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Federal Circuit Court Denies En Banc in Star Scientific v. RJ Reynolds - What Does That Really Mean?

|Includes: Rock Creek Pharmaceuticals, Inc. (RCPI)

On Tuesday Nov. 29th, the Court of Appeals of the Federal Circuit (CAFC) denied RJ Reynolds request for Panel Rehearing and Rehearing En Banc in the case of Star Scientific v. RJ Reynolds.    That makes the August CAFC ruling now final.  That ruling validated Star Scientific's patents for reducing Tobacco Specific NitrosAmines (TSNA's) in the tobacco curing process.   The tobacco industry has attempted to invalidate Star's patents at the US Patent and Trademark office (via an ex partes reexamination proceeding) and they have now tried to invalidate Star's patents in the federal courts.   Both attempts have failed and the patents are now valid.

In the infringement case against RJ Reynolds that was held in MD District Court, the jury ruled the patents were invalid and that Star Scientific didn't prove infringement.   That case was only for tobacco cured by RJR during the 2001 and 2002 growing seasons.   The CAFC is the highest patent court in the land and they overturned the jury verdict that the patents were invalid.   The Supreme Court rarely ever hears an appeal unless major issues of law are at stake and that is not the case here.   Even though I expect a writ of Certiorari to the Supreme Court will be filed by RJR, the odds are over 95% it will be rejected.   Now that Star's patents are valid according to the CAFC, as soon as they issue the mandate Star will be free to move to reopen the other stayed case against RJR, or they would be free to file another case in a different venue.

Here is what Star Scientifice said in their press release


The Court in its August decision affirmed the validity of each of the claims in the patents at issue in the prosecution of infringement against RJR, and specifically rejected each of the four invalidity defenses raised by RJR. The three-judge panel also reversed the district court's 2007 summary judgment ruling on priority date, which affirmed that the patents' claims deserve the September, 1998 priority date as originally claimed. The Federal Circuit ruling did not, however, reverse the jury verdict of non-infringement that Star had requested on appeal. RJR'S request for a rehearing of the August decision was based on its contention that the patents were indefinite.

This latest ruling by the Federal Circuit Court concludes its review process of the 2009 jury trial verdict. The Federal Circuit Court will issue an order shortly that will specify when the court intends to issue a formal mandate. When that mandate issues, the case will be sent back to the US District Court for proceedings that relate to the patent infringement lawsuit filed by Star in May, 2009 for curing seasons subsequent to 2002. That case had been stayed pending the outcome of this appeal.

Paul L. Perito, Esq., Star's Chairman, President and COO, commented, "These two patents, whose validity has been upheld twice by the Federal Circuit Court, also have been affirmed after reexamination by the US Patent & Trademark Office. We view them as rock-solid, and we are considering all options to leverage their value as we move forward. Our company's work to protect its intellectual property has been longstanding and, at times, frustrating, both for management and for our shareholders. However, we continue to believe that the value of the '649 and '401 patents is worth every effort we have undertaken. The unique tobacco-curing technology that is the foundation of our patents now can be licensed by tobacco companies in the US and abroad to manufacture both cigarette and smokeless tobacco products that contain the lowest available levels of a lethal group of carcinogens - tobacco-specific nitrosamines (TSNAs) - in the industry."


These patents are now valid and they are in effect until 2018.   In my opinion, the next time Star's case comes before a jury, the infringement outcome will be in Star's favor, and the whole tobacco industry will owe Star for every pack of cigarettes sold.   The tobacco industry has a choice of reducing the TSNA's that cause cancer to almost undetectable levels (and paying Star a royalty), or allowing high levels of TSNA's in cigarettes and subjecting themselves to more and more lawsuits from the families of smokers who die from cancer.  

Disclosure: I am long CIGX.