Amicus Curiae Brief — Atlantic Richfield Co. v. Union Oil Co. of California

MOTION FILED

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SEP 13 2000 No. 00-249

Supreme Court of the Anited States

ATLANTIC RICHFIELD COMPANY, et al.,

Petitioners,

vs

UNION OIL COMPANY OF CALIFORNIA, INC.,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Federal Circuit

MOTION FOR LEAVE TO FILE

BRIEF AMICI CURIAE AND BRIEF AMICI CURIAE

G. WILLIAM FRICK MICHAEL F. MCBRIDE

DAVID T. DEAL (Counsel of Record)

JOHN E. REESE JOHN W. LAWRENCE

AMERICAN PETROLEUM LEBOEUF, LAMB, GREENE &

INSTITUTE MACRAE, L.L.P

1220 L Street, N.W. 1875 Conn. Ave., Suite 1200

Washington, D.C. 20005 Washington, D.C. 20009

(202) 986-8000

ROBERT G. SLAUGHTER GREGORY R. MCCLINTOCK

MAURICE H. MCBRIDE MAYER, BROWN & PLATT

NATIONAL PETROCHEMICAL & COUNSEL FOR WESTERN STATES

REFINERS ASSOCIATION PETROLEUM ASSOCIATION

1899 L Street, N.W. 350 So. Grand Ave., 25th FI.

Washington, D.C. 20036 Los Angeles, CA 90071

Attorneys for Amici Curiae

ATT Lar oee cence eet 1h

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 - WASHINGTON, D. C. 20001

MOTION FOR LEAVE TO FILE

BRIEF AMICI CURIAE OF

AMERICAN PETROLEUM INSTITUTE,

NATIONAL PETROCHEMICAL & REFINERS

ASSOCIATION, AND WESTERN STATES

PETROLEUM ASSOCIATION

American Petroleum Institute ("API"), National

Petrochemical & Refiners Association ("NPRA"), and Western

States Petroleum Association ("WSPA") hereby respectfully

move, pursuant to Rule 37.2 of the Rules of this Court, for leave

to file the attached brief as amici curiae. Although Petitioners

have consented to the filing of this brief, the Respondent has

refused to consent to the filing of this brief.

API, NPRA, and WSPA represent virtually all U.S.

petroleum refiners and most of the U.S. petroleum industry.

Many members of API, NPRA, and WSPA expend large sums

of money to produce reformulated gasoline ("RFG"). RFG is

mandated by federal and state laws to be sold in about one-third

of the country where significant air quality problems may justify

RFG's increased cost. Respondent Union Oil Company of

California, Inc. ("Unocal") has extraordinary claims to patents

for a large number of combinations of RFG that have caused

some refiners to reduce their production of RFG to avoid claims

of infringement. The continuation of the RFG program is

threatened in part because all of Unocal’'s patents on RFG derive

from the one that was upheld below. Amici respectfully submit

that they are well-positioned to assist the Court in understanding

the issues in this case and their significance.

Amici contend that the courts below have incorrectly

upheld the validity of a patent for products whose properties

are, in significant respects, set forth in federal and state statutes

and regulations. Respondent Unocal claims (or is expected to

claim) that essentially all RFG manufactured in the United States

in conformance with law infringes its patents, and therefore will

impose substantial additional cost on such sales, in the amount

of nearly one hundred million dollars per year in the State of

California alone, and substantial amounts elsewhere as well.

Amici not only have an interest in resolving the validity of

Unocal's patent, but-also have an interest in assuring that the

decisions of the courts below will not create confusion or

uncertainty in patent law.

For the foregoing reasons, amici respectfully request

leave to file the attached brief.

Respectfully submitted,

G. William Frick Michael F. McBride

David T. Deal (Counsel of Record)

John E. Reese John W. Lawrence

American Petroleum Institute LeBoeuf, Lamb, Greene

1220 L Street, N.W. & MacRae, L.L.P.

Washington, D.C. 20005 1875 Conn. Ave., Suite 1200

Washington, D.C. 20009

(202) 986-8000

Robert G. Slaughter Gregory R. McClintock

Maurice H. McBride Mayer, Brown & Platt

National Petrochemical & Counsel for Western States

Refiners Association Petroleum Association

1899 L Street, N.W. 350 So. Grand Ave., 25th FI.

Washington, D.C. 20036 Los Angeles, CA 90071

Attorneys for Amici Curiae

September 2000

ait aaa

TABLE OF CONTENTS

Page

OME PRP RME EIS oo ccc eevee kecccvcces ii

STATEMENT OF INTEREST OF AMICI CURIAE ..... 1

REASONS FOR GRANTING THE WRIT ............. 5

I.

II.

Il.

