Attorney General Lockyer Hails Gasoline Patents Deal Between Federal Trade Commission And Unocal

Agreement Could Save California Drivers Hundreds of Millions of Dollars

Friday, June 10, 2005
Contact: (415) 703-5837, agpressoffice@doj.ca.gov

(SACRAMENTO) – Attorney General Bill Lockyer lauded the agreement announced today between the Federal Trade Commission (FTC) and Unocal that resolves allegations Unocal abused the regulatory process and engaged in anti-competitive conduct in obtaining patents on specially-formulated, anti-pollution gasoline sold in California.

“No one has suffered more from exorbitant gasoline prices than Californians,” said Lockyer. “No drivers need more relief at the pump. This agreement helps provide that relief by eliminating the possibility our state’s motorists would have to pay literally hundreds of millions of dollars in higher prices every year. And it helps ensure Unocal cannot benefit from its subversion of the regulatory process.”

Under the agreement – which clears the way for FTC approval of Chevron’s proposed acquisition of Unocal – Unocal will stop enforcing its disputed patents on the reformulated gasoline. Unocal also will drop pending patent infringement lawsuits, including actions against Arco and Valero in U.S. District Court for the Central District of California. Additionally, within 30 days of the acquisition’s effective date, Unocal will abandon any claim to the remaining term of the patents.

Unocal obtained the patents in 1990. At the time, the Air Resources Board (ARB) was working to adopt a gasoline formulation to help California meet its clean air standards. Unocal participated in that process, along with other oil companies and auto manufacturers. Unocal steered the ARB to its formula, without informing the ARB it had obtained the patents, and allegedly misrepresenting to the ARB that its research was in the public domain. In 1991, the ARB adopted a standard that meshed with Unocal’s patented product.

The development placed Unocal in the position of being able to collect royalty payments from oil refiners. The other companies, in turn, could seek to recoup their costs by charging drivers higher prices for gasoline. The FTC estimated the potential pass-through cost to drivers at more than $500 million annually.

The FTC filed an administrative complaint that alleged Unocal had unlawfully obtained monopoly power in California’s reformulated gasoline market. Representing the ARB, Lockyer sided with the FTC, and assisted the FTC in prosecuting the case. He also led a bipartisan, multi-state effort to prevent Unocal from enforcing the patents.

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