation of the ship at all. For example, there is much innovation and a high number of

patents being filed in the personal entertainment industry. Is a television set, a DVD player, or a

video game in the crew common room used ‘exclusively for the needs of the vessel’? Similarly, a

cruise ship needs to entertain its passengers; does that mean that arcade games, fitness room

equipment, and sun tanning beds fall under the exception? Considering these questions, Moffat

(1959) stated that ‘[i]t might well be argued that every piece of equipment throughout a ship,

260 Art. 5ter (ii) Paris Convention, reading “[…] the use of devices forming the subject of the patent in the construction or operation of aircraft or land vehicles […]” (emphasis added).

261 See Stena, where the UK Court of Appeal had to consider whether the temporary presence exception covered the entire vessel and not just parts of it, as well as the US Federal Circuit in Nat. Steel Car, holding that the provision should not be interpreted “so narrowly as to exclude inventions […] pertaining to the construction of a vehicle”.

73

whether it be a winch or a can opener, is employed exclusively for the needs of the ship’. Ladas

(1975) commented:

This wide exemption is justified by the nature of the modern vessel, by the fact that a

ship enters only the territorial waters of a country, and by a desire to exempt vessels

from all unnecessary inconveniences and impediments. (Emphasis added.)

For the US position, in his authoritative reference work, Chisum (2004) noted that “The phrase

‘exclusively for the needs of the vessel, aircraft of vehicle’ in Section 272 should cover any use for

the benefit of the passengers or crew or for the operation of the vessel.”

For the temporary presence exception to have its intended effect, this is clearly necessary. Such

a broad interpretation, at least for ships engaged in international transport, therefore appears

very probable. It would be fully consistent with argumentation in previous national case law as

well as the underlying intention of Article 5ter, i.e. to relieve vessels from having to deal with the

varying patent rights in different countries. This would thus imply interpreting the ‘needs of the

vessel’ very broadly, namely not as strict necessities required for vessel operation, but rather as

‘anything used (only) internally on the vessel’.

4.2.3(b) Petroleum equipment

For equipment used in petroleum-related operations, it may, however, be possible to

differentiate against the line of argument above. Such equipment, having a purpose and

function ‘outside the vessel’, may not be considered to be used ‘exclusively for the needs of the

vessel’. This may include, for example, the compensator, tension frame and seismic streamer

mentioned above and in Section 1.3.1, or any other equipment which is used for petroleum

operations and which is not needed for the operation of the vessel itself. A notable argument to

this effect was put forward in the Stena case262 which appears to have been accepted as obiter

by the Patents Court, namely that:

If the vehicle is used for an infringing purpose, then patent rights can be invoked, but not

if the patent covers the fabric of the vehicle or a process which enables the vehicle to

function. [For example,] where a ship is used for laying marine cable, that operation is

not protected by [the temporary presence exemption] because it is not “exclusively for

the needs of a relevant ship”. The cable laying is for the needs of the party which has

asked for the cable to be laid. The vessel is being used for that purpose. On the other

hand the propeller, bow thruster or radar equipment on a ship is used for the needs of

the ship alone. They enable the vessel to perform properly and safely.

There is clearly scope for a court to differentiate on this question for equipment used in

petroleum operations. For vessels carrying out some operation using equipment falling under

the scope of a coastal state patent, there would be good arguments to say that that particular

equipment is not used ‘exclusively for the needs of the vessel’. It may even be possible to argue

262 [2002] R.P.C. 50 p. 995f. See also footnote 251 above.

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that no equipment on the vessel would be exempted in that case, i.e. that the whole vessel is

used for other purposes that exclusively for the needs of a temporarily visiting vessel.

Such a situation may, however, not be entirely black-or-white; some maritime equipment may

be used both for navigation purposes and for the petroleum operation. One example may be a

dynamic positioning system; this is clearly part of the vessel navigation system and ensures that

the vessel can operate safely, however it is also a key tool for efficient performance of a number

of petroleum operations. Nevertheless, it would seem that this distinction would be less relevant

in practice, since a vessel for which such a question would come up may probably not fall under

the 'temporary' requirement above (see Section 4.2.2(a)).