UPHOLDING UNOCAL'S PATENTS WILL

DISCOURAGE PRODUCTION OF RFG, THUS

HARMING AIR QUALITY AND THWARTING

CONGRESSIONAL INTENT.................. 5

UNOCAL'S PATENT WAS INVALID BECAUSE

IT DID NOT INVENT ANYTHING, BUT

RATHER TRACKED THE REGULATORY

REQUIREMENTS FOR RFG COMPOSITION... . 8

A. Federal Statutory and Regulatory Framework. . 8

B. California's Regulatory Program forRFG. ... 12

C. Unocal's Patent Application Was Tailored to

CARB's Proposed Requirements for RFG. ... 14

D. Unocal Amended All of Its Claims to

"Resemble" Changes in CARB's Requirements. 14

E. The Logic of the Second Circuit's Decision

to Invalidate a Copyright, the Language of

Which Was Required by Federal Law,

Should Also Invalidate Unocal's Patents. .... 17

UNOCAL'S PATENT WAS FOR OLD

PRODUCTS, NOT NEW INVENTIONS, AND

THUS SHOULD BE DECLARED INVALID. ... 17

PICT ET Ee OTe ere Sere re 19

ii

TABLE OF AUTHORITIES

Page(s)

Cases

American Petroleum Inst. v. EPA, '

Fe Fey oe rr 6

American Petroleum Inst. v. EPA,

ROG Fe Be Cs Ge BE anc hncansideds 2,13

General Electric Co. v. Jewel Incandescent Lamp Co.,

Se A Be Cn ie 5 Soh 060% tnd beware e sane 18

McCarthy v. Lehigh Valley R. Co.,

Se Se: SS £4, 65k bea Wad ccdbae beens 18

In re Ruschig, 379 F.2d 990 (CCPA 1967) ............ 16

SmithKline Beecham, Inc. v. Watson Pharmaceuticals,

Inc., 211 F.3d 21 (2d Cir.), cert. pending,

No. 00-019, 69 U.S.L.W. 3023 (July 3, 2000).... 17

Union Oil Company of California, Inc. v. Atlantic

Richfield Co., et al., No. CV-95-2379-KMW,

slip. ops. (C.D. Cal. May 19, 1997, and Mar. 10,

1998), aff'd, 208 F.3d 989 (Fed. Cir. 2000) .... 1,4,9

ill

Federal Statutes

BE 2 et errs eer re eee Tere ee Eee 18

Bo Pe ee ere re ee Pre ery eer 18

35 USL. § 12 .. : ee Tore Cee ee Te eee 14

Clean Air Act, as amended, 42 U.S.C. § 7401, et seq.:

Section 211(c)(4)(B), 42 U.S.C. § 7545(c)(4\(B) .. 2

Section 211(k), 42 U.S.C. § 7545(k) ......... 1,10

Section 211(k)(1), 42 U.S.C. § 7545(k)(1) ... 10,11

Section 211(k)(3), 42 U.S.C. § 7545(k)(3) ...... 10

Federal Regulations

ge i re rere eer re ee eee 10

State Regulations

CAL. CODE REGS., tit. 13:

NE Been GE ks ea hs ie Cena Seas 2,15

ee ee ee ee rrr eres 15

ONE SREP ENED 4.0 4a 0\ caweees Setuecuns 15

SCN aed F CD. 8 ka 6 vd Cosa EG h sees 15

iV

Federal Register

38 Fed. Reg. 1,254 (Jan. 10, 1973) .......c.cceeeeaees +

54 Fed. Reg. 11,868 (March 22, 1989) ...........0000. 8

55 Fed. Reg. 23,658 (June 11, 1990) ..........c0ce aces 8

59 Fed. Reg. 7,716 (Feb. 16, 1994) .........c. cue. 10,11

Miscellaneous

CALIFORNIA ADVISORY BOARD ON AIR QUALITY

AND FUELS, 1 REPORT TO THE CALIFORNIA

SN EEUR CPOE: 2, BOND ok eck resus eedeeebabounes 12

CALIFORNIA AIR RESOURCES BOARD,

REFORMULATED GASOLINE: PROPOSED PHASE 1

SPECIFICATIONS, STAFF REPORT (Aug. 13, 1990) ..... 12,13

CALIFORNIA AIR RESOURCES BOARD, 1 PROPOSED

REGULATIONS FOR CALIFORNIA PHASE 2 REFORMULATED

GASOLINE, STAFF REPORT (Oct. 4, 1991) .............. 13

KEITH OWEN AND TREVOR COLEY, AUTOMOTIVE FUELS

REFERENCE BOOK (2nd ed. 1995) ...........c cee eeees 8

LEGISLATIVE HISTORY OF THE

CLEAN AIR ACT AMENDMENTS OF 1990 (1993):

S. 1630, 101st Cong. (1989) reprinted in

LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990 (1993) ......... cece cc cccees 8

Vv

136 CONG. REC. $2806 (1990) reprinted in

LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990 (1993) ........ ccc eee eeeees 9

136 CONG. REC. $3502 (1990) reprinted in

LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990(1993) .........cceeceeevees 9

