Valero vows to fight Unocal lawsuit over alleged patent infringement

Sam Fletcher
OGJ Online

HOUSTON, Jan. 24 -- Valero Energy Corp., San Antonio, vowed Thursday to fight a federal lawsuit filed this week by a subsidiary of Unocal Corp. that claims Valero infringed Unocal patents for reformulated gasoline.

"If necessary, we intend to vigorously fight this lawsuit and we are confident that we will win," said Valero officials. "The Unocal patents make a mockery of the regulatory rule-making process and line the pockets of an entity that produces nothing by gouging the California consumer."

In what is seen by some as a test case for enforcement of its controversial patent, Union Oil Co. of California asked the US District Court in Los Angeles to force Valero to buy a license for Unocal's patented process and to make periodic royalty payments (OGJ Online, Jan. 23, 2002).

Unocal also is seeking damages amounting to 5.75¢ for each gallon of gasoline allegedly produced by Valero through that patented process, with the total to be tripled as punishment for "willful infringement."

"Currently, California consumes approximately 1 million b/d of gasoline. If successfully litigated, the 5.75¢/gal royalty would cost California consumers, who already have some of the highest gasoline prices in the nation, another $580 million during the summer months alone," said Valero officials.

Of Unocal's five patents related to reformulated gasoline, only the one designated '393 previously has been litigated, said Valero officials. They claimed most refiners can "blend around" that process, at a cost that can be passed on to consumers.

However, Valero officials claim the lawsuit against their company "is far more potentially damaging to California consumers as it (also) includes patent '126, which, in Unocal's view, covers every single gallon of California summer CARB gasoline."

"Valero has said openly that it made fuels covered by Unocal's patents in complete disregard for Unocal's intellectual property rights," said Unocal officials Wednesday. "Unocal has repeatedly invited Valero to negotiate a licensing agreement, but Valero has refused to have any discussions."

However, Valero officials responded, "We believe the patents are invalid because we believe Unocal violated anti-competitive laws by manipulating the standard-setting process for CARB Phase 2 gasoline requirements without disclosing its pending patents to the California Air Resources Board in order to gain an unfair competitive advantage."

For its part, Unocal says the patent claims were sometimes narrowed and sometimes broadened, but never copied from the CARB regulations (OGJ Online, Jan. 26, 2001).

ARCO Corp., Chevron Corp., ExxonMobil Corp., Shell Oil Co., and Texaco Inc. challenged the Unocal's patent in 1995. Eventually, the US Supreme Court upheld the patent ruling by refusing to hear the case (OGJ Online, Feb. 20, 2001). A jury in 1997 awarded Unocal damages of 5.75¢/gal for gasoline manufactured through infringement.

So far, Unocal has signed licensing agreements with eight companies at a rate of 1.2-3.4¢/gal. It said it is willing to negotiate commercial licensing agreements with all interested parties.

Contact Sam Fletcher at [email protected]