It might well be argued that the 'exclusively for the needs of the vessel' must be interpreted in

light of the 'temporary (or accidental) entry', so that use of equipment falls under the exception

if it is used 'for that temporary entry'. The conclusion would be the same.

4.3 The temporary presence exception offshore

Having analysed the scope of the temporary presence exception in terms of the types of vessels

and activities covered above, a final question which needs to be addressed is its geographical

scope. In the Paris Convention text, the temporary presence exception applies to vessels which

"… temporarily or accidentally enter the waters of [a] country …". As noted above263, 'the waters

of a country' under international law would generally mean the internal waters and the

territorial sea, this being the maritime areas in which the coastal state has (with only minor

exceptions) unrestricted jurisdiction and sovereignty. The exclusive economic zone or waters

above the continental shelf can not be said to form part of the waters of the coastal state.264

Therefore, to the extent that coastal state patent law applies offshore, there would be a

question of whether the temporary presence exception applies for temporarily visiting foreign

vessels in this area.

This will be discussed in relation to two practically relevant scenarios, namely (i) to what extent

the temporary presence exception will have effect for activities taking place in the EEZ / on the

continental shelf, and (ii) the situation for vessels operating in the EEZ / on the continental shelf,

but also visiting the internal or territorial waters of the coastal state.

4.3.1 The temporary presence exception in the EEZ / on the continental shelf

A direct implementation of the Paris Convention provision, only applying to 'the waters of a

country', does not take into account the fact that patent rights may extend beyond these areas.

Considering the historic strict territoriality principle in patent law,265 the possibility that patent

rights may extend beyond the territory of the coastal state was probably not considered by the

drafters of the Paris Convention provision. The freedom of the high seas has traditionally been a

strong principle, and the extension of coastal state rights beyond territorial waters is a relatively

263 See Sections 2.1 and 2.2 above.

264 See Section 2.3.1 above.

265 See Section 1.2.1 above.

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recent development, following from the changes in the law of the sea in the mid-20th Century

and its codification in UNCLOS.266

As discussed in Section 4.1, the intention of the temporary presence exception is to relieve at

least all those vessels engaged in international transport and temporarily visiting a country from

any existing patent rights in the coastal state. In a petroleum context, a number of vessels will be

engaged in transport of equipment, supply and necessities to offshore installations, as well as

transporting petroleum products to and from offshore facilities. For example, it is common that

oil and gas are loaded onto tankers offshore and transported away. Figure 11 illustrates an

example of loading of an LNG (liquefied natural gas) tanker offshore through a so-called loading

tower. Such tankers may (and in a great deal of cases will be) a 'visiting foreign vessel' which, if

visiting a port in the relevant country, would arguably fall under the temporary presence

exception, being in the country's waters only to load (or unload) cargo.

Figure 11 Offshore loading tower and LNG tanker (figure courtesy of Bluewater Energy

Services, www.bluewater.com)

It is clearly the intention of the Paris Convention that international transport activities should be

covered by the temporary presence exception. For vessels whose operation is purely transport-

related, and which do not carry out any petroleum-related operations (as those exemplified in

Section 1.3.1 do), it would seem that the temporary presence exception should apply, also

outside the "country's waters". It would, for example, arguably be very artificial to differentiate

between a tanker loading oil directly offshore, and a tanker going to a port to load the same oil

(with the oil having been transported via pipeline to shore). It is submitted that under a correct

interpretation of the Paris Convention, the temporary presence exception must apply also in the

exclusive economic zone or above the continental shelf, to the extent that the same activity

would have been covered had it taken place in the internal or territorial waters of the state.

Considering the functional limitation of the temporary presence exception to activities purely

related to international transport (see above), such an interpretation would not extend the

266 See Chapter 2 above and e.g. Klabbers (2013) for further details.

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exception to any offshore activities for which the coastal state would justifiably have an interest

in applying patent law.

