Unocal sues Valero Energy for willful infringement of gasoline patents
El Segundo, Calif., Jan. 23, 2002 - Unocal Corporation (NYSE: UCL) today said that its Union Oil Company of California subsidiary has filed suit against Valero Energy Corporation (NYSE: VLO) for willful infringement of Union Oil's '393 and '126 gasoline patents. These patents cover certain compositions of cleaner-burning motor gasolines.
The lawsuit, filed Tuesday in the U.S. District Court for the Central District of California (Los Angeles), asserts that Valero, which now includes facilities previously operated by Ultramar Diamond Shamrock Corporation, has willfully infringed on Unocal's patent claims for cleaner burning gasolines.
In the complaint, Unocal noted that Valero has said openly that it made fuels covered by Unocal's patents in complete disregard for Unocal's intellectual property rights. Unocal has repeatedly invited Valero to negotiate a licensing agreement, but Valero has refused to have any discussions.
The '393 patent was litigated at length in an earlier case and upheld with a royalty rate of 5.75-cents-per-gallon imposed on the defendants. The complaint against Valero asks that the rate found by that jury be applied to this infringing company. Unocal is asking for triple damages for Valero's willful infringement.
Unocal is also seeking a mandatory license with court-ordered periodic royalty payments for future infringement. The company said that the mandatory license is preferable to the need for repeated litigation if Valero wishes to continue its use of Unocal's patented formulations.
License agreements signed with 8 companies
Unocal has signed licensing agreements with eight companies, giving them the right to produce and blend cleaner burning gasolines using Unocal's patented formulations. The company said it is willing to negotiate commercial licensing agreements with all interested parties.
Unocal introduced a uniform licensing program that specifies a range of between 1.2 and 3.4 cents per gallon for volumes that fall under the Unocal patents. The licensee's rate per gallon is reduced as more utilization occurs. Unocal holds five patents on cleaner burning gasoline compositions.
Unocal believes that its patented formulations provide refiners and blenders with a cost-effective way of meeting California and Federal standards for cleaner-burning gasolines. The company estimates that licenses for the patents would add less than one cent to the cost of reformulated gasolines nationwide.
Background on Unocal patents and litigation
The '393 patent (No. 5,288,393) was granted to Unocal by the U.S. Patent and Trademark Office on Feb. 22, 1994. The validity of that patent has been the subject of lengthy litigation in the Federal courts. The '126 patent (No. 5,837,126; issued Nov. 18, 1998), which is an outgrowth of the company's earlier research, supplements the claims of the '393 patent.
In April 1995, Unocal was sued by six of the world's largest refiners, challenging the validity of the '393 patent. In 1997, a jury in the U.S. District Court in Los Angeles found the patent was valid and that the defendant companies had infringed. The jury awarded damages of 5.75-cents-per-infringing-gallon. Unocal received a payment of $69 million plus accrued interest and some attorneys' fees in June 2000 for infringement from March 1, 1996, to July 31, 1996. About 29 percent of the RFG gasoline manufactured by the defendants during that period infringed on the '393 patent.
The jury decision was upheld by the Federal Circuit Court of Appeals in May 2000. In February 2001, the U.S. Supreme Court declined to hear the case.
Unocal is pursuing additional damages from the defendants for infringement of its '393 patent during the period of Aug. 1, 1996, to Dec. 31, 2000.
Additional information about Unocal's patents for cleaner burning gasoline formulations is available on the company's web site, and in its 2000 Annual Report on Form 10-K and subsequent reports filed with the U.S. Securities and Exchange Commission.
Updated: January 2002