WINSTON-SALEM, N.C. -- R.J. Reynolds Tobacco Co. said it is pleased with the recent decision by a U.S. District Court Judge granting its summary judgment motion on invalidity in a patent infringement lawsuit brought against it by Star Scientific Inc. The ruling renders Star's patents in question invalid based upon indefiniteness. The patents involve a method of treating tobacco to substantially prevent the formation of tobacco-specific nitrosamines (TSNAs).
In granting the motion, Judge Marvin Garbis ruled Star failed to give notice as to what activities [image-nocss] are covered by the alleged invention, stating in his ruling: The essential problem with the claims is that no onecertainly not one of ordinary skill in the artreading the patents-in-suit would be able to carry out the invention.
It has been R.J. Reynolds' position that Star's patents are invalid, said August Borschke, chief patent counsel for R.J. Reynolds, in a statement. Today's ruling confirms our belief.
Star filed the suit on May 23, 2001, in the U.S. District Court for Maryland, Southern Division, and had sought hundreds of millions of dollars in damages for past alleged infringement, and an injunction going forward to prevent future alleged infringement.
In a second memorandum and order, the court granted in part and denied in part RJR's motion for summary judgment regarding the priority date of the patent, establishing Sept. 15, 1999, as the effective filing date for the patents-in-suit, Star said in a statement.
The court rejected certain other arguments presented by RJR and otherwise denied summary judgment on this second motion, it said.
Judge Garbis advised in a separate memorandum that he would not enter judgment on the indefiniteness ruling until he issues the pending ruling on the inequitable conduct defense tried in January-February 2005. The Court advised that it expects to issue that ruling before the end of February and, hopefully, well before the end of the month.
Star said it believes that the decision of the court in its two memoranda, and the grounds articulated for those decisions, are incorrect. Star issued an additional statement that said it wants to affirm in the clearest terms its intent to file notice of appeal with the U.S. Court of Appeals for the Federal Circuit as soon as possible.
Star added that the appellate process will require significantly less capital investment than the discovery and pre-trial phases of the lawsuit.
The statement also said, Although Judge Garbis did rule in Star's favor on some issues, management understandably is disappointed with his rulings on the remaining issues, but remains confident that the company will prevail on the enforceability of its patents. It is important to remember that when Star had its first commercial harvest of StarCured tobacco in 1999, it was the only low-TSNA flue-cured tobacco available for sale in the United States. Three growing seasons later, in 2001, over 85% of the flue-cured tobacco grown in the U.S. was being cured so as to reduce TSNAs. Shortly thereafter, the U,S, Department of Agriculture issued regulations stating that beginning in 2002, only flue-cured tobacco cured in a manner to reduce TSNAs would be eligible for full price support. These facts make it perfectly clear that once Star developed and scaled up its technology, the industry followed by adopting that technology.
While the appellate process moves forward, Star will continue to work aggressively to further expand sales of its dissolvable smokeless tobacco, Ariva and Stonewall Hard Snuff through licensing agreements with other companies as well as through its own distribution, it said.
Two patents already have been issued on the dissolvable hard tobacco, and others are pending. In addition, a natural flavor for Stonewall Hard Snuff, which recently has been tested in a consumer preference study, will be introduced.
As the company supports the appeal of the court's rulings, it will assess a series of measures designed to conserve resources and maximize results from operations. These include the potential sale of some or all of its curing barns to reduce debt obligation on the barns, and the use of the interest stream and reversionary interest in the company's $38 million Master Settlement Agreement (MSA) escrow funds, which together could result in additional sources of funds; and continued efforts to enhance the stability of Star Tobacco Inc.'s discount cigarette business in the four non-MSA states.
At the same time, Star said it will review operating costs with the goal of reducing them where appropriate. It will review executive salaries, personnel costs and all other expenses to achieve reductions wherever feasible. The company will end its lease on the Chester, Va., facility in March and will relocate those operations to the Petersburg, Va., facility owned by Star. And it will review options for the two facilities in Chase City, Va., and the offices in Bethesda, Md., with an eye toward the purchase and sale of the Chase City facilities and a reduction in space in Bethesda. The company expects to complete these reviews within the next few weeks, it said.
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