4.3.1(a) National positions

Also on this point the national law varies, in terms of how the temporary presence exception is

implemented in national law. In the UK, the Patents Act S. 60(5)(d) provides that no

infringement exists for "[…] the use, exclusively for the needs of a relevant ship, of a product or

process in the body of such a ship or in its machinery, tackle, apparatus or other accessories, in a

case where the ship has temporarily or accidentally entered the internal or territorial waters of

the United Kingdom […]" (emphasis added). Thus, any activity falling under S. 132(4)267 is, in a

literal interpretation, unaffected by S. 60(5)(d). Considering the very broad effect UK patents are

given offshore268, it is submitted that UK national law does not comply with its obligations under

the Paris Convention that visiting foreign vessels should be exempted from the effects of

national patents.

Norwegian and US law gives a similar effect, albeit somewhat less explicit than the UK statute's

specific reference to 'internal or territorial waters'. The Norwegian patent act implements the

temporary presence exception to apply to foreign vessels when in this country, while US,

similarly, applies to vessels entering the United States.269 Under the normal interpretation of

what comprises a country's territory, this must be taken as applying only to the internal and

territorial waters.270

Canadian and Dutch laws are similar to the US and Norway,271 while, notably, the Australian

legislator seems to have taken this into account: the Australian Patents Act first defines its

application as being in relation to the 'patent area' and then applies the temporary presence

exception to the (entire) patent area.272 This is the correct implementation of the Paris

Convention's temporary presence exception, in light of the more recent273 developments in the

267 The extension of UK patent law to the exclusive economic zone and the continental shelf; see Section 3.2.1 above.

268 Going beyond that permitted by international law of the sea; see Section 3.2.1 above.

269 Norwegian Patents Act §5 provides that Norwegian patents would not have effect on foreign vessels in their "temporary or accidental presence in this country". (My translation.) 35 U.S. Code § 272 applies to "[t]he use of any invention in any vessel […] entering the United States temporarily or accidentally […]."

270 See Sections 2.2 and 2.3 above.

271 See Canadian Patents Act S. 23: "No patent shall extend to prevent the use of any invention in any ship, vessel, aircraft or land vehicle of any country entering Canada temporarily or accidentally […]" and Patents Act of the Netherlands Art. 54: "[…] when such vessels are in the waters of the Netherlands […]."

272 See the Australian Patents Act S. 118: "The rights of a patentee are not infringed: (a) by using the patented invention on board a foreign vessel, in the body of the vessel, or in the machinery, tackle, apparatus or other accessories of the vessel, if the vessel comes into the patent area only temporarily or accidentally and the invention is used exclusively for the needs of the vessel […]"

273 UNCLOS was concluded in 1982, whereas the temporary presence exception was adopted into the Paris Convention in 1926; see Sections 2.1 and 4.1 above.

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International Law of the Sea which potentially extend patent rights beyond the internal and

territorial waters.

The extent to which this would pose an actual practical issue will vary according to the extent

that national patent law is given effect beyond the internal and territorial waters of the coastal

state; clearly, if coastal state patents do not cover the activity in question there would be no

need for a temporary presence defence. For the UK, the current statute text appears to be

contrary to its international obligations, in that it gives UK patents (general) effect offshore,

while not providing a temporary presence defence beyond the internal and territorial waters.

For Norway, this would seem to be less problematic, in that patents would not have effect for

the relevant activities offshore.274 The same would be the case for the US, however with a

question mark in relation to the "attached to the seabed" requirement275 and whether e.g.

temporarily mooring the vessel in an offshore loading situation may satisfy this. However there

would seem to be a clear basis for a court to distinguish on this point (compared to, for example,

the type of 'attachment to the seabed' of a drilling platform) and hold that the temporary

presence exception should apply, which would arguably be the correct result.

4.4 Summary and conclusions

One key purpose of the temporary presence exception is to relieve ship owners from the burden

of checking the patent situation of each country a ship in international traffic visits.276 This

concern does not apply equivalently for petroleum vessels; it is not unreasonable for an

operator of, for example, a drilling rig to check the patent situation in a country before the rig

carries out operations there. Such operations are typically planned well in advance, and of

significantly longer duration than a simple visit by e.g. a container vessel to a port for loading

and unloading. The underlying objective must therefore assumed to be that petroleum vessels

carrying out some sort of operation (as opposed to pure transport activities) should not be able

to claim defence under the temporary presence exception.

