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Baltimore Federal Jury Rejects Star's Patent Infringement Claims Against R.J. Reynolds 

The jury verdict was a wipeout for Star: Jurors not only found its patents invalid but also said Reynolds did not infringe. It doesn't get much more resounding than that, folks. Star's shares, according the The Wall Street Journal's account of the verdict, fell more than 80 percent after the jury ruled. . . .

McMillan told the Litigation Daily on Wednesday that Star will file posttrial motions asking Judge Marvin Garbis to reverse the verdict, and, if those are not successful, will appeal. The Crowell & Moring partner said Reynolds based its case on whether the tobacco farmers that Star alleged to infringe its patents used an earlier curing method developed by a Reynolds scientist. "We moved at the outset to strike that and focus on the relevant issues we were trying, which were whether the farmers did in fact perform each element of the [Star] patents," McMillan said. "We think there were an extraordinary number of errors made by the trial judge."

Given Star's history with Judge Garbis, we'd put odds against him tossing the jury verdict.

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Jury Verdict Announced in Star Scientific Patent Infringement Lawsuit Against RJ Reynolds 

Scientific Inc. (NASDAQ: STSI) announced today that the jury in the trial of the company's patent infringement lawsuit concluded its deliberations. The jury found that the two Star patents at issue in the case were not valid, and were not infringed. The company issued the following statement:

Our counsel will file a motion with the US District Court for Judgment as a Matter of Law or a New Trial within the next ten days. If that motion is not granted, our appellate counsel then will file a notice of our intent to appeal the verdict with the United States Court of Appeals for the Federal Circuit as soon as practically possible.

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• Blowing Smoke: A lawsuit over tobacco patents goes to the jury  

There are dozens of lawyers attached to the court case Star Scientific v.. R.J. Reynolds tobacco company, and it is possible that all of them are packed into courtroom 5C at the Baltimore federal courthouse on Monday, June 15. . . .

The attraction of the day is a patent-infringement lawsuit brought by Star, a small, Virginia-based tobacco company, against Reynolds, one of the giants of the industry.

"It's not the patent law that makes the case interesting, though," says Lawrence Sung, the director of the University of Maryland Law School's Intellectual Property Law Program. "It's the technology."

Star claims that Reynolds has infringed on a process developed by Star inventor Jonnie Williams, which reduces the amounts of harmful nitrosamines in cured tobacco. Reynolds denies this, and further alleges that Star's patents should never have been granted in the first place. The Wall Street Journal has reported that the U.S. Patent Office is re-examining Star's patents, but a request by Reynolds to stay the trial until that examination was complete was denied. . . .

"I don't even want to think about the number of witnesses," Garbis tells the jury. "There were enough witnesses. . . . I'm sure somewhere in this case, they've agreed on something. I have a hard time remembering what it is."

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• Star Scientific loses Reynolds US patent dispute  

A U.S. jury in Maryland ruled on Tuesday against tobacco company Star Scientific Inc in its lawsuit with Reynolds American Inc over a patent dispute on reducing cancer-causing elements in tobacco.

Shares of Star Scientific plummeted more than 80 percent in after-hours trading while shares for Reynolds gained 2.39 percent.

Star Scientific sued RJ Reynolds, a subsidiary of Reynolds American, in 2001, alleging patent infringement over a technology invented by Star Chief Executive Jonnie Williams. The technology comes from work he began in 1996 on a tobacco curing process that would inhibit "microbial nitrate reductase activity," which can lead to cancer-causing nitrosamines in tobacco.

In June 2007, a Maryland district judge ruled that Star's patents were unenforceable because of the way in which the company applied for the patent.

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• Jury Hears Closing Arguments In Tobacco-Patent Case 

Lawyers for Star Scientific Inc. (STSI) and R.J. Reynolds Tobacco Co. made their final bid Monday to sway jurors in a high-stakes case involving Star's patent claim to a new tobacco-curing method that substantially reduces the formation of certain cancer-causing toxins.

Star, which is seeking several hundred million dollars from RJR for patent infringement, said its patented method for reducing certain toxins in cured tobacco, known as tobacco specific nitrosamines, was a revolution in the tobacco industry.

"Nobody could believe it," Star lawyer Richard McMillan said in his closing argument to jurors. "It was completely surprising to the industry."

McMillan said RJR, a unit of Reynolds American Inc. (RAI), "got wind" of the small company's patent and encouraged its farmers to practice Star's invention without permission.

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• High-Stakes Tobacco-Patent Lawsuit Heads To Jury Next Week  

The fortunes of aspiring tobacco company Star Scientific Inc. (STSI) could hinge on a high-stakes patent-infringement case that goes to a federal jury in Baltimore next week.

Star, a small tobacco company with a big patent claim, says it has invented a method of curing tobacco that prevents the formation of certain cancer-causing toxins.

The Virginia-based company sued R.J. Reynolds Tobacco Co., a unit of Reynolds American Inc. (RAI), alleging that the nation's second-biggest tobacco company encouraged its tobacco farmers to practice Star's patented curing method. . . .

