Unocal Patents to Face New Review
The Federal Trade Commission on Wednesday reinstated civil antitrust charges against Unocal Corp. over the oil company’s patents for cleaner-burning gasoline in California. The FTC and other critics contend that those patents would saddle state motorists with higher fuel prices.
The five-member panel voted unanimously to overturn a ruling made in November by an FTC administrative law judge, who found that Unocal’s actions were immune from antitrust prosecution. That decision was appealed by the FTC’s staff to the commission members.
At issue are several patents held by El Segundo-based Unocal that critics allege give Unocal an illegal monopoly over California’s unique formula for cleaner-burning gasoline.
In the early 1990s, Unocal and other oil companies were working with the California Air Resources Board to develop a standard for gasoline that emits less pollution. The FTC, in its initial complaint in March 2003, alleged that Unocal was simultaneously applying for patents on key aspects of the new blend but hid that fact from others in the group.
The result was that Unocal’s patents provided the company with “unlawful market power” to demand royalties from other gasoline sellers using the new, state-required blend, the FTC said.
Unocal “induced CARB to adopt reformulated gasoline standards that substantially overlapped with Unocal’s patent rights,” the FTC reiterated Wednesday.
The agency claims that as the expenses of those royalty payments are passed along to motorists, the patents could cost California consumers $500 million a year in higher pump prices, or a few pennies per gallon.
Unocal disputes that figure, saying its estimate of annual royalties is $75 million to $150 million. Unocal’s total revenue last year was $6.5 billion.
The case now goes back to an FTC administrative law judge for further proceedings on its merits.
“The bottom line is there is no finding of fact by this commission” in Wednesday’s decision, said Unocal spokesman Barry Lane. “Ultimately, we expect to prevail in this venue as we have in every other venue.”
Indeed, the company’s patents have been challenged in the past by other major oil companies facing the royalty payments, but the patents remain in force. Some of those cases have been suspended pending the outcome of the FTC action and a review by the U.S. Patent and Trademark Office.
California Atty. Gen. Bill Lockyer, who supports the FTC’s lawsuit, praised the commission’s vote Wednesday.
“The decision is excellent news for California consumers,” Lockyer said in a statement.
Exxon Mobil Corp., the nation’s largest oil company, also welcomed the FTC’s action. It “underscores what we have always maintained, that Unocal engaged in unfair methods of competition” and monopolized the technology for making “a legally mandated product,” Exxon Mobil spokeswoman Sandra Duhe told Bloomberg News.
Unocal’s stock fell 24 cents to $38.54 on Wednesday and Exxon Mobil gained 27 cents to $45.37, both on the New York Stock Exchange.