The current legal situation for the temporary presence exception and its implementation in

national law is reasonably clear; the wording of most national laws closely follows that of the

Paris Convention and although only a few cases exist where national courts have had to

interpret this provision they have used remarkably similar argumentation. Nevertheless, there

exists some uncertainty in relation to petroleum vessels, in that such vessels may literally fall

under the temporary presence exception as implemented in most national statutes. For this

reason, the scope of the temporary presence exception in relation to foreign petroleum vessels

was analysed in this chapter.277

274 See Section 3.2.3 above.

275 See Section 3.2.2 above.

276 See Section 4.1 above.

277 As noted above, similar considerations may apply to other vessel types, such as offshore construction or installation vessels.

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The conclusion is that the legal situation for petroleum vessels in relation to the temporary

presence exception is sufficiently clear. While the literal wording of the provision as

implemented in national law may rise some initial questions around its possible applicability, the

legislative intent and the existing case law (albeit not extensive) give clear directions as to the

scope of the temporary presence exception. There is ample opportunity for national courts to

distinguish a petroleum vessel against such vessels involved in international transport, notably

on the requirement for the vessel’s ‘temporary entry’ and that any exception applies only for

‘the exclusive needs of the vessel’.278

A second relevant aspect of the temporary presence exception is its geographical scope in

relation to offshore operations, i.e. whether it should apply outside a coastal state’s internal and

territorial waters. The legislative intent appears clear, namely that any foreign vessel involved in

international transport should be exempted. It appears illogical and clearly against the intention

if this were not to apply offshore, i.e. in the exclusive economic zone and above the continental

shelf, for an operation which would be exempted if taking place within internal or territorial

waters.

Chapter 4.3 demonstrated how the national law of a number of countries do not reflect this, but

rather applies the temporary presence exception only in internal and territorial waters. Where

national patent law is not given effect for the relevant activities offshore this is unproblematic,

such as in the case of Norwegian and, probably, United States law. However, as shown above,

UK law does not meet the obligations of the Paris Convention by the fact that national patent

law is given full effect offshore but the law only provides a ‘temporary presence’ defence in

internal and territorial waters.279 The same appears to be the case for the Netherlands, while the

Australian lawmaker has resolved this by giving the temporary presence exception effect for the

whole ‘patent area’, i.e. that the exception applies wherever patent law may have effect.

278 See Sections 4.2.2(a) and 4.2.3 above.

279 See Sections 3.2.1 and 4.3.1 above.

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5 Discussion and conclusions

This final chapter will discuss the implications of the above findings, as well as identify and

provide recommendations for the most important aspects identified.

5.1 Policy considerations

There are clearly strong practical and commercial arguments in favour of giving coastal state

patents effect in offshore areas, including the exclusive economic zone and on the continental

shelf. The energy industry is a major player in the global economy, and energy security is a key

political issue of today. As easily exploitable natural resources are dwindling, innovation and

technology development become more and more important in order to permit development of

challenging and unconventional resources in a cost-efficient, safe and environmentally friendly

way. Examples of this include offshore oil and gas, in which the trend is going towards more

challenging areas, such as deep-water regions or remote areas such as the arctic.

Patents are a key mechanism to enable investment in technology development, however a key

requirement is that effective protection can be obtained.280 This must include that it be possible

to obtain exclusivity in the area(s) where the invention is intended to be practiced, which may,

for the questions considered here, include offshore areas beyond the territory of any coastal

state. At the same time, operators in these areas need certainty in relation to their freedom-to-

operate, i.e. to what extent national patent rights apply for their relevant operations.

There would appear to be strong practical arguments in favour of giving a coastal state's patent

law effect in its exclusive economic zone and on the continental shelf. From a practical

viewpoint, it would seem natural that the coastal state, having the right to regulate281 the

petroleum activities in those areas, would also have the right to give its patent law effect.282

From the point of view of patent law’s main objectives, namely to stimulate technology

development, it is clearly desirable, or even necessary, to provide exclusivity in the areas where

the product incorporating the invention is actually used, as that may be the only instance where

there would be infringement of a patent.