136 CONG. REC. H2765 (1990) reprinted in

LEGISLATIVE HISTORY OF THE CLEAN AIR ACT

AMENDMENTS OF 1990 (1993) ...........ccceeevees 9

Michael Liedtke, Fuel Patent Could Drive Up Prices

at Pump Nationwide, THE COMMERCIAL APPEAL,

CEE sce c tere kes GU es bad kK osea a ceeded ks 6

NATIONAL PETROLEUM COUNCIL, 1 U.S. PETROLEUM

REFINING - MEETING REQUIREMENTS FOR CLEANER

FUELS AND REFINERIES (August 1993) ................ 7

U.S. ENVIRONMENTAL PROTECTION AGENCY,

EPA REPORT ON VEHICLE PERFORMANCE WITH

PHASE II RFG, EPA420-R-99-025 ..............0000- > 11

Unocal Extends Offer of Limited Amnesty to Spur

Patent Talks, THE WALL ST. J. (Aug. 21,2000) ......... 3

BRIEF AMICI CURIAE OF THE

AMERICAN PETROLEUM INSTITUTE,

NATIONAL PETROCHEMICAL & REFINERS

ASSOCIATION, AND WESTERN STATES

PETROLEUM ASSOCIATION

STATEMENT OF INTEREST OF AMICI CURIAE'

American Petroleum Institute ("API"), National

Petrochemical & Refiners Association ("NPRA"), and Western

States Petroleum Association ("WSPA") (collectively, “amici")

together represent virtually all U.S. petroleum refiners and most

of the U.S. petroleum industry. Amici and their members have

an interest in this case because Unocal has been awarded Patent

No. 5,288,393 (the '"'393 patent") and four other patents that

derive from the '393 patent that extend to additional

formulations of "reformulated gasoline" ("RF G"), acleaner form

of gasoline which (with some variations) is required by federal

and state laws to be sold in about one-third of the United States,

generally where air pollution is worst. The members of API,

NPRA, and WSPA made enormous investments to produce

RFG. That investment is now threatened, however, because the

validity of Unocal's '393 patent was upheld below (Pet. App.

32a-56a), and affirmed by a 2-1 decision of the Federal Circuit

(Pet. App. la-31a), Judge Lourie dissenting.

In 42 U.S.C. § 7545(k), Congress mandated that certain

geographical areas of the nation use RFG, and that other areas

may do so if they are not in attainment with the National

Pursuant to SUP. CT. R. 37.6, no person or entity other than amici

curiae has made monetary contributions toward the preparation or

submission of this brief, and no counsel for any party has authored this

brief in whole or in part.

2

Ambient Air Quality Standard ("NAAQS") for ozone. See

American Petroleum Inst. v. EPA, 198 F.3d 275, 281 (D.C. Cir.

2000). As aresult of these provisions, approximately 30 percent

of the Nation's gasoline is RFG.

Under the Clean Air Act, California has unique statutory

rights to establish criteria for fuels sold within its borders that go

beyond the requirements of federal law. 42 U.S.C. §

7545(c)(4)(B). The State of California has established its own

more stringent requirements, through the California Air

Resources Board ("CARB"), for RFG. CAL. CODE REGS.., tit.

13, § 2262.1, et seg. The State of California has had rules

requiring cleaner gasoline since 1971, when it first regulated

Reid vapor pressure ("RVP"), a measure of gasoline volatility.

This case arose because Union Oil Company of California

("Unocal") gamed the system by convincing the U.S. Patent and

Trademark Office that it had invented RFG needed by

Petitioners and other refiners to comply with regulatory

requirements. In reality, gasolines covered by Unocal's claims

(i.e., fuels "suitable for combustion in an automobile engine")

had been used in racing vehicles for many years, and other

gasoline covered by the claims in the '393 patent had also been

made since the 1970s for aviation purposes. The racing gasoline

had actually been marketed for use in street-legal automobiles.

Unocal did little more than write down in its patent application

the broad ranges of properties that Congress or CARB had

already considered, so as to "resemble" CARB's requirements.

JA 562.’

. After Unocal's patent application was amended -- four times (at

least two of which were after CARB issued its proposed rules) -- so as to

"resemble" the changing regulatory requirements, and after its patent was

(continued...)

3

The effect of the judgment of the Federal Circuit, unless

overturned by this Court, is to subject Petitioners to claims of

infringement for a significant percentage of the RFG they make

for sale in California, potentially requiring payment of 5.75 cents

per gallon. The amount Unocal claims is about one hundred

million dollars per year in California alone, if not more.

As bad as that is, it is not the end of the story. Unocal

now contends that virtually any RFG composition sold, used,

distributed, or blended anywhere in the United States infringes

on one or more of Unocal's patents.’ Amici are unaware of any

case in which a court has ever held that property limits which

were claimed in a patent following their mandate in a statute or

regulation may be patented, let alone a substance so vital, and so

much in demand, as is gasoline.

The uncertainty created by Unocal's extraordinary claims

has caused some refiners to reduce their production of RFG to

avoid claims of infringement on one or more of Unocal's patents.

See Pet. at 9-10. Unfortunately, these entirely understandable

actions have contributed to the recent reductions in RFG supply

in the Midwest which the Federal Trade Commission suggests

may have increased its price. Jd.

2(...continued)

issued, Unocal's spokesman then gloated that "we believe that almost any

gasoline that would be practical to make and meet state [i.e., California]

requirements would fall under the scope of our patent." JA 473.

