Oil prices may be down, but trade secret thefts in the oil patch are on the rise. Why? As oil prices sink, companies lay off employees. Often, employees leave with more than their car keys. Also, struggling E&P companies that once zealously guarded their confidential business information are often forced to share such data to facilitate potential asset divestitures or mergers, or go bankrupt. When the deal doesn’t close, however, such information is often misused. Examples of this fact scenario have already played out in Texas courts, and may be coming to a courthouse near you.
Knowledge is King
In re TXCO Resources in the U.S. Bankruptcy Court for the Western District of Texas in 2012 is a classic story of opportunistic self-dealing in the wake of depressed oil prices. TXCO was an early entrant in the Maverick Basin in South Texas and drilled the first horizontal Eagle Ford well. As a result, it had accumulated technical, geologic, geophysical and engineering knowledge allowing it to evaluate the economic viability of acreage in the region. As noted by the TXCO court, “Knowledge is king,” and TXCO had the knowledge. However, timing is everything, and the price of oil began to slide in July 2008, falling from almost $147 to $35 per barrel by the following January. Sound familiar?
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