Supreme Court Rejects Shell Bid in Royalties Case

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WASHINGTON -- Shell Oil faces a lawsuit for past royalties on a plastic-making patent after failing to convince the U.S. Supreme Court that it can't be forced to pay any fees after a patent's been declared invalid.

The high court on Monday rejected Shell's appeal of a decision that permits Germany's Studiengesellschaft Kohle (SGK) to proceed with a suit seeking royalties for plastic that Shell produced at a Texas plant from 1987 to 1993.

SGK's suit charged that Shell violated a licensing agreement by failing to pay fees that were due under a contract that permitted Shell to use SGK's patented technology for making polypropylene plastic. During an initial court fight, Shell challenged the validity of SGK's patent. A federal appeals court agreed that SGK's patent is not valid. The appeals court nonetheless said SGK could ask for royalties under the licensing contract for the period before Shell first raised questions about the patent's validity. In its high court appeal, Shell unsuccessfully argued that once a patent has been declared invalid, companies that agreed to pay a patent-licensing fee should be free from liability for earlier royalties. "The invalidity of the licensed patent should end any ability (by SGK) to recover any additional or past due royalties under any legal theory," Shell argued. SGK is an arm of Germany's non-profit Max-Planck Institute for Coal Research. The appeals court ruling sends the case back to a trial court for further proceedings to see whether Shell actually used SGK's previously patented process to make plastic at a plant in Seadrift, Texas. Shell argues that the Seadrift plant used different technology. If a court finds that Shell's process did use technology covered by SGK's patent, Shell could be liable for royalties it would have been charged up to the date when Shell first challenged the patent's validity. SGK's lawyer, Nathaniel Kramer, said damages against Shell could reach "seven figures" if SGK ultimately wins the case. The lawsuit, however, has not proceeded far enough for more than the broadest estimate of potential damages, he said. Houston-based Shell has since sold that polypropylene business to Union Carbide. Shell is a unit of Royal Dutch Petroleum. The case is Shell Oil vs. Studiengesellschaft Kohle, 97-533. In other Supreme Court action Monday: * The justices sought the federal government's views about whether insurance companies can be sued for stiff penalties under a federal racketeering law, without usurping state authority to regulate the insurance industry. The high court asked the Justice Department to file a brief outlining its position in an appeal by Humana. …

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