Largest U.S. Patent Infringement Case Ever is Controversial Too

By Herald de Paris Contributor's Bureau on May 19, 2009

By Sandy Hoff
BALTIMORE (Herald de Paris) - A trial begins tomorrow in a patent infringement case that could result in the largest patent infringement award in U.S. history. It could also pave the way down tobacco road to less hazardous cigarettes, in terms of the rate of cancers caused from smoking.

The case is Star Scientific, Inc., v. R. J. Reynolds Tobacco Company, and jury selection already occurred on Monday, May 18, 2009. The trial is scheduled for 3 to 4 weeks. The venue is the U.S. District Court for Maryland, Baltimore (Northern) Division (101 W. Lombard Street, Baltimore, MD 21201 (410) 962-2600). The case is civil action number MJG 01-CV-1504 and MJG 02-CV-1504.

Aside from its status as a large patent infringement case, this is truly a David v. Goliath scenario. Tiny Star Scientific of Chester, VA is exclusive licensee of patents owned by inventor and principal stockholder Jonnie Williams. The patents are for a method of substantially eliminating what are believed to be among the most potent carcinogens, called tobacco specific nitrosamines (TSNAs), in cured tobacco, and thus potentially eliminating them from both smokeless and smoked tobacco.

The patented curing process prevents microbial action during the curing (drying) of tobacco, a process that turns unusable green tobacco into the “cured” form suitable for use in tobacco products. Star originally licensed the use of this process to produce what were hoped to be possibly reduced risk tobacco products (called “PREPs”, for “possibly reduced exposure products”) to Brown and Williamson (B&W) Tobacco Company in 1998-1999.

Shortly after the patents were first publicized, in about year 2000, the other large players in the tobacco industry like R. J. Reynolds (RJR) and Philip Morris also began sharply reducing the amount of TSNA in their products by a process that Star Scientific alleges incorporates some of the steps covered in the claims of its patents.

Thus arose the patent infringement suit. The suit as presently styled covers only the years 2001 – 2002, and addresses only alleged infringement by RJR, now a part of Reynolds American, Inc. (RAI). Even with that limited scope, the damages Star seeks are in the $250-300 million range … with future royalties over and above that for the life of the patent in the offing, if the patents are upheld and infringement is ruled.

If the patents are upheld in this case, royalties from other industry players, who may have infringed (and continue to do so), over the life of the patents, could amount to well over a billion dollars.

The story has several interesting twists and turns. B&W had at first embraced the new technology when it was introduced, and they licensed the technology from Star immediately, paying royalties for its use, so as to begin investigating reducing the hazards of its products. After only a couple of years of this, with new products, both cigarette and smokeless, being test marketed here in the U.S., B&W suddenly was overcome with a mysterious and complete change of heart … the other big tobacco companies having refused to go along with the new technology.

There were apparently many jittery executives in the tobacco industry concerned about the prospect of competing with each other on the basis of product (relative) safety. Their concerns were apparently caused by concern for “the bottom line” and not “safety” – as the events that unfolded seem to prove.

It would appear that these tremors became unbearable for B&W executives (and the others), and by 2004, instead of going ahead and competing with RJR and Philip Morris in the arena of, “safer tobacco products,” B&W suddenly decided (1) to drop the new possible reduced exposure products (PREPs) it was test marketing, (2) to shut down its relationship with Star Scientific, and (3) interestingly, to merge with its decades-long arch rival RJR to form Reynolds American Inc. (RAI).

Thus Star’s former “pal” in the industry and paying user of Star’s technology, B&W, merged with the company Star was suing for infringement on the Star technology.

Star had made the B&W partnership the whole foundation of its effort to promote the use of its technology in the tobacco industry, borrowing millions of dollars from a seemingly very willing and friendly B&W to finance the equipment necessary to supply B&W with “safer” tobacco, in what was by all appearances a perfect marriage from which to launch a truly disrupting assault on the industry regarding the issue of product safety. Suddenly B&W turned and walked away, leaving tiny Star deeply in debt to B&W, and leaving it faced with years of huge litigation expense in its fight against the very firm that B&W merged with, RJR.

Then in 2004, the judge on the case, Federal District Judge Alexander Williams, Jr., was replaced by Judge Marvin J. Garbis. Judge Garbis immediately took the case in a different direction by bifurcating one issue from the trial on the matter, a trial that had been scheduled for January of 2005. Instead, Judge Garbis decided to bifurcate the issue of RJR’s charge of inequitable conduct, a charge which implies that the patents were obtained fraudulently by withholding information from the United States Patent and Trademark Office (USPTO). The trial date on that one matter was held in February of 2005.

For unexplained reasons, it took Judge Garbis until June of 2007 to come out with a verdict on the matter (he had been promising it almost monthly since the previous October), more than two years after the trial. Judge Garbis ruled that Star had committed inequitable conduct in obtaining the patents and also granted two summary judgments against Star … each of the three matters being “dispositive” in that each “ended the case” for Star’s patents.

Then in yet another twist in August of 2008, a three judge panel for the United States Court of Appeals for the Federal Circuit (CAFC) unanimously overturned all the lower court’s rulings against Star, labeling the lower court’s IC decision as, “clearly erroneous,” and reversing the district court’s grant of summary judgment holding Star’s patents to be indefinite.

