Unocals patent of gasoline formulas is complex

Robert W. Strozier
Chamberlain, Hrdlicka, White, Williams, & Martin
Houston

In December 1990, Unocal filed a patent application for clean-burning gasoline formulations. In February 1994, Unocal was granted that patent.

The patent encompasses the gasoline specifications mandated by the California Air Resources Board in its Phase 2 reformulated gasoline program, which will be phased in beginning Mar. 1, 1996. For this reason, Unocals patent is being challenged by a number of major refiners operating in California.

General concepts

Patents are composed of several parts. First, each patent must have a specification. The specification must enable one of ordinary skill in the art to which the patent pertains to practice the patented technology.

In the case of the Unocal patent, the specifications must be sufficient to allow an ordinary refiner to make unleaded fuels that meet the limitations of each issued claim.

In addition to enabling an ordinary artisan to practice the technology, patent specifications also must disclose the best mode of practicing the invention known to the inventor or inventors at the time of filing. (In other words, the final commercial product resulting from the patent can use improved practices not known at the time of filing.)

With the exception of provisional applications, all U.S. patent applications must end in one or more claims. Claims are the protectable part of issued U.S. Letters Patents and are designed to inform the public about the extent and nature of the patent coverage.

Claims must be written in clear and concise language that plainly inform the public (in this case, the refining industry) of what acts would constitute acts of infringement.

Table 1 (16020 bytes) lists the characteristics of a patent.

Claim strategy

Because claims are the essence of a patent, claim construction, claim type, the number of claims, and what each claim covers are of primary importance to the patent attorney and the inventors.

The primary consideration in drafting claims is to ensure that the invention is claimed as broadly as can be sustained. The broader the claim coverage, the more activities the patent will exclude others from freely practicing.

A secondary consideration is to ensure that claims fully cover commercial or potentially commercial products. Claims directly covering commercial products can simplify evidence needed at trial to prove infringement of the patent.

The Unocal patent

The Unocal patent was issued as U.S. Letters Patent No. 5,288,292 on Feb. 22, 1994, from a patent application filed on Dec. 13, 1990. The patent is assigned to Union Oil Co. of California (Unocal). Many references were cited in the Unocal patent, including 43 U.S. Patents and 43 printed publications.

The Unocal patent has nine illustrations and a 9-page, 18-column specification. The number of illustrations and the size of the specification are not unusual. However, the number of issued claims is a bit out of the ordinary.

The Unocal patent was issued with 155 claims. The patent has 17 independent claims and 138 dependent claims.

Independent claims are those that stand irrespective of any other claim. In other words, independent claims do not depend on any other claim for their definition or scope.

Fig. 1 (56625 bytes) is a chart of the Unocal patents claims. The figure shows the independent claims on the left side and the dependent claims branching off toward the right. ( The independent claims are defined and summarized in Table 2 [21559 bytes].) This branching indicates the dependent claims relationship to the independent claims.

Patent coverage

The Unocal patent covers reformulated gasoline (RFG) and is based on the discovery that certain properties of RFG affect the type and quantity of noxious exhaust gases produced during combustion of the fuel in spark-discharge, internal-combustion engines.

The Unocal patent is also based on the discovery that four fuel properties are critical for producing less polluting fuels. Those properties are:

• 50% D-83 distillation point

• Reid vapor pressure

• Octane value

• Olefin content.

Two other properties were also found to be somewhat important: the paraffin content and the 10% D-86 distillation point.

The 17 independent claims of the Unocal patent cover fuels with different combinations and values of those properties, while the dependent claims further limit particular fuel properties. Because this patent, if sustained, could have an ultimate value to Unocal in the hundreds of millions of dollars in potential royalties, Unocal probably included as many claims as it could possibly sustain to ensure that all commercially significant fuels having the stated values of these key properties were adequately covered.

Table 2 (21559 bytes) shows which of the six aforementioned fuel properties are covered by the patents independent claims.

Patent challenges

The Unocal patent is obviously a key patent in the area of reformulated gasoline. If the patent survives court challenges, it could produce significant royalty income to Unocal. For that reason, and because the patent covers fuels satisfying current and future environmental standards, other refiners would not be free to sell such gasoline fuels in this country without incurring patent infringement liability.

The monetary stakes and the claimed reach of the Unocal patent to fuels that may eventually be mandated by law, make a patent dispute inevitable. Six other refining companies filed suit against Unocal on Apr. 13, 1995.

This suit is pending in the U.S. District Court for the Central District of California. The court action pits Unocal against Atlantic Richfield Co., Chevron U.S.A. Inc., Exxon Corp., Mobil Oil Corp., Shell Oil Products Co., and Texaco Refining & Marketing Inc.

