TOP COURT MAY REJECT UNOCAL CASE, BUT KEY LEGAL ISSUES ARE INVOLVED

Legal experts and industry observers agree there is only a slim chance the U.S. Supreme Court will review the validity of Unocal’s patent for cleaner-burning gasoline as oil companies have petitioned. If the appeal is denied, the six oil companies, found to be infringing on the patent, will have to begin paying hefty royalties to Unocal.

Atlantic Richfield Co., Chevron USA, Exxon Mobil Corp., Mobil Oil Corp., Shell Oil Products Co. and Texaco Refining and Marketing contend the case “has important ramifications for consumers, gasoline refiners and regulators.” Patent attorneys may take note as well.

“The petitioners’ legal position is ably represented in the petition. The petition sets forth a compelling factual and legal basis on which the Supreme Court could grant it and address two issues of great importance to patent lawyers — claim construction and the patent law/regulatory law interface,” said Christopher Philip Wrist, an attorney in the Washington, D.C., law firm Fitzpatrick, Celia, Harper & Scinto and patent committee chair of the D.C. Bar Association, Intellectual Property Law Section. “The petition asserts that the federal circuit decision is in conflict with the patent statutes as interpreted in prior Supreme Court decisions, but two of three judges on the federal circuit panel disagree.

“Moreover, the petition could still fail simply on the basis of numbers. The Supreme Court grants Certiorari in only a small number of cases. The petition does not present an issue of Constitutional interpretation and can not present an issue on the basis of conflicting opinions by different circuit courts because the federal circuit has exclusive jurisdiction in all patent appeals. Other cases involving one of these types of issues could be deemed more compelling by the Supreme Court.

The Supreme Court is expected to decide whether to grant the petition in the fall during the term that begins in October.

Unocal to Respond Next Month

“The application to the Supreme Court was not unexpected. Exxon Mobil had been saying all along they would file an appeal,” said Unocal spokesman Barry Lane. “We have not had an opportunity to review the petition. Based on statements we have seen, they’re not offering anything new. The issues were extensively reviewed at trial and on appeal. where Unocal has prevailed. At this point, it’s not clear to us that Exxon is raising any new issues that warrant the Supreme Court taking this case.”

At trial, the ‘393 patent, as it is known, was deemed valid, Lane reminded. Unocal applied for the ‘393 patent in December 1990, almost a year prior to California’s regulations. Since then, Unocal obtained four more patents, which oil company attorneys say cover 800 claims.

“Although the chances of a Supreme Court hearing are slim, the defendants need to take a shot because the downside for them is huge,” said Dave Hackett, an expert on the Unocal patent issue while president of Stillwater Associates, currently the vice president of business development for eLink Commerce. “The cost for California alone could run over $500 million per year if Unocal’s five patents cover all the RFG sold in the state.” The tab for past infringement from mid-1996 to present could be over $2 billion.

The oil companies have been invited to negotiate a royalty with Unocal, but they have declined, Unocal’s Lane said. “For five years, we’ve asked people to sit down and to negotiate fair and reasonable licensing terms. The defendants just chose to keep going to court.”

Too much is at stake, the industry feels. “We believe that the Supreme Court should hear our case, as it has important consequences for consumers as well as for the integrity of the regulatory process,” said Gene Renna, senior vice president of Exxon Mobil.

The nation, not just California, could potentially be affected by the Court’s decision, Exxon Mobil said. U.S. Federal Trade Commission Chairman Robert Pitofsky told the House Commerce Committee in June Unocal’s patent for some formulations of RFG may have caused some refineries to change RFG blends in an apparent attempt to avoid infringement or high royalty payments and caused production delays and decreased refinery throughput that contributed to price spikes that month.

“Our brief points out the inequity of effectively levying a fine against producers who are required by law to make this clean burning gasoline,” Renna said. —Carol Cole

(with permission of Hart's Octane Week)