After several years of pre-trial legal wrangling, a patent-infringement trial began May 18. Closing arguments are likely to wrap up Monday, and then the case will be submitted to the jury for deliberations.

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• Star Scientific Files First Quarter Financial Report 

Star Scientific, Inc. (Nasdaq: STSI) filed its quarterly report on Form 10-Q for the period ended March 31, 2009, today with the Securities and Exchange Commission. The company reported cash and cash equivalents of $19.7 million as of March 31, 2009 compared with $6.5 million for the fourth quarter 2008.

Net sales for first quarter 2009, which totaled $.15 million, were essentially unchanged compared with fourth quarter 2008 net sales of $.15 million. The company believes that sales of the company's dissolvable smokeless tobacco products, Ariva and Stonewall, were adversely impacted by an increase in the Federal Excise tax on tobacco products contained in the SCHIP legislation, which became effective April 1. Wholesale and retail operations were reluctant to maintain inventory on hand beginning in late February, in an effort to minimize taxable inventory as of the April 1 effective date. Early second quarter sales data appear to indicate that dissolvable tobacco sales have rebounded as wholesale and retail inventories are being restocked. Star Scientific had a net loss of $5.2 million for first quarter 2009 compared with a $5.5 million loss for first quarter 2008.

The company also announced that the jury trial in its patent infringement lawsuit against RJ Reynolds Tobacco Company (RJR) will commence with jury selection on Monday, May 18. The trial will be held in US District Court, West Lombard Street in Baltimore, MD, and Star anticipates that the jury trial will last approximately three weeks.

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• Excise tax takes a bite 

The recent increase in the federal excise tax on cigarettes took a toll on both Reynolds American Inc.'s profitability and trademark values in the first quarter.

The decision to take a $453 million trademark-impairment charge on a pretax, noncash basis, contributed to Reynolds reporting just $8 million in net income -- down $285 million from a year ago.

Diluted earnings were 3 cents a share, compared with $1.71 a share a year ago. The earnings from the first quarter of 2008 included a gain of 71 cents from the dissolution of Reynolds' Gallaher joint venture. . . .

The 62-cent increase in the federal excise tax, effective April 1, affected Reynolds in three ways.

In response to congressional approval of the tax increase, the company on March 16 raised the list price on its cigarette brands from 41 cents to 78 cents a pack for wholesale customers.

That led some retailers and suppliers to cut back on their orders. . . .

Susan Ivey, the parent company's chairwoman, president and CEO, said that the tax and pricing increases "triggered trademark valuations that resulted in impairment charges on some of our companies' non-growth brands."

Those include the Kool, Winston, Doral and Salem cigarette brands and the Kodiak smokeless brands.

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• Tobacco giants to fight threat to branding 

ONE of the world's biggest cigarette companies, British American Tobacco, has foreshadowed a High Court challenge if the Rudd Government adopts ambitious anti-smoking measures proposed by its hand-picked health taskforce.

British American Tobacco Australia, alongside Philip Morris, Imperial Tobacco and the US Chamber of Commerce, have launched a stinging attack on a National Preventative Health Taskforce proposal to make Australia the first country in the world to mandate plain packaging for cigarettes.

In submissions to the taskforce's technical papers, published on Wednesday, they warn the proposal to ban company branding on cigarette packs could breach Australian and international law.

BATA said such a prohibition could leave the Government exposed to a lawsuit in the High Court, arguing such an acquisition of property -- including brand logos and pack designs -- on unjust terms would breach the Australian Constitution.

"Attempts to introduce plain packaging into Australia would see BATA take every action necessary to protect its brands and its right to compete as a legitimate commercial business selling a legal product," its submission says. . . .

Stripping the branding, colours and imagery from cigarette packs would "cost the taxpayer nothing and offers the prospect of shattering the image of cigarettes as an ordinary consumer item", the taskforce argued in a technical paper last year. . . .

Brad Huther, the Washington-based senior director of the US Chamber of Commerce, challenged the proposal's "disregard" of established international norms of intellectual property.

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• Chinese NGO wants cigarette brand name snuffed out  

An anti-tobacco NGO will submit a petition to the trademark authority today, asking it to discontinue the use of "Zhongnanhai" - the name of the central leadership compound - as a cigarette brand.

"Using the sacred place's name as that of a cigarette brand is misleading consumers," said Wu Yiqun, deputy director of the Beijing-based NGO, Think Tank Research Center for Health Development, at a symposium yesterday.

"Buyers feel the cigarette brand is acknowledged by the central government, and see it as a symbol of high quality and authority," she said.

Zhongnanhai is one of China's famous cigarette brands, worth 7.8 billion yuan (1.1 billion U.S. dollars) in May last year, the company said on its website, citing a report by the Beijing Intangible Assets Development and Research.

But legal experts believe using Zhongnanhai as a brand violates the Trademark Law.

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• With Tobacco-Patent Suit, Star Scientific Presses for Clout  

A decade of seeking traction in the tobacco market has produced little success for Star Scientific Inc. Last year it posted an $18 million loss on sales of only $500,000.

