SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) October 14, 1997
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UNOCAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-8483 95-3825062
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(Commission File Number) (I.R.S. Employer Identification No.)
2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245
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(Address of Principal Executive Offices) (Zip Code)
(310) 726-7600
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(Registrant's Telephone Number, Including Area Code)
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Item 5. Other Events.
On October 14, 1997 the following news release was issued:
Jury upholds Unocal gasoline patent
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El Segundo, Calif., October 14, 1997 -- A jury in the Federal District
Court, Central District (Los Angeles, Calif.), today returned a verdict
validating Unocal Corporation's cleaner burning gasoline patent. The jury also
found that the six defendants had infringed on the Unocal patent.
From March 1, 1996, through July 31, 1996, the six defendants produced
nearly 1.2 billion gallons of gasoline that fell within Unocal's patent claims.
This amounted to about 29 percent of the total gasoline produced by the six
defendants in California during this five-month period.
Unocal issued the following statement:
"We are extremely pleased with the jury decision today that
upholds our patent claims and finds that the six defendants have
infringed on that patent. This is a proper decision based on the
evidence.
It would be inappropriate to comment further at this time. The
jury has yet to determine the extent of the damages. Then the
Court must rule on some additional issues."
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UNOCAL'S REFORMULATED GASOLINE PATENT
BACKGROUND
OVERVIEW
In February 1994, Los Angeles-based Unocal Corporation was granted a United
States patent for new gasoline formulations that burn cleaner. Unocal's patented
gasolines are cost effective and meet stringent air quality standards, including
the California Air Resources Board's Phase 2 Reformulated Gasoline (CARB Phase
2) reduced emissions regulation. The CARB Phase 2 regulation set a March 1996
deadline for oil companies to produce lower-emission fuels and required
exclusive sale of those fuels at service stations throughout the state no later
than June of that same year.
Unocal applied for the patent in December 1990, after spending millions of
dollars over a period of months to develop formulations for low-emitting
gasolines. The patent was the fruit of a Unocal project to meet anticipated
federal Clean Air Act goals without having to resort to ineffective fuels,
controversial additives, or costly alternative vehicles. Unocal's patented
gasolines work effectively in modern cars.
BASIC SCIENCE BEHIND REFORMULATED FUELS
Gasolines are a complex mixture of hydrocarbons -- molecules containing various
configurations of hydrogen and carbon atoms. They may also contain various
additives, including detergents, anti-icing agents, demulsifiers, corrosion
inhibitors, dyes, deposit modifiers, and nonhydrocarbons like oxygenates. Gases
emitted when gasoline burns in an automobile engine generate ozone -- an
invisible, pungent form of oxygen that is considered an air pollutant when
present at ground-level in high concentrations.
Unocal's patent for reformulated gasolines -- or RFG -- describes gasolines
having combinations of separate gasoline properties necessary to achieve reduced
emissions and maintain engine performance. Unocal was the first to discover
unexpected relationships between certain gasoline properties and the reduction
of particular tailpipe emissions. The company's research found that by
controlling the Reid Vapor Pressure, olefin content and distillation boiling
point of a gasoline, one could achieve significant reduction in smog-causing
tailpipe emissions.
Unocal's reformulated gasolines do not rely on emission-reducing additives like
methanol, MTBE, or oxygenates, which have generated significant public health
concerns, to achieve their goal. Moreover, the resulting gasolines can be
manufactured with minimal modifications to the industry's existing plants,
transportation systems and service stations.
REGULATORY CONTEXT
California has the strictest clean fuel standards in the country. The Phase 2
requirements for lower-emission gasolines were issued by CARB under authority of
the federal 1990 Clean Air Act amendments. Those amendments require states to
meet and maintain federally mandated standards for air quality.
As part of its rulemaking process, CARB gathered information from industry
members (including Unocal), environmentalists, consumers and scientific leaders.
Based on the best available data, the agency formulated its specifications for
Phase 2 gasolines. It is important to note that while Unocal's patented
gasolines meet these CARB specifications, the company's research program
preceded CARB's adoption and publication of the Phase 2 requirements. In fact,
Unocal applied for its patent 10 months before CARB issued its regulations.
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HOW THE PATENT FITS IN
Having met the legal requirements to obtain a patent -- namely, establishing its
invention to be "new and non-obvious" -- Unocal received Patent No. 5,288,393
from the United States Patent and Trademark office on February 22, 1994.
Unocal's patent includes many of the possible fuel compositions that refiners
find practical to manufacture, while still complying with CARB's Phase 2
requirements. CARB has issued a "predictive model" that allows for refiners to
adjust various characteristics of the fuel to achieve low emissions. Although
other oil companies may develop their own fuels, Unocal will offer its patent
for license in order to spread the benefits of lower emissions from its patented
fuels (without the use of controversial additives) as widely as possible to the
industry and the public.
Offers to license a government-mandated product have several precedents, even
within the petroleum industry. Both Texaco and Chevron sought license fees from
other oil companies for their discoveries pertaining to CARB-certified diesel
fuels. Arco also filed a patent application for its version of RFG in July 1992,
but later withdrew the application.
Within the auto industry, seat belts, air bags and catalytic converters are
examples of inventions that were patented, licensed and then mandated by the
government. Unocal's patented reformulated gasolines provide the industry with a
way to economically produce cleaner burning fuels without the use of
controversial additives.
TIMELINE
1989 Auto/Oil study group formed in October
1990 Unocal filed RFG patent application based on independent research on
December 13
1991 Unocal results presented to CARB in June
CARB issued Phase 2 regulations in November
1992 Arco filed for RFG patent in July
1993 Texaco offered to license CARB diesel formula
Chevron filed application for CARB diesel patent and offered to sell
license to Unocal CARB diesel introduced
1994 Unocal awarded RFG patent on February 22
1995 EPA RFG introduced
Unocal announced RFG patent on January 31 Chevron awarded CARB diesel
patent Plaintiffs filed suit against Unocal on April 13
1996 CARB Phase 2 production began March 1
1997 Trial began on July 15
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNOCAL CORPORATION
(Registrant)
Date: October 15, 1997 By: /s/ JOSEPH A. HOUSEHOLDER
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Joseph A. Householder
Vice President, Tax and Comptroller
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