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technology for use on particular properties typically does not
occur in the oil industry.
In the late 1970's and early 1980's, when the license
agreements involved in these cases were entered into, the
established license fee in the oil industry for the right to use
EOR technology was a 2-3 percent running royalty based on
incremental increased oil production, or on the income actually
realized therefrom, that was attributable to the particular EOR
technology being licensed. The fixed fees to be paid by Boulder,
Tech-1979, and Winfield for the EOR technology licenses were not
competitive in the oil industry and were contrary to industry
norms.
It was not necessary for Boulder, Tech-1979, and Winfield to
license these technologies. Of the technologies licensed --
Carmel VaporTherm (Carmel), TEC, ElektraFlo, and SME Oil Drive --
only the TEC and Carmel processes were developed to any
significant extent, and the TEC and Carmel processes could have
been licensed by the partnerships directly from the inventors
thereof for running royalties based solely on income realized
therefrom. Thus, it was not necessary for Boulder, Tech-1979,
and Winfield to license the Carmel and TEC processes from Elektra
and pay up-front fees for them.
In the oil exploration and production industry, it is
ordinary to lease tar sands properties based on projections of
reserves, not oil in place.
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Last modified: May 25, 2011