The suit was not filed by Unocal, but rather is a declaratory judgment action by the other refiners asking the court to find the patent either invalid or unenforceable or to stop Unocal from collecting royalties under its patent. Table 3 (34201 bytes) lists factors involved in determining the invalidity and unenforceability of a U.S. patent.

The other refiners contend that the reformulated fuels covered by the Unocal patent were already known, used, or sold by the industry; hence, there was no new discovery. The other refiners also contend that Unocal failed to inform the Patent Office of the most pertinent prior art, violating its duty of disclosure and good faith to the Patent Office.

The other refiners further contend that Unocal concealed its application while participating in setting new environmental standards for fuels.

Unocal, on the other hand, contends that it was fully within its rights to file its patent application, that its invention was not known by others prior to filing its application, and that it fully complied with all duties owed to the Patent Office. Unocal, of course, has filed a counterclaim accusing the other refiners of willful patent infringement and claiming damages.

Dispute resolution

If the matter is resolved between Unocal and the other refiners only after a trial on the merits, it could be yearsperhaps as many as 10 years if an appeal is taken after a trialbefore the outcome is known. There is always the prospect, of course, that the parties may settle their differences in some fashion acceptable to them.

Because settlement of cases like this often involves recognition of the validity of at least some of the patent claims, together with a license to practice the art covered by those claims, it is possible that some refiners might resolve their dispute with Unocal while others continue to pursue their positions in court.

WHAT IS A PATENT?

1. A patent includes a specification and one or more claims.

2. The specification must explain and describe the best mode of application for the invention.

3. The claims describe what the patent cannot do.

4. Claims are written to broadly protect the invention.

5. Claims also are written to protect commercial products.

6. A patent gives the inventors or owners the right to exclude all others from practicing the invention.

Strozier answers tough questions

Following Dr. Stroziers presentation at the Oil & Gas Journal International Conference on Oxygenates and Reformulated Gasoline, audience members asked pertinent questions about Unocals gasoline patent:

Q: If part of the patent is invalid, does that invalidate the whole patent?

A: Thats invalidated on a claim-by-claim basis. Each claim stands on its own.

Now, you can jeopardize the whole patent by other things. If they are found guilty of concealing information from the Patent and Trademark Office that was considered vital or material to patentability and there was an intent to deceive, then the whole patent goes away. Every part of it is unenforceable.

It doesnt necessarily mean it was invalid. It just means that Unocal cant take its right and exercise its right against anybody.

Q: Who is it that youre representing in this?

A: Im not. Im neutral.

Q: Presuming these companies that are contesting the patent, the six, will have to make gasoline or will make gasoline during this period when its being contested, what happens if they lose? How do they decide what their royalties are going to be then?

A: Its a very interesting complaint and answer. In the complaint, the six major oil companies basically state they will make fuel and will continue to make fuel that complies with the EPA and the CARB standards or the Phase 2 standards. The problem is that this patent really sits on a lot of those standards.

So theyre caught between a rock and a hard place. They will incur liabilities by selling fuel to comply with California EPA guidelines and they have admitted that and will continue to do that.

Q: Since they were all in this Auto/Oil study at the time, can you counter this with a fraud claim?

A: That is an interesting point. Its not in the lawsuit at this time.

The lawsuit basically has three counts: invalidity, unenforceability, and an estoppel argument that Unocal really cant go forward with collecting the royalties. But theres not a common law fraud, which was kind of odd.

Most of us among the general litigators that I talk to at Chamberlain, Hrdlicka, were kind of astounded that there was not a direct fraud count. That may come later.

They were all (all the oil companies) involved in some kind of collaboration in California, but Unocal states that that collaboration allowed each to have the right to do independent research, and they didnt have to divulge that independent research. And this was all their independent research; and, therefore, their patent wasnt imputed by the collaboration that was done by agreement in California.

Q: Inasmuch as you dont represent any of the parties, if you were given the opportunity to choose one side or the other, and had to argue that before the judge, you would choose which side?

A: To give you an idea, Im not sure which side Id be involved in now. The reason I say that is the Federal Circuit has basically made patents more difficult to invalidate.

Before 1982, when patents would go into court, about 65% of the time they would be held invalid for one reason or the othermainly because we didnt like monopolies, and patents are monopolies. The Federal Circuit came into existence in 1982 and basically completely flipped it around.

Now, about 65% of the patents are held valid. And thats a substantial problem to people trying to invalidate patents. So Im not sure which side Id sit on.

The Author