Further, there seems to be no particularly strong arguments against extending coastal state

patent rights to the exclusive economic zone and continental shelf, neither from a public policy

consideration nor in relation to potential conflict of laws. No third party would seem to be

negatively affected by such effect of a coastal state patent; it is not unreasonable to require a

party wanting to carry out some petroleum operation offshore to familiarise themselves with

relevant coastal state patent landscape. (In the same way that they are required to in relation to

the, usually extensive, regulatory framework for such operations, such as safety requirements.)

280 See Section 1.1 above.

281 See Section 2.3.2 above.

282 Notable, in this respect, is how the judge in the WesternGeco case (discussed in more detail in Section 3.2.2(b) above), characterised the fact that US patent law did not apply to the activities of a seismic vessel operating offshore the United States as 'a loophole'.

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Geographically, the exclusive economic zone and continental shelf are well-defined, and there is

no overlap between neighbouring jurisdictions. In terms of the potential overlap and conflict

between coastal state law and flag state jurisdiction for vessels, extending coastal state rights to

the exclusive economic zone and continental shelf would not introduce any issues not already

existing in relation to internal and territorial waters, and may be handled in an equivalent

manner.283

5.2 Actual situation

Under international law of the sea, the rights of the coastal state to apply national law in the

exclusive economic zone and on the continental shelf are limited. Based on the traditionally very

strong principle of the freedom of the high seas, Chapter 2 showed that, despite the

developments in the law of the sea in the mid-20th Century, coastal states may apply national

legislation which is not directly petroleum-related (i.e. directed at regulating such activities) only

in limited circumstances. Relevant case law, notably at least two decisions from the International

Tribunal for the Law of the Sea,284 indicates that this must be interpreted in a restrictive sense.

As shown in Chapter 3, national legislation in relation to patent law effects offshore show

significant discrepancy and variation between coastal state practices. Some countries, such as

the UK and Australia, give national patent law blanket effect in the exclusive economic zone and

on the continental shelf, which, it is submitted, is contrary to international law. Other countries'

laws are more well-aligned with international law of the sea, e.g. the US and Canada, while the

case of Norway was shown as an example where national law does not take advantage of the full

scope of rights provided under international law. Moreover, the implementation of the Paris

Convention's temporary presence exception varies between these countries in terms of to what

extent it is given effect beyond internal and territorial waters.

Most notable is the case of UK law, which, according to the findings here, does not comply with

UNCLOS in that national patent law is given general effect offshore,285 and, further, does not

meet the UK's obligations under the Paris Convention in that no exception to patent

infringement is provided for 'temporarily visiting vessels' beyond the internal and territorial

waters.286

5.3 Practical implications

The above shows that the legal situation in relation to patent rights offshore is unclear, with in

certain cases significant variations between relevant major offshore petroleum countries. This

283 See Section 2.2 above. A vessel entering foreign internal or territorial waters subjects itself to the jurisdiction of the coastal state in its entirety. A vessel entering the exclusive economic zone would subject itself to the jurisdiction of the coastal state for those activities that relate to natural resources exploration and exploitation, i.e. qualified functionally such as to not affect the freedom of navigation and other third party rights in the EEZ.

284 See Section 2.3.2 above.

285 See Section 3.2.1 above.

286 See Section 4.3.1 above.

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creates uncertainty for both operators, in terms of freedom-to-operate in relation to coastal

state patent rights, and technology developers, aiming to obtain broad protection for their

inventions and needing certainty in the scope of protection of a potential patent in order to

justify investment in new technology.

Returning to the example cases presented in Section 1.3.1, the practical implications of the

findings in this work for different vessel types will now be briefly summarised and discussed.

Category Type of unit Characteristics Examples

A Fixed or moored installations

Permanently or semi-permanently fixed or moored to the seafloor.

Production platforms, jack-up rigs, drilling vessels.

B Installation / intervention vessels

Temporarily connected to the seafloor or well.

Well intervention or installation vessels.

C Support / supply vessels

Mobile and not interacting with the seafloor or well

Vessels for transport, seismic, emergency response, etc.