. In early August 2000, Unocal threatened United States gasoline

refiners (many if not all of whom are members of amici) with infringement

lawsuits and punitive damages for the manufacture of RFG unless they

quickly executed licensing agreements with Unocal. See Unocal Extends

Offer of Limited Amnesty to Spur Patent Talks, THE WALL ST. J. (Aug. 21,

2000), p. B13.

4

It would be one thing if Unocal had invented RFG, then

convinced the United States Environmental Protection Agency

("EPA") or the State of California to require that its invention

be used. API, NPRA, and WSPA could not object to that; if the

government were to conclude that the-public interest is served

by mandating the sale ofan essential product only in its patented

form, the patent system is not a bar to such an outcome.

But that is not what happened here. Unocal did not

invent anything because gasoline falling within the scope of its

claims has been marketed for years. Yet the District Court gave

instructions to the jury not to consider, as within Unocal's

claims, i.e., fuels that meet the specific property limitations of

the claims and are "suitable for combustion in an automotive

engine," and as a result the jury was able to reach the findings of

fact that it did. Pet. at 41a, 46a-47a.

By failing to include an adequate written description in its

application, by amending its claims to "resemble" the regulatory

requirements as enacted, and also by not disclosing its patent

application to CARB, EPA, or the industry, Unocal used the

patent system to put refiners in a regulatory/patent law trap, the

result of which will cause harm to the public. In many instances,

ifnot all, either the public will pay more for RFG (if the royalties

to be paid to Unocal are passed through to the consumer), or it

will have less RFG available for use (due to cutbacks in

production, as CITGO has already done), or both. Pet. at 9-10.

5

REASONS FOR GRANTING THE WRIT

The Court should grant a writ of certiorari to address

whether a patent is valid when it merely copies existing or

proposed regulatory requirements or fails to describe what was

eventually covered. Moreover, this case raises questions of

exceptional public importance with respect to air quality and

economic harm to the Nation that also justify issuance of the

writ.

I. UPHOLDING UNOCAL'S PATENTS WILL

DISCOURAGE PRODUCTION OF RFG,

THUS HARMING AIR QUALITY AND

THWARTING CONGRESSIONAL INTENT.

Unocal has not only patented something it did not invent,

but also it seeks to exploit the obligation of refiners, if they are

to sell gasoline at all in California, to sell only RFG which

Unocal claims to be covered by its '393 patent or other related

patents. This raises matters of profound public policy concern.

Unocal's actions not only expose refiners or their ultimate

customers to higher costs and potentially higher prices,* but in

doing so Unocal has discouraged refiners from continuing to

produce RFG so as to avoid infringing on Unocal's patents. The

uncertainty over Unocal's patents already has affected gasoline

supply in the Midwest, and thus presumably prices, by

discouraging refiners from producing the amount of RFG they

. Unocal was held to be entitled to about 90 million dollars

(including interest) for just a five-month portion of 1996, with litigation

continuing about other time periods.

6

would otherwise have produced, as discussed supra.° This is a

significant issue for California as well as much of the Nation.

The Clean Air Act as amended mandates sale of RFG in

certain geographical areas of the country to reduce air pollution.

See American Petroleum Inst. v. EPA, 52 F.3d 1113 (D.C. Cir.

1995). RFG achieves air quality benefits for some pollutants,

such as air toxics (e.g., benzene), nitrogen oxides ("NOx"), and

volatile organic compounds ("VOCs"). Thus, Unocal's claims

of patent infringement directly discourage the production of a

product that Congress has determined is important to public

health. The State of California in its amicus curiae brief (at 1)

on rehearing before the Federal Circuit noted: "Unocal abused

the patent process by trying to patent the results of a joint

public-private effort to improve public health, in an effort to

hijack California's administrative regulatory process to obtain

monopoly power in the market for cleaner-burning gasoline."

Recent events, including new regulatory requirements for

RFG sold in the Midwest and production decisions by oil-

producing countries, have caused certain States to seek

suspension of the RFG program and sparked calls from some

public officials to consider repealing it. The possibility that

some gasoline sold, used, distributed, or blended outside of

California will also be found to infringe one or more of Unocal's

patents has only exacerbated the problem. Such actions would

be contrary to public policy because of the need to reduce air

pollution in certain identified areas.

. See Michael Liedtke, Fuel Patent Could Drive Up Prices at Pump

Nationwide, THE COMMERCIAL APPEAL, June 2, 2000, at C2.

7

Unocal's patent also undermines public policy for other

reasons. When refiners and others were obliged to meet more

stringent requirements for the RFG they sell, they made

substantial changes to their refineries, at great expense. Indeed,

some estimates of the cumulative impact ofall of EPA's recently

adopted or proposed requirements on refineries approximate or

exceed the entire net book value of those refineries.° Because

such investments were made entirely at the risk of the refiner, a

subsequent decision to suspend or reverse the RFG

requirements previously imposed leaves the refiner with

unnecessary investments and exposed to the risk that other

refiners who did not make such appropriate investments may be

able to produce gasoline for less. There is no public benefit in

such wasted investments or in harming refiners who make

substantial investments to comply with governmental mandates.

