Sam Fletcher
OGJ Online
HOUSTON, Feb. 20�The US Supreme Court's opinion Tuesday upholding Unocal Corp.�s patent for cleaner-burning reformulated gasoline (RFG) calls into question the feasibility of the federal Clean Air Act that it�s supposed to advance, said an industry official.
Urvan Sternfels, National Petrochemical & Refiners Association president, said with a movement underway to ban the use of methyl tertiary butyl either (MTBE) as an oxygenate additive to gasoline, and without sufficient ethanol to replace it, the Supreme Court decision has �national implications� for refiners' ability to provide enough RFG at affordable prices.
NPRA had joined with the American Petroleum Institute and the Western States Petroleum Association in urging the Supreme Court to overturn Unocal�s patents. California, 33 other states, and the District of Columbia also challenged the validity of the patent.
In the initial trial, a US District Court jury found that five major refiners�ARCO, Chevron Corp., ExxonMobil Corp., Shell Oil Co. and Texaco Inc.�manufactured 13 million gal of RFG that fell under on Unocal�s designated �393� patent during March-July 1996 in California. The jury awarded Unocal $69 million, plus interest, which the company received in June 2000.
Opponents said that award is only the tip of the potential massive cost to other refiners and consumers.
Refiners might have to pay a fee of up to 5.75�/gal for use of Unocal's patented process for RFG. That could exceed $100 million/year in California alone, API officials earlier reported (OGJ Online, Sept. 13, 2000).
However, Unocal officials said Tuesday they could get $75-$150 million/year from total royalties on their RFG process that is now covered by five patents.
They said the Unocal process is most useful in the manufacture of lower Reid vapor pressure gasolines for summer months, which accounts for less than half of all reformulated gasolines. Moreover, they claim that other refiners have demonstrated their ability to manufacture gasolines that comply with government-imposed clean air standards without infringing on Unocal�s patents.
Unocal officials said Tuesday they are �ready and willing� to negotiate with refiners, blenders, and importers on licensing agreements for its gasoline patents.
Unocal CEO Charles R. Williamson said in a written statement, �Lost in this long dispute is the simple fact that utilizing the formulations in our cleaner burning gasoline patents can save refiners and consumers millions of dollars while improving air quality. � I think it is time for all of the parties to sit down and negotiate fair and reasonable licensing agreements.�
An API representative told OGJ Online, �Individual companies will have to address their own business relationships and determine how to proceed in light of today�s court decision.�
A Chevron spokesman said that company is reviewing �a number of options� and should decide in a few weeks.
Unocal said in early 1989 its scientists developed �new and nonobvious ideas� about cleaner burning gasolines that they offered to a consortium, consisting of 11 major oil refiners and the three largest US automakers, that was testing a variety of gasoline components. When that group rejected Unocal�s research, the company decided to fund and conduct its own independent tests, company officials said.
Unocal applied for its initial patent in December 1990. The following June, the company shared its results with the California Air Resources Board, which was considering new RFG regulations. Unocal received four additional patents for reformulated gasolines in 1997-2000.
Unocal introduced its original �393� patent in January 1995 and offered to negotiate licensing arrangements with other companies.
However, a group of refiners sued in US District court in April 1995, claiming that Unocal�s patent was invalid and unenforceable. The companies also claimed that Unocal�s conduct in obtaining the patent was improper. Unocal filed a counterclaim alleging patent infringement.
