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UPDATE 3-Star Scientific loses Reynolds U.S. patent dispute
June 16, 2009 / 9:55 PM / 8 years ago

UPDATE 3-Star Scientific loses Reynolds U.S. patent dispute

(Adds comments from R.J. Reynolds and Star Scientific, options trade details)

CHICAGO, June 16 (Reuters) - A U.S. jury in Maryland ruled on Tuesday against tobacco company Star Scientific Inc STSI.O in its lawsuit with Reynolds American Inc RAI.N in a patent dispute over reducing cancer-causing elements in tobacco.

Star Scientific shares plummeted more than 80 percent in after-hours trading, while shares for R.J. Reynolds gained 2.39 percent.

“Certainly, we are pleased with the jury’s decision,” chief patent counsel for R.J. Reynolds August Borschke said in a statement. “They saw what we have known all along, that Star’s patents are invalid, and they should not have been issued in the first place.”

A statement from Star Scientific said the company will file a motion with the U.S. District Court for Judgment as a Matter of Law or a New Trial within the next 10 days. If the motion is not granted, the company intends to appeal the verdict.

Star Scientific sued R.J. Reynolds, a subsidiary of Reynolds American, in 2001, alleging patent infringement over a technology invented by Star Scientific 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” that can lead to cancer-causing nitrosamines in tobacco.

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

More than a year later, Star Scientific won an appeal against R.J. Reynolds in the U.S. Court of Appeals for the Federal Circuit [ID:nN25233036].

The U.S. Supreme Court, this year, said it would not hear R.J. Reynolds’ appeal in the case.

Trading of Star Scientific options was brisk on Tuesday as investors awaited a decision in the patent case. In all, about 38,000 calls and 22,000 puts changed hands, three times the normal daily combined volume, according to option analytics firm Trade Alert.

Star Scientific shares closed down 3.44 percent in regular trading on Tuesday on the Nasdaq at $4.21, while R.J. Reynolds shares closed down 0.6 percent at $36.33 on the New York Stock Exchange.

See Star Scientific v. R.J. Reynolds, U.S. District Court, District of Maryland (Greenbelt), No. 01-cv-01504-MJG (Reporting by Ian Sherr, additional reporting by Doris Frankel, editing by Matthew Lewis and Andre Grenon)

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