If those who sell RFG in certain areas continue to do so |

while paying Unocal royalties, it is likely to cause consumers to

incur higher prices for gasoline at no public benefit. The total

cost to the Nation of such royalties is itself a reason to grant a

writ of certiorari.’

2 "Projected U.S. refining capital expenditures of $37 billion (1990

dollars) in the 1991-2000 period for product quality (cleaner transportation

fuels) and stationary source regulatory compliance exceed the total net fixed

asset base of U.S. refineries of $31 billion at the start of this period."

NATIONAL PETROLEUM COUNCIL, | U.S. PETROLEUM REFINING - MEETING

REQUIREMENTS FOR CLEANER FUELS AND REFINERIES 5 (August 1993).

, Unocal's recent letters to United States gasoline refiners (supra

note 3) are eloquent testimony of both the breadth of Unocal's nationwide

claims and the hundreds of millions or billions of dollars at issue if

Unocal's '393 patent is not invalidated.

8

Il. UNOCAL'S PATENT WAS INVALID

BECAUSE IT DID NOT INVENT ANYTHING,

BUT RATHER TRACKED THE REGULATORY

REQUIREMENTS FOR RFG COMPOSITION.

Federal Stat nd Regulato mework.

Government regulation of gasoline to reduce automobile

emissions dates back to the 1970s. EPA's first regulatory

actions under the Clean Air Act were to reduce the lead and

phosphorus content of gasoline. See 38 Fed. Reg. 1,254 (Jan.

10, 1973)(col. 1). In 1989, EPA issued its first regulation

directed at reducing gasoline volatility by reducing its Reid

vapor pressure ("RVP"), 54 Fed. Reg. 11,868 (March 22,

1989)(col. 1), followed by a second round of regulations that

reduced RVP even further. See 55 Fed. Reg. 23,658 (June 11,

1990)(col. 1). Reducing RVP reduces emissions of smog-

causing VOCs.

In 1989, Congress seriously considered a bill that

contained a provision to further regulate gasoline by reducing

RVP, and a provision that would have required EPA to

promulgate regulations to improve fuel quality by reducing

emissions of hydrocarbons®, NOx, particulate matter, and

hazardous air pollutants. S. 1630, 101st Cong. (1989) reprinted

in LEGISLATIVE HISTORY OF THE CLEAN AIR ACT AMENDMENTS

OF 1990, at 9169-70 (1993). Although clean gasoline

: The hydrocarbons that make up a typical gasoline are divided into

three broad groups -- aromatics, olefins, and paraffins. KEITH OWEN AND

TREVOR COLEY, AUTOMOTIVE FUELS REFERENCE BOOK (2nd ed. 1995).

Once olefins are limited, for example, essentially to zero, and aromatics are

limited to less than 25 percent, as CARB did, it necessarily follows that

paraffins will constitute about 75 percent or more of the hydrocarbons in

gasoline.

9

requirements and proposals had been published for years, the

first significant amendment leading to the RFG program

ultimately enacted was a Senate amendment (Wirth-Wilson) on

March 20, 1990, that would have required reductions in

aromatics, VOCs, toxics, and CO emissions. 136 CONG. REC.

S2806-07 (1990) reprinted in LEGISLATIVE HISTORY OF THE

CLEAN AIR ACT AMENDMENTS OF 1990, at 5951-52 (1993).

Another similar amendment was introduced on March 29, 1990,

by Senators Daschle, Dole, and Harkin, focused on reducing

emissions of NOx, hydrocarbons, CO, and aromatics. 136

CONG. REC. $3502-07 (1990) reprinted in LEGISLATIVE

HISTORY OF THE CLEAN AIR ACT AMENDMENTS OF 1990, at

6782-88 and 6816-18 (1993).° Congressmen Richardson and

Madigan introduced another version in the House on May 23,

1990, that focused on controlling aromatics, oxygen content,

VOCs, and other potentially hazardous emissions. 136 CONG.

REC. H2765-66 (1990) reprinted in LEGISLATIVE HISTORY OF

THE CLEAN AIR ACT AMENDMENTS OF 1990, at 2058-2065 and

2693-2703 (1993).

At the same time Congress was contemplating action on

legislation to mandate the sale of RFG in certain areas to reduce

emissions, refiners were individually moving forward with

efforts to introduce lower emission gasolines. The debates

surrounding these amendments demonstrate that the relationship

between fuel parameter control and emissions reduction was

understood by this time, and Congress was also aware that

numerous petroleum companies were marketing what was

referred to as RFG. Ultimately, the Daschle-Dole-Harkin

. Notably, both Senate amendments were introduced before the

"invention" date of Unocal's patent of March 30, 1990. Pet. at 50a. Thus,

Unocal claims to have invented something, substantial components of

which had already been set out in proposed legislation.

10

amendment and the Richardson-Madigan amendment were

reconciled in conference and were enacted as 42 U.S.C. §

7545(k).

