Unocal Corp.’s defense of its patents on cleaner-burning gasoline is before the U.S. Supreme Court, where justices are deciding whether to hear a challenge from five of the world’s biggest oil companies.
Unocal filed a brief last week in the case, which pits it against Exxon Mobil Corp., Royal Dutch/Shell Group, BP Amoco Plc, Chevron Corp. and Texaco Inc. The refiners accuse Unocal of gaining overly broad patents on reformulated gasoline and want a reversal of a lower court’s award of $91 million in royalties and fees.
“What Unocal’s doing cuts against 100 years of court precedent and patent law,” said Casey Johnson, Exxon Mobil’s lead litigator in the case. The patents’ breadth makes them “impossible to blend around,” he said.
If the refiners lose, they warn that U.S. gasoline prices will rise further as they pass the costs of royalties on to consumers. Some analysts blamed summer price jumps in the Midwest on Unocal’s patents, saying concerns about infringement helped to limit fuel supplies. Unocal disputes that claim.
“Every court that has heard this has concluded the patent is legitimate,” Unocal spokesman Barry Lane said. A jury in 1997 ordered the five refiners to pay 5.75 cents for each gallon produced in California that violated Unocal’s patent during a five-month period in 1996.
A federal appeals court in Los Angeles upheld the verdict in March. The Supreme Court is expected to decide no earlier than next month whether it will hear the case.
El Segundo-based Unocal said it’s open to speaking with companies willing to pay licensing fees. Such fees could reach $200 million to $300 million a year, said analyst James Van Alen of Janney Montgomery Scott. Lane declined to say whether Unocal is in any licensing talks.
The refiners accuse Unocal of basing the patents on information received in forums that were open to the public, a charge the company denies.
Inspired by the federal Clean Air Act of 1990, officials from Unocal and other major energy companies met in the early 1990s with California regulators to design stricter auto-emission standards. Unocal in February 1994 received the first of five patents on combinations used to make gasoline that, when burned, emitted less of the chemicals that can interact with sunlight to form smog.
“A lot of people laughed when they first heard about the patent,” said Edward Murphy, vice president of the American Petroleum Institute, which has filed a brief in the case backing the refiners. All five are members of the trade group, while Unocal isn’t.