5.3.1 Category A: Fixed or moored installations

Fixed installations (‘oil platforms’) are clearly within the scope of coastal state ‘exclusive

jurisdiction’ under UNCLOS for the exclusive economic zone and continental shelf. The coastal

state may apply national law in relation to activities on such units. All the countries discussed

here have done so in their patent laws.

In terms of movable units, such as a drilling rig which position itself in the exclusive economic

zone or on the continental shelf, e.g. by means of a jack-up system, there is a clear basis in

UNCLOS to give the coastal state jurisdiction on board these. Most countries have elected to give

national patent law effect in relation to these, an exception being Norway in relation to such

units under foreign flag.

A notable effect is that under a correct interpretation of international law, the flag state will

have no rights on board the vessel during the time it is considered a ‘structure or installation’ in

a foreign country’s exclusive economic zone or continental shelf.287 Thus, an activity taking place

during this time would not constitute infringement of a flag state patent; it would only be

relevant for a coastal state patent. (To the extent that this covers the relevant activity.)

5.3.2 Category B: Installation / intervention vessels

There are significant open questions around the effect of coastal state patent law on board

category B vessels, and the current legal situation clearly does not provide certainty for

operators and technology developers.

Under international law, it is unclear whether this type of vessels shall fall under the

‘installations or structures’ definition, which would give the coastal state exclusive jurisdiction

287 See Section 2.3.3(b)(iii) above.

82

on board.288 In addition, the nature of the operations of these vessels may include periods

operating ‘freely’ as vessels, and periods operating stationary in position and connected to a

wellhead; a key question would be whether the coastal state rights change between such

varying operations.

National patent laws vary in relation to such vessels; while the very broad scope of patent law in

Australia, UK and the Netherlands would cover any operation by such vessels, the more narrow

US, Canadian and Norwegian laws would seem to exclude these vessels either partly or

completely.

5.3.3 Category C: Support / supply vessels

Substantial questions around the scope of national patent law also exist for Category C vessels.

The mentioned national laws of Australia, UK and Netherlands cover the activities of such

vessels operating offshore, which, it is submitted, is beyond what is permitted under the

international law of the sea. In the case of the UK, such vessels are also not given the benefit of

the temporary presence exception, which is contrary to the UK’s obligations under the Paris

Convention. US and Norwegian patent laws are, correctly, not applied to these types of vessels.

A notable case-in-point for the varying legal framework and the effect it can have for operators

and patent rights holders is the situation for a seismic vessel. Such a vessel may carry out its

operations offshore and then come to port in the coastal state for supplies, repairs, etc. Systems

and, in particular, methods for seismic exploration, data collection and processing may be

patentable, however a technology developer may be left with no real possibility to obtain

effective protection for such inventions. This is the case under current US289 and Norwegian law

if the vessel sails under a convenience flag or a foreign flag where there is no patent protection

available (or obtained) in the flag state. This is, it is submitted, the correct result according to

current international law. When operating offshore, a coastal state patent in these countries

would not cover the relevant activities, while when the vessel comes to port there may be no

infringement, as the particular equipment in question may only be actually used offshore.290

5.4 Proposals and recommendations

The current situation is unfortunate for both operators and technology developers in the

offshore petroleum space, in that the national law in major operating areas varies, and because

there is uncertainty in relation to the interpretation of certain aspects of this. This is in particular

the case for predominantly method-based inventions, for example well intervention methods or,

as mentioned above, seismic exploration. For such inventions, the potentially infringing acts

may, in practice, only be those carried out offshore. If these activities are then not covered by a

coastal state patent, that may leave a technology developer with no effective means of

protecting inventions. This goes against the objective of the patent system, and does not align

288 See Section 2.3.3 above.

289 As evidenced by the WesternGeco case; see Section 3.2.2 above.

290 I.e. there is no infringing activity when the vessel is in port; see Sections 1.3.1(c) and 1.3.2(a) above.

83

with practical considerations, as there does not seem to be any fundamental arguments against

giving patent law such extended reach (see Section 5.1 above).