As enacted on November 15, 1990, section 211(k)(1) of

the Clean Air Act, 42 U.S.C. § 7545(k)(1), required EPA to

promulgate regulations to control, inter alia, emissions of

VOCs, NOx, and toxics from use of gasoline. Specifically, EPA

was required to ensure that NOx emissions did not increase, and

that VOC and air toxic emissions were reduced to the greatest

extent achievable taking into consideration costs and other

factors. In addition to these general requirements, 42 U.S.C. §

7545(k)(3) specifically required that emissions of VOC and air

toxic pollutants be reduced by 15 percent in Phase I of the RFG

program (1995-2000) and 25 percent in Phase II (2000 and

thereafter). It also provided, however, that the Administrator

could adjust the Phase II standards depending on technological

feasibility and costs.

The details of the RFG program on the Federal level

were developed during a regulatory negotiation sponsored by

EPA and actively participated in by Unocal, and in the

subsequent EPA rulemaking process. EPA developed a

complex computer model that describes the relationship between

fuel parameters and gasoline VOC, NOx, and air toxics emission

performance.'® After developing this model, EPA analyzed

refinery models to estimate the cost of controlling the individual

fuel parameters. Based on these analyses, EPA promulgated

" EPA's “complex model" uses mathematical formulae to calculate

total VOC, NOx, and air toxics performance as a function of seven fuel

characteristics -- oxygen, sulfur, RVP, aromatics, benzene, olefins, and

distillation properties. 40 C.F.R. § 80.45 (1999). With the help of the

"complex model," EPA estimated the costs associated with adjusting each

of the fuel characteristics. See 59 Fed. Reg. 7,716, 7,750 (Feb. 16, 1994).

11

what it believed at the time were (as here relevant) cost-effective

Phase II VOC, NOx, and air toxics performance standards.

These computations led EPA to ultimately conclude that

reductions of RVP offered a cost-effective means of satisfying

Congressional intent to reduce VOC and air toxics emissions

without increasing NOx emissions. See 59 Fed. Reg. 7,716,

7,750 & Table VI-1 (Feb. 16, 1994).

For example, limiting RVP to 6.7 psi reduced estimated

VOC emissions by 25.5 percent but was estimated to cost only

0.26 cents per gallon, while a reduction in sulfur would have

reduced VOC emissions by only an additional 1.9 percent while

estimated to cost 0.92 cents per gallon. Jd. Based on these

values, it is clear that EPA would have regarded an additional

cost of 5.75 cents per gallon royalty to be paid Unocal as

substantial and unreasonable, given that EPA estimated the total

costs of the Phase II RFG program for refiners to be 4 to 7 cents

per gallon. 59 Fed. Reg. at 7,810 (col. 1).

Based on its evaluation of emission impacts and refining

costs (as section 211(k)(1) of the Clean Air Act requires it to

do), EPA adopted its stringent Phase II VOC, NOx, and air

toxics standards on gasoline with properties that fall within the

scope of Unocal's patents. U.S. ENVIRONMENTAL PROTECTION

AGENCY, EPA REPORTON VEHICLE PERFORMANCE WITH PHASE

II RFG, EPA420-R-99-025, Appendix E.

Had EPA known of Unocal's plans for patenting the

RFG requirements at the time its regulations were promulgated,

EPA might well have concluded that the cost of Unocal's patents

was too great to impose on refiners and, based on this history,

might have imposed less-stringent RFG requirements, taking

into account the cost of the Unocal patent claims. The Unocal

patent claims, therefore, if upheld, could seriously impact the

12

regulatory judgments that EPA has made and must continue to

make, and could lead to an increase in air pollution, a cutback

in the scope of the federal RFG program, or both.

B. California's Regulatory Program for RFG.

The process of developing reformulated gasolines for

use in California began in 1987, when the Governor appointed

an advisory board to evaluate the feasibility of developing anew

formula gasoline that would be equivalent to or cleaner than

emissions from then-existing gasolines. CALIFORNIA ADVISORY

BOARD ON AIR QUALITY AND FUELS, 1 REPORT TO THE

CALIFORNIA LEGISLATIVE, at 1-2 (Oct. 2, 1989). Unocal's

current Chairman was appointed by the Governor to serve as a

member of the advisory board. /d. at iv. To facilitate increased

use of cleaner fuels, the advisory board recommended that

CARB promulgate new regulations containing air quality based

performance standards for vehicle fuels. Jd. at 6-8 and 26-27.

By 1990, based in part on the efforts of the advisory

board, CARB had begun the process of amending its existing

regulations to promulgate appropriate requirements for cleaner

gasoline to be sold in California. CARB held a workshop in

March 1990 on such matters, and other workshops were held

throughout 1990 "to discuss the basis for the proposals,

projected emission inventories, emission reduction estimates,

cost estimates, and the regulatory language." CALIFORNIA AIR

RESOURCES BOARD, REFORMULATED GASOLINE: PROPOSED

PHASE | SPECIFICATIONS, STAFF REPORT, at 6 (Aug. 13, 1990).

CARB's Staff Report on the results of those workshops

included the views that the Staff would recommend to the

Board, in a section entitled "What is the staff considering for

Phase 2 gasoline specifications?" Jd. The CARB Staff Report

13

explained that various programs and studies were then

underway, with industry participation that "will provide

information which can be incorporated into the development of

the Phase 2 specifications." Jd. Among the criteria then under

consideration were a reduction in RVP to 7.0 psi, and limits on

aromatics, olefins, benzene, and oxygen. Jd. Unocal and others

participated in the process and suggested regulatory criteria.

