Unocal: FTC seeking to apply hindsight to CARB rulemaking
El Segundo, Calif., March 4, 2003 - Unocal Corporation (NYSE: UCL) today said that hard evidence and case law will again vindicate Unocal as it responds to a complaint filed today by the U.S. Federal Trade Commission (FTC) over the company's conduct during the California Air Resources Board's (CARB) rule-making for reformulated gasolines (RFG).
"We are again taking this matter into a judicial setting where facts and the law are used, rather than what some wish the law should be in the future," said Charles O. Strathman, Unocal's chief legal officer. "Unocal's conduct will be vindicated as it has in the U.S. District Court, the U.S. Court of Appeals, and the U.S. Supreme Court."
The company said it has not seen the FTC complaint, but understands that the FTC alleges that Unocal acted improperly by not disclosing during the CARB rule-making process in 1991 that it had applied for cleaner burning gasoline patents, resulting in an anti-competition effect.
CARB rule-making process
The issue of Unocal's conduct before CARB was raised but then abandoned by the major California refiners in the U.S. District Court in 1997. CARB officials testified in depositions that they had not been deceived by Unocal's behavior. In fact, the refiners were sanctioned by the court and ordered to pay Unocal its legal expenses it incurred to counter the claim made and then dropped at trial, Strathman said.
"The refiners subsequently attempted to raise the claim before the Federal Circuit Court of Appeals, the U.S. Solicitor General, and the U.S. Supreme Court. It was rejected in all venues. One of the refiners then pressed the same court-rejected claim with the FTC," Strathman said. "In light of this history, we are confident that the claim will be rejected again. In the impartial light of courtroom after courtroom, the refiners have failed in this fallacious assertion. We expect to ultimately achieve the same result here."
Strathman noted that CARB never asked or even considered asking if anyone who CARB sought information from had any patents or pending patent applications during its rule-making.
In fact, CARB officials admitted in depositions that the companies were not under any obligation to disclose any patent applications. "CARB simply asked us in 1991 to lift the confidential status of our gasoline research data so that CARB could add it to a large database. To suggest now, 12 years later, that it was fraudulent or wrongful for a company to comply with the government's request is deeply unfair," Strathman said. Unocal made its proprietary research data points available to CARB.
Strathman went on to say, "The evidence shows that Unocal's communications with CARB were truthful in advocating regulations we thought were best. CARB ultimately rejected our advice and adopted an approach we opposed. We did not have any intent to deceive, let alone defraud, CARB."
Unocal's patents have not had an adverse effect on the gasoline market. Studies by the FTC, Environmental Protection Agency, U.S. Department of Energy, Congressional Research Service, California Attorney General, and various news services have concluded that Unocal patents have had little or no impact on gasoline prices.
In addition, Unocal has offered a uniform licensing arrangement, and eight companies have signed agreements with Unocal. However, none of the defendant refiners have ever met with Unocal to negotiate a license.
Strathman also pointed out that Chevron and ARCO, who were also providing information to CARB, had patent applications for cleaner burning gasolines pending during the CARB rule-making process. Neither of those companies disclosed its patent position to CARB. Although neither company was successful in obtaining a patent, this is evidence that no one participating in the process considered it proper or necessary to disclose such information, Strathman said.
Rewriting the law
"The FTC is apparently trying to use the CARB rule-making process as a platform to overturn the long-held Noerr-Pennington doctrine," Strathman said. Noerr-Pennington is based on U.S. Supreme Court rulings guaranteeing the right to petition government (as provided by the First Amendment) to secure legislation and regulations that may confer private gain; it excludes such petitioning from antitrust liability.
Each company that participated in the CARB proceedings was pursuing such rights. CARB, under California law, was exercising its quasi-legislative powers in formulating cleaner burning gasoline regulations, and therefore, fell under the Noerr-Pennington doctrine, as previously supported by the FTC.
Unocal will now pursue the issue in a proceeding before an administrative law judge. The judge will issue a finding for consideration by the FTC. The process before the judge typically takes approximately one year.
About Unocal Corporation and the patents
Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's principal oil and gas activities are in North America and Asia.
Additional information about Unocal's patents for cleaner burning gasoline formulations is available on the company's web site, www.unocal.com/rfgpatent, and in its amended 2001 Annual Report on Form 10-K/A and subsequent reports filed with the U.S. Securities and Exchange Commission, which can also be accessed from the company's web site.
Updated: March 2003