Star Scientific: The Sore Loser In Their Reynolds Tobacco Patent Suit

After over a year wait, Maryland district court judge Marvin Garbis all but ended Star Scientific's (STSI) attempt to reap huge patent royalties from tobacco giant Reynolds American Inc. (RAI). The lawsuit accused Reynolds of infringing a patent owned by Star Scientific for its so-called StarCure method of curing tobacco.

Judge Garbis ruled that the main patent claims were invalid because they were indefinite as a matter of law (in other words, there was not enough of a dispute to put this issue to a jury). He also found that the actual patent date was September 15, 1999, not the 1998 date when Star Scientific filed a provisional application. This is important because Reynolds claims that farmers were already using the method in the summer of 1999, and a patent cannot be granted if its teachings are already being practiced.

Of course, Star Scientific immediately posted a press release stating it will appeal. However, there are so many hurdles it must overcome that, taken as a whole, they seem insurmountable:

1. Star Scientific must convince the Federal Circuit Court of Appeals that Judge Garbis was incorrect in finding the claims indefinite as a matter of law. I understand the Federal Circuit reverses around 40% in patent cases, so this is an uphill battle but not a long shot.

2. Star Scientific must prevail on the inequitable conduct issue. Reynolds and Star had a mini-trial on this issue, which essentially claims that Star was dishonest in its patent application to the Patent and Trademark Office. I didn't follow that trial and have no opinion on its likelihood of prevailing. Star's press release says that the judge will rule on this issue within the next few weeks.

3. If Star prevails on the inequitable conduct issue and wins its appeal there will be a jury trial on: (a) whether the method was practiced by any farmers before September 1999; (b) whether Star disclosed the "best mode" of accomplishing the StarCure method in its patent; and (c) whether Reynolds infringed the patent. Star must win on all these issues, plus the appeal and the inequitable conduct ruling to establish infringement.

This epic battle will drag on for a few more years, but as far as I'm concerned, its over. Star lost. I don't see an investment case there even after it lost more than half of its value.

Disclosure: Author has no position in STSI or RAI.

Comments

[jcmeredith1:]

Greetings!
Do you have any plans to write another article about the STSI v RAI case?
Thank you

2008 Dec 08 01:03 PM

[justhinkin:]

I don't think he or she does, JC.

No one ever has the guts to come back and admit how very wrong he or she is, having spoken with such authority and disdain.

It is too bad you hadn't followed the trial, and the whole matter (as you admitted) ... you would have had a very different viewpoint, likely, or most certainly at least a more neutral one.

Everyone at trial, including Garbis (as was seen in the courtroom and was shown by his comments in the record), knew RAI failed to prove IC ... RAI did not even impeach the testimony of a single one of several Star witnesses, each of whose testimony had to be overcome by evidence in the record in order for RAI to win.

Star was a "sore loser" because after delaying for TWO and 1/2 years Garbis wrote a "decision' on IC that was pure fiction (and in fact fiction composed by attorneys on the other side, in their briefs, cut and paste), as the CAFC found ... "clearly in error" ... as also they found his decisions on the other matters.

By the way, you wrote your piece in Jan 2007, saying "After over a year wait ....". The trial was held in Feb of 2005 and the SJs were submitted then also, (actually in Jan just before) ... so the wait just for the SJ material was 2 years, not one.

Perhaps you should seek more information abut that about which you write.

Right now, 6/6/2009, the first part of the jury trial on the matter (validity and infringement) is about to wrap up. Infringement is a foregone conclusion (as RIA's defense firm wrote so in an opinion letter introduced into evidence), and frankly things don't look too shabby for Star. Yes, it just may be "over". The other way.

Are you seeking alpha, or smoking alpha?

Jun 06 04:12 AM