CALIFORNIA AIR RESOURCES BOARD, 1 PROPOSED

REGULATIONS FOR CALIFORNIA PHASE 2 REFORMULATED

GASOLINE, STAFF REPORT, at 28 (Oct. 4, 1991).

In the 1990 Amendments to the Clean Air Act, Congress

required RFG to be sold in significant portions of California and

other areas where there were substantially elevated

concentrations of ozone. Congress also provided for its use in

other parts of California and in other areas classified as

"nonattainment" areas for ozone. See American Petroleum Inst.

v. EPA, 198 F.3d 275 (D.C. Cir. 2000). The month after the

Clean Air Act Amendments of 1990 were enacted into law,

Unocal filed its patent application for RFG.

Unocal thus relied on information gleaned from its

participation in California regulatory process, as well as the EPA

proceedings (supra Section II.A) to prepare its patent

application, unbeknownst to the rest of the petroleum industry,

CARB, EPA, or the public. Moreover, when CARB published

its RFG rules in 1991, Unocal amended all of its claims to

"resemble" CARB's rules. What good, after all, would be a

patent on RFG that did not conform to CARB's rules? If it did

not conform, it could not be licensed.

14

C. Unocal's Patent Application Was Tailored

to CARB's Proposed Requiremen r

During development of the RFG requirements in

Congress and at CARB, Unocal was preparing its application

for the patent at issue in this case. Unocal's application was filed

in December 1990, one month after passage of the 1990 Clean

Air Act Amendments. The parameters stated for Unocal's

"invention" were, for the most part, broad ranges for RFG

properties -- e.g., RVP up to 8.0 psi when CARB had already

limited RVP to 7.8 -- rather than exact terms descriptive of

unique combinations of properties defining a product, which

were then amended to "resemble" CARB's revised regulations."

As such, Unoéal's '393 patent failed to satisfy the statutory

requirement that the application "contain a written description

of the invention and of the manner and process of making and

using it, in such full, clear, concise, and exact terms" so as to

justify the award of a patent. 35 U.S.C. § 112 (emphasis

added). These ranges corresponded either to then-applicable

lawful ranges for gasoline that could be sold in California or to

the proposed rules that CARB was expected to issue.

D. Unocal Amended All of Its Claims to

"R le" Chan ARB' nts.

CARB and EPA then continued with their respective

rulemaking proceedings over the next few years. As those

proceedings, especially CARB's, developed in ways that differed

from what Unocal had proposed in its application, Unocal

The ranges that were included in the application were for things

such as olefins, RVP, T10, T50, T90, and other characteristics. "T10,"

"T50," and "T90" are the temperatures at which 10 percent, 50 percent, and

90 percent of the gasoline vaporizes, respectively.

15

amended all of its claims to "resemble" CARB's new

requirements.

For the convenience of the Court, we set out below, as

here relevant, the amended requirements of CARB for RFG sold

in California that were published or put into effect after Unocal

had filed its patent application, and before it amended its

application to "resemble" CARB's requirements:

limited olefin

prescribed 0%-

2%. JA 397.

CODE REGS. tit.

13, § 2262.4

(2000).

Initial Patent Final CARB Amended Patent

Application Regulation/Limit | Application

Taught T10 of CARB did not limit | Raise T10 to

<140°F. JA T10. CAL.CODE | <158°F (the

1465, 13:54-56 to | REGS. tit. 13, § maximum allowed

14:44-48: JA 2262.6 (2000). under CA law). JA

5493. 594-96, 972.

Preferred olefin Olefin flat limit of | 0% olefin restriction

content of 0%. JA | 6%, an average dropped; 33 of 34

465. Most limit of 4%, anda _ | claims limiting

original claims cap of 10%. CAL. | olefins specify the

4%, 6%, or 10%

limitation mandated

by CARB. JA 472.

Min. aromatics

content at least

35% (JA 465:

14:63-68); one

claim had 35%

Limited aromatics

to 25%; no min.

rqmts. JA 573.2.

CAL. CODE REGS.

tit. 13, § 2262.7

Removed the

minimum aromatics

limitation from its

claims. JA 592.1-

592.

<8.0 psi. JA 397.

2262.1 (2000).

min. JA 386. (2000).

Most claims 7.0 psi CAL. CODE | All but one claim

limited RVP to REGS. tit.13, § now limit RVP to

7.0 psi or lower.

16

A good example, displayed in the above Table, of a

parameter for which no CARB requirement was imposed in

CARB's final rules was T10. Unocal included a limit for T10 of

140 degrees Fahrenheit in its original patent application, with

120 degrees Fahrenheit as the preferred limit. When CARB did

not include tne 140-degree limit in its final rules, Unocal

amended its application to specify a T10 limit of 158 degrees

Fahrenheit, the maximum standard of the American Society of

Testing and Materials ("ASTM").'? These changes clearly

illustrate that Unocal's patent application was nothing more than

a recitation of whatever the applicable regulatory limit

established. Unocal was not "inventing" RFG, but rather

copying regulatory requirements -- a process that here created

amended claims that bore little resemblance to the original

claims. This is a violation of longstanding, black-letter patent

law. E.g., In re Ruschig, 379 F.2d 990, 994-95 (CCPA 1967)

(requiring "blaze marks" along the trail from the application as

filed to the application as amended so as to ensure that the

inventor was in possession of the invention on the date of the

application).