CAFC remanded the case back to the lower court for trial on the matter of infringement. In February of 2009 the U.S. Supreme Court refused to hear RJR/RAI’s appeal of the appellate decision. The trial on the matter is now finally getting underway in this case originally filed in 2001.

The case is convoluted with science, law, and interesting personalities … not to mention the controversial subject of tobacco safety and health issues, and the apparently ongoing mischief of the tobacco industry to do with that.

Expert testimony directly concerning the role of TSNAs in causing many of the cancers from smoking will likely be part of the damages argument. RJR/RAI has unleashed a blizzard of motions in limine to try to avoid a court room scene in which the court may have to litigate just what role smoking plays in causing cancer, and how it does so. It appears that both the court and RJR/RAI would like to avoid that scenario, and yet that matter is the crux of the worth of Star’s intellectual property, and thus determines damages and royalties.

The trial on the matters of infringement, patent validity, and damages gets underway in a court that will no doubt have palpable tension between the parties, and between the parties and the judge (Star formally requested of “Appeals” that the judge be removed, due apparently to what was perceived as very uneven treatment of the two parties in the first set of decisions. That was denied).

Tobacco giant Philip Morris will be present at trial in the audience (as they were at the IC trial in 2005), even though not formally a part of the trial, as they have taken a keen interest in this from the start: they tried to have Star’s patents invalidated via a declarative action early on as this matter played out in the Maryland court.

The whole tobacco industry is waiting to exhale as this trial proceeds over the next three to four weeks.

The scene smacks of an era of legal Americana … an era in which even the most despised corporate structures in America, big tobacco, appear to hold sway, even still at least at first brush, in matters before Congress and the courts. It pits a corporate David against tobacco Goliaths in a battle in which the proverbial David tries to force the tobacco industry to improve the safety of its products using new technology, and the tobacco Goliaths seemingly fight for their right to continue doing business with only one concern – the bottom line.

The trial will likely be a knock-down, drag-out battle between two of the biggest name legal teams in the business. The trial may litigate controversies like how smoking causes cancer … and may expose once again the misdeeds of the tobacco industry, and how the industry has actually fought for years now to keep from having to improve their products by making them less harmful using the best technology available to do so. The judge knows he’s got “Appeals” breathing down his neck after their unanimous rejection of his thinking in the decisions he has rendered so far.

A wild card situation is the possibility that Congress will soon pass law causing FDA regulation of the industry, perhaps while the trial is in process. That possibility is seen highly favorable to Star, as the FDA is deemed likely to require that the industry minimize TSNAs in its products, as it does in other products it regulates as the various nitrosamines are considered highly carcinogenic in whatever form or by whatever means they come in contact with the human body.

The whole affair is smoking hot, as patent litigation goes.


Comments
Tuck Keating May 19, 2009

I simply cannot thank you enough for the most honest and accurate article I’ve read on the case in the last eight years. The inexplicable lack of media attention and fair coverage from the onset has been a source of monumental frustration and concern. It truly is a David versus Goliath story but thanks to Big Tobacco the vast majority of smokers world-wide have no idea that a potentially life saving technology exists. I don’t think Reynolds stands a chance on the merits of their case but it’s their deep pockets, influence, and willingness to forego ethical behavior that has me so concerned. Personally, Garbis is Exhibit A of the way the tobacco industry continuously manages to flaunt the law.

Joseph Lieser May 21, 2009

Can the tobacco co buy Star Scientific out and end this lawsuit?

Bill Thompson May 22, 2009

Great story ! Pls send your follow-up. I have lived it for 6-7 yrs and glad that it’s coming to a head. Thx again.

Rhoda Stillman May 28, 2009

Having worked for the American Lung Association of SE Virginia, as Regional Director for 10 years, I am very interested in this story. Nothing showing in the Southeastern Virginia newspapers. I will fax this to our local paper, The Virginian-Pilot for (hopefully) follow-up.

njgoulds@verizon.net May 29, 2009

A full detailed story…

Tom Blair June 5, 2009

Yes, a company like RAI or MO could purchase STSI as a mediation tool and collect royalties from the other players to offset their purchase price. Estimates of $20-25/share or $2 -2.5 billion market cap versus current $5 or .5 billion market cap today.

Jacqueline OGlesby February 16, 2010

I am trying to find the outcome on this – as you see it is very lengthy

Sandy Hoff August 3, 2010

“I am trying to find the outcome on this – as you see it is very lengthy”

Star lost the trial, in the same court where they lost the first trial in the matter and then won on appeal. The jury trial is now on appeal. That will probably drag on for another 9 months.

A “good” source (in that there are few “single sources”) of information on this whole matter (Star Scientific overall) is the Yahoo! finance message board for the stock (now “CIGX”, was “STSI” at the time of trial) at

http://messages.finance.yahoo.com/mb/CIGX

although you’ll have to endure a very great deal of nonsense along with any “information” there.

A better source is a private message board that contains most of the information posted on the public board, plus (directions to) archived information back to the beginning, That is

http://finance.groups.yahoo.com/group/stsivipgroup/

Yahoo membership and board membership is required. There (in “files”) you can read Star’s initial brief in the latest appeal, which of course contains arguments for why the trial should not have been lost. At this writing RJR/RAI