IMO 2020 VLSFO Patent Wars?!

By Ara Barsamian, President/CEO, Refinery Automation Institute, LLC
Monday February 18, 2019

If you thought that making, supplying and buying IMO 2020-compatible bunkers was not challenging enough, wait for the "Patent Wars"!

A Singapore colleague inquired about patents for making 2020-compliant 0.5% S VLSFO bunkers. This was just "up my alley" since as part of my research on formulating compatible and stable VLSFO recipes, I examined tens of patents filed by oil companies in the USA with an eye on establishing models to insure bunker blend compatibility and stability.

What did I find? Ghosts of the infamous "UNOCAL" patents: all the major and some minor oil companies having been "burned" by the UNOCAL CARB gasoline patents, had hurriedly filed patent applications and received patents on "Low Sulfur" bunkers production, whether directly or indirectly in the guise of establishing or improving a property, e.g. lowering Sulfur content or semi-guaranteeing compatibility.

With few exceptions documenting real breakthroughs, most of the patents are overly broad and meaningless, having thrown in the proverbial "kitchen sink" in it, and frankly, unenforceable.
By rank, the most numerous patents belong to my Alma Mater, EXXON (now ExxonMobil), followed by Shell and BP. Odds and ends filing include Sunoco, Total, Lukoil, and other bunker players.

What does it mean to you?

If you are a bunker producer or supplier, you'll have to worry about patent infringement, and unless you have the deep pockets and staying power of a BP or ExxonMobil, you can be driven into bankruptcy, and more immediately, loss of customers afraid of being dragged into patent infringement lawsuits.

Is it serious? It all depends on the size of the "infringer": if you are a substantial size company, you are a good candidate for a "cease and desist" letter and possibly taken to court to either pay patent infringement damages or squeezed to pay royalty per ton of bunker.

If you are a small fry, probably you are safe, but with a "Damocles' Sword" hanging over you neck; most immediately you'll lose customers afraid of lawsuits.

What Can Be Done?

One can negotiate a royalty-free agreement or de-minimis royalty with the patent holder(s), or just plainly ignore the patents since most of them are questionable and possibly unenforceable. My suggestion is to have IBIA, BIMCO, or similar organizations take the lead to resolve what could became a bigger headache than making the 0.5% S bunkers.

For further information or learn more about 2020 bunker blending or to get a set of fifteen IMO 2020 bunker patents (partial list in References below), please contact the author at ara@refautom.com or attend RAI upcoming 2020 Bunker Blending Course in Houston, March 11-12, 2019.

References:

[1] Lowell, Josh., "Beyond 2020: 'Patents Threaten LSFO Blends", pp. 2, Clipper Data, December, 2018
[2] US Patent 9,803,152 B2 Kar et al, assignee: ExxonMobil, 'Modifications of Fuel Oils for Compatibility", October 31, 2017
[3] US Patent US20040121472/ EP 1573315 A1, assignee: BP, 'Predictive Crude Oil Compatibility Model", September 14, 2005
[4] US Patent 8,916,041 B2 Van Den Berg et al, assignee: Shell Oil Company, 'Blending Hydrocarbon Streams to Prevent Fouling", December 23, 2014
[5] US Patent Applic;us2015/0353851A1 Buchanan et al, assignee: Sunoco Partners Marketing, 'Low Sulfur Marine Fuel", December 10, 2015

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