But its commercial failures belie some technological innovations that have made Star Scientific something of a pioneer in the industry's hottest market: lower-carcinogen smokeless tobacco. And now its stock price is rising amid hopes of an imminent payoff for shareholders.

Those hopes -- and possibly Star's survival -- hinge on the outcome of a patent-infringement lawsuit that is scheduled to go to trial in U.S. District Court in Baltimore in May. In the suit, Star charges that tobacco-purveyor R.J. Reynolds infringed on Star patents covering a carcinogen-lowering process for curing tobacco. . . .

In one measure of the importance of legal strategy to Star's fortunes, its president is Paul Perito, a former senior partner in the law firm of Paul, Hastings, Janofsky & Walker LLP. And the lawyer who successfully represented Star in 2008 at the U.S. Court of Appeals for the Federal Circuit was Carter G. Phillips, a Sidley Austin LLP managing partner who has argued 56 cases before the U.S. Supreme Court.

Still, the merits of Star's case against Reynolds remain to be decided. And if it prevails, Reynolds would almost certainly appeal, while even the most generous verdict would leave Star a David in an industry of Goliaths.

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Reynolds Appeal Rejected, Clearing Way for Star Trial (Update2)  

The U.S. Supreme Court refused to question Star Scientific Inc.’s lawsuit against R.J. Reynolds Tobacco Co. over a patented formula for reducing cigarette carcinogens, clearing the way for trial as soon as May.

The justices, without comment, today rejected an appeal by Reynolds, the second-largest U.S. tobacco company. The Reynolds American Inc. unit sought to overturn a federal appeals court decision, arguing unsuccessfully that Star obtained two patents by withholding information from federal examiners. Star rose as much as 17 percent on the news.

Star, based in Petersburg, Virginia, is seeking as much as $1 billion in damages in its patent-infringement suit. The company’s patents cover a method for curing tobacco leaves while leaving oxygen in the air to prevent formation of cancer-causing nitrosamines.

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Supreme Court refuses to get involved in tobacco patent fight 

The Supreme Court has refused to get in the middle of a patent fight over a way to cure tobacco that may make it less carcinogenic.

The high court on Monday refused to hear an appeal from R.J. Reynolds Tobacco Co., who is being sued by Star Scientific, Inc.

Star Scientific, Inc. says R.J. Reynolds Tobacco Co. infringed on its patents on a way to cure tobacco minimizing the formation of tobacco-specific nitrosamines or TSNA, which may be carcinogenic.

But a trial court says the patents are unenforceable, because the inventor kept from the Patent and Trademark Office key documents and information -- including that low-TSNA tobacco already had been grown in the U.S.

The U.S. Court of Appeals for the Federal Circuit overturned that decision, saying a judge cannot throw a patent out without clear and convincing evidence that a deception was intentional.

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Reynolds Appeal Rejected, Clearing Way for Star Trial (Update1) 

The U.S. Supreme Court refused to question Star Scientific Inc.’s lawsuit against R.J. Reynolds Tobacco Co. over a patented formula for reducing cigarette carcinogens, clearing the way for trial as soon as May.

The justices, without comment, today rejected an appeal by Reynolds, the second-largest U.S. tobacco company. The Reynolds American Inc. unit sought to overturn a federal appeals court decision, arguing unsuccessfully that Star obtained two patents by withholding information from federal examiners. Star rose as much as 17 percent on the news.

Star, based in Petersburg, Virginia, is seeking as much as $1 billion in damages in its patent-infringement suit. The company’s patents cover a method for curing tobacco leaves while leaving oxygen in the air to prevent formation of cancer-causing nitrosamines.

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• Supreme Court Denies RJ Reynolds Petition for Review in Star Scientific Patent Infringement Lawsuit 

Star Scientific, Inc. (Nasdaq: STSI) announced that the United States Supreme Court today denied the petition for a writ of certiorari filed with the Court by RJ Reynolds Tobacco Company (RJR). RJR had filed its petition for review on January 16, 2009 as part of its defense of the patent infringement lawsuits filed by Star Scientific, Inc. against RJR in 2001 and 2002.

The Supreme Court petition arose from a bench trial that was held in February, 2005 on RJR's defense claim of inequitable conduct. Shortly before that trial began, RJR also was permitted by the District Court to file a summary judgment motion on definiteness. Two years later, in January, 2007, the district court issued a ruling that granted RJR's summary judgment motion. On June 26, 2007, the district court ruled that Star committed inequitable conduct in the prosecution of its patents. Star immediately filed an appeal with the US Court of Appeals for the Federal Circuit. On August 25, 2008, the Federal Circuit issued a unanimous decision reversing the lower court's ruling on inequitable conduct. It also reversed the district court's grant of summary judgment which held Star's patents indefinite. The Supreme Court's denial of RJR's petition terminates the process through which RJR can appeal the Federal Circuit's decision in favor of Star.

The case has been remanded to the US District Court of Maryland for further proceedings, including a jury trial.

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