press release

Federal court denies challenge to Unocal RFG patent; Unocal holding discussions on royalty terms with potential licensees

El Segundo, Calif., May 18, 2000 -- Unocal Corporation today said that the Federal Circuit Court in Washington, D.C., denied a petition by six major oil companies to rehear their appeal of the earlier decision validating Unocal's patent for reformulated gasoreformulated gasoline.

In March, the Circuit Court upheld the validity of Unocal's reformulated motor gasolines patent and confirmed the earlier jury award of 5-3/4-cents per gallon in damages for infringing motor gasoline production by the six major oil refiners. The defendant companies had asked the entire Circuit Court panel to rehear the appeal.

In 1997, a jury in the Federal District Court, Central District (Los Angeles) found the Unocal patent was valid and that the six defendant companies had infringed on the patent.

"Now that the Circuit Court has entered the order and finalized its decision, we expect to collect damages from the defendants," said Roger C. Beach, Unocal chairman and chief executive officer.

"During trial, the defendant companies indicated they could blend around our patent and avoid infringement," Beach said. "Unocal has consistently indicated that it is ready and willing to negotiate fair and appropriate licensing terms with refiners, blenders and importers for those quantities that infringe on Unocal's patented compositions."

Beach said that Unocal has had preliminary discussions with potential licensees for Unocal's reformulated patents, and Unocal is continuing to receive inquiries from additional companies. The company did not disclose any further details on licensing terms or on discussions with potential licensees.

Unocal holds five patents for new, useful and non-obvious compositions of traditional motor gasolines that substantially reduce unwanted air emissions using current refining technology and motor vehicles. The compositions outlined in the patents involve specifications of certain parameters of various grades of gasolines, including Reid Vapor Pressure (RVP), olefin content, and distillation points. With the RVP component, the Unocal patents are applicable principally to so-called "summer gasolines."

"We believe that our patents will be advantageous for refiners, blenders and importers throughout the U.S., particularly now with the focus on cleaner-burning gasolines," Beach said. "The Unocal patents provide a roadmap for motor gasolines that will help clean up the air. Like seat belts, air bags, and catalytic converters, Unocal's reformulated gasolines are patented inventions that can benefit the motoring public."

With the conclusion of the appeal, Unocal will now ask the District Court in Los Angeles to implement an earlier order for the defendant companies to provide an accounting of their infringement of Unocal's patent since the five-month period covered by the trial.

During the initial trial, evidence showed that 29.1 percent of the total California reformulated gasoline manufactured by the defendants between March 1, 1996, and July 31, 1996, infringed on Unocal's "393" patent. The jury's award for the five-month period covered by the trial exceeds $95 million, including interest and certain attorney's fees.

The "393" patent was granted to Unocal by the U.S. Patent and Trademark Office on Feb. 22, 1994 (No. 5,288,393). The validity of that patent was the subject of the litigation in U.S. District Court. The four additional patents, which are an outgrowth of the earlier research, supplement the claims of the "393" patent. None of Unocal's patents require or exclude the use of MTBE or other oxygenates.

About Unocal Corporation

Unocal has long been a leader in the development of clean air process technology and cleaner burning fuels, including unleaded gasolines. In addition to the new generation of low-emission gasolines, Unocal has developed extensive resources of natural gas, one of the cleanest burning fuels. In addition to developing natural gas and crude oil resources, the company focuses on pipeline and power plant projects in Asia and the Americas.

At year-end 1999, the company had worldwide natural gas reserves of 6.6 trillion cubic feet, representing two-thirds of the company's overall hydrocarbon reserves. In North America, Unocal is one of largest independent natural gas producers, with current net production of 1 billion cubic feet per day.

Updated: May 2000