It is therefore proposed that coastal state patent law should extend to the exclusive economic

zone and the continental shelf. This should apply also for foreign vessels carrying out any kind of

petroleum-related operation offshore.291 It is proposed that for activities that the coastal state is

permitted to regulate under Art. 56(1)(a) and 77,292 it should also have jurisdiction to apply

national patent law in relation to those activities. A ‘clean’ borderline between such activities

and those falling under the temporary presence exception seems possible. The temporary

presence exception must apply to foreign vessels in international traffic also offshore. Apart

from that, the practice of the temporary presence exception should follow the clear direction

given by the legislative history and current national practice, namely giving it a narrow

construction to cover only such vessels engaged (purely) in international transport.

One possibility to improve the current situation and achieve this would be to amend the

international conventions. There would be two options for this: amending UNCLOS or amending

the Paris Convention. Amending the Paris Convention, having more than 170 signatories,

appears unrealistic. Furthermore, even if the Paris Convention were to specify the effect of

patent law in offshore areas, as proposed above, such an amendment would leave a discrepancy

and conflict between international patent law (through the Paris Convention) and the much

more restrictive international law of the sea (through UNCLOS and relevant case law).

Amending UNLCOS specifically to correct a ‘side’ issue such as patent law also appears

unrealistic, however would appear to be the required measure if this problem should be

corrected through legislative means. Such a change would, however, clearly go against the

current, restricted, provisions in relation to coastal state jurisdiction beyond territorial waters.

Giving patent law extended effect in offshore areas would be a clear step in the direction of

increasing coastal state rights, and is likely to be disputed and resisted by a number of the

current UNCLOS signatories. Nevertheless, for the case of patent law it appears clear that

UNCLOS Art. 56(1)(a) and 77 are too narrow in their current form, in particular in light of the

very restrictive interpretation applied by the authoritative International Tribunal for the Law of

the Sea (ITLOS). The second possibility to implement the above suggestions would be to

establish new international law through state practice. If a sufficient number of states apply its

patent law in a similar manner offshore, and/or communicate this openly, this may over time be

accepted as established law.293 In particular, if major offshore nations (those having significant

petroleum or other types of natural resources exploitation) establish a similar practice on this

matter, then this would carry considerable weight. This could be achieved by such nations

291 I.e. any vessel not involved in purely transport-related activity which would fall under the temporary presence exception.

292 See Section 2.3.2 above.

293 See e.g. Klabbers (2013).

84

establishing an aligned practice that they consider applying national patent law to fall under the

coastal state rights provided by UNCLOS Art. 56(1)(a) and 77.

In order to achieve this, other states need to follow the UK, Australian and Dutch position.

Notably, at the moment important offshore oil and gas producers such as the US and Norway do

not follow the same line, which speaks against this being considered established international

law.

Nevertheless, even if this could be established as state practice, many may still consider it to go

against statute law, namely UNCLOS, and it would in particular go against the express case law of

ITLOS.294 A trend against extending the rights for coastal states in relation to foreign vessels may

be challenged by certain states; for example, for major shipping countries, avoiding other

countries’ rights to interfere with their ships will be a key consideration.295 Thus, there may be

conflicting considerations to take into account in this matter, and there may be express

objections to such a practice by other states, or challenges to the application of national law in

relation to foreign vessels (e.g. flag states bringing cases before ITLOS). Such dispute may

diminish the value of state practice as an indicator of established international law.

In order to correct this problem, and for patent law to fully achieve its objectives, it therefore

appears that a legislative change is required. UNCLOS Art. 56(1)(a) and 77 should be amended to

give the coastal state more extensive rights to give national patent law effect in relation to

petroleum-related activities in the exclusive economic zone and on the continental shelf. This

can be achieved by amending Art. 56(1)(a) and 77 such that they not only permit directly

regulating the exploration and exploitation of natural resources, but also to give national law

effect also for matters associated with such activities. Art. 56(1)(a) and 77 may still be qualified

functionally so as to exclude any activity not related to natural resource exploration and

exploitation, thus preserving the freedoms of the high seas ensured by Art. 58 UNCLOS.

294 See Section 2.3.2(a) above.

295 Notably, including Norway, which may be one reason why the Norwegian lawmaker has been restrictive in applying Norwegian national law in relation to foreign vessels offshore.

85

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