What makes this case especially important to API,

NPRA, WSPA, their members, and the consuming public is that

Unocal did not just patent one or a few of the possible

combinations of RFG that comply with CARB's requirements.

Rather, Unocal claimed to have patented all or nearly all

possible combinations of RFG that would meet CARB's

requirements (supra notes 2 and 3)."*

” Many States, including California, apply ASTM standards as

minimum State requirements for commercial products sold therein.

7 As the State of California so aptly put it in its amicus curiae brief

(at 5) before the Federal Circuit:

(continued...)

17

E. The Logic of the Second Circuit's Decision

to Invalidate a Copyright, the Language

of Which Was Required by Federal Law,

'

In SmithKline Beecham, Inc. v. Watson

Pharmaceuticals, Inc., 211 F.3d 21 (2d Cir.), cert. pending,

No. 00-019, 69 U.S.L.W. 3023 (July 3, 2000), the Second

Circuit invalidated a copyright for printed matter required for

use in the sale of consumer products, in that case generic drugs.

The Second Circuit's statement of its holding is instructive:

"Appellees cannot be liable for copyright infringement because

the Hatch-Waxman Amendments require generic drug producers

to use the same labeling as was approved by the FDA for, and

is used by, the producer of the pioneer drug." 211 F.3d at 29,

The Federal Circuit's holding that Unocal's '393 patent is valid

cannot be squared with the logic of the Second Circuit's opinion

in SmithKline Beecham. See Pet. at 14-16.

III. _ UNOCAL'S PATENT WAS FOR OLD

PRODUCTS, NOT NEW INVENTIONS, AND

THUS SHOULD BE DECLARED INVALID.

Petitioners convincingly demonstrate that the evidence

of record is unrebutted that Unocal itself was making gasoline

'5(.. continued)

Failure to strictly construe the written description requirement will

encourage the filing of broad, preliminary, and ill-defined patent

applications at the beginning of an administrative rulemaking

process, followed by substantial amendments that conform more

closely to the developing and ultimately-adopted regulatory

requirements. This would all be achieved without disclosure to

the rulemaking body, and distort the agency's ability to pursue the

public interest. This is simply bad public policy.

18

for automobile racing purposes which also was "suitable for

combustion in an automotive engine," to quote Unocal's patent,

and that Chevron was making aviation gasoline since the 1970s

that also was "suitable for combustion in an automotive engine."

Unocal's racing gasoline was even marketed to everyday

automobile drivers. Moreover, industry literature has long

included compositions of gasolines covered by Unocal's patent

at issue in this case. Pet. at 19-22. It follows that Unocal did

not "invent" anything because products covered by its claims

were made, marketed, or published in the literature, long before

it filed its patent application. 35 U.S.C. § 101 (whoever

"invents or discovers any new and useful ... composition of

matter ... may obtain a patent").

The patent statutes clearly would have prevented the

Patent Office from issuing the '393 patent to Unocal, had it

known of the prior art, and should have caused the lower courts

to invalidate the patent once the prior art became known. See

35 U.S.C. § 102(a) (prohibiting patent issuance if "the invention

was known or used by others ... before the invention thereof by

the applicant for the patent"). The result should not be different

even though prior art gasolines were not intended as RFG for

the general public. McCarthy v. Lehigh Valley R. Co., 160 U.S.

110, 116 (1895) (courts lack power to rewrite claims to exclude

products covered by them). Moreover, "it is not an invention to

perceive that the product which others had discovered" could be

utilized in ways that were not previously perceived. General

Electric Co. v. Jewel Incandescent Lamp Co., 326 U.S. 242

(1948). Because Petitioners have covered this topic well in the

Petition, amici simply adopt their argument.

19

CONCLUSION

For the foregoing reasons, and those stated in the

Petition, the Petition for a writ of certiorari to review the

judgment of the Federal Circuit should be granted.

G. William Frick

David T. Deal

John E. Reese

American Petroleum Institute

1220 L Street, N.W.

Washington, D.C. 20005

Robert G. Slaughter

Maurice H. McBride

National Petrochemical &

Refiners Association

1899 L Street, N.W.

Washington, D.C. 20036

Respectfully submitted,

Michael F. McBride

(Counsel of Record)

John W. Lawrence

LeBoeuf, Lamb, Greene

& MacRae, L.L.P.

1875 Conn. Ave., Suite 1200

Washington, D.C. 20009

(202) 986-8000

Gregory R. McClintock

Mayer, Brown & Platt

Counsel for Western States

Petroleum Association

350 So. Grand Ave., 25th FI.

Los Angeles, CA 90071

Attorneys for Amici Curiae

September 2000