Chevron to Pay California Drivers $48M to Settle Unocal Patent Suit

 unocal_logo_svg.png

Standards-setting organizations (SSOs) are industry or government groups that develop and publish uniform technology standards to ensure product quality and interoperability for new technologies.  Although rules vary among SSOs, generally private industry participants in the process have a duty to disclose patents or patent applications they own that relate to the industry standards under development. 

Failure to disclose relevant intellectual property can expose a company to legal liability (both through private lawsuits and by government agencies such as the Federal Trade Commission (FTC)) and render the company’s patents unenforceable. 

Companies that do disclose their patents early in the standards-setting process are more likely to see their patented technologies become the industry standards.  Often, companies in this situation are required by the SSO to agree to provide licenses to their technology under reasonable and non-discriminatory terms.

When the 1990 Clean Air Act mandated that gasoline be reformulated to reduce evaporation and cut ozone-forming and toxic air pollutants, the California Air Resources Board (CARB) worked with the oil and gas industry to develop reformulated gasoline (RFG) standards. 

After the RFG standards were issued, the U.S. Patent & Trademark Office (PTO) granted several RFG patents (which had been pending during the standards-setting process) to Union Oil Company of California (Unocal). 

In 2005, after Chevron Corp. (Chevron) bought Unocal, California consumers brought a class action against Unocal alleging that it had failed to disclose its pending patent applications during the standards setting process and had represented its technology as “non-proprietary” (the FTC also filed a complaint against Unocal in 2003). 

The class action complaint alleged that Unocal had manipulated and deceived the CARB and other industry groups into adopting RFG standards that overlapped with the undisclosed patent applications.

The patents at issue include U.S. Patent Nos. 5,288,393, 5,593,567 and 5,653,866, which relate to methods for producing gasoline having reduced nitrogen, carbon monoxide and other hydrocarbon emissions.  Unocal has since dedicated each of these patents to the public so they can no longer be enforced.

Last month, Judge Christina A. Snyder of the U.S. District Court in Los Angeles issued a preliminary approval of a settlement of the class action (settlementorder.pdf).  By the terms of the settlement, Chevron will pay $48 million to a class of consumers defined as all consumers who purchased CARB-compliant reformulated gasoline in California between January 1995 and August 11, 2005.

Obviously, it is important for patent owners participating in standards-setting activities to consult a patent attorney to review the disclosure obligations imposed by the SSO and analyze the company’s patent portfolio to determine whether patents and applications need to be disclosed to the SSO.

This issue is almost certain to come up again as new energy technologies emerge and mature.  Just last week, Matter Network reported that the Roundtable on Sustainable Biofuels is developing the first international standard for biofuel production.

Eric Lane Avatar

Eric Lane

Eric Lane, the founder and principal of Green Patent Law, is an intellectual property lawyer and registered U.S. patent attorney in New York and is a member of the bar in New York and California. Eric has more than two decades of experience working with wind, solar PV, CSP, biofuels, and geothermal, energy storage technologies, carbon capture and sequestration, medical devices, data communications, mechanical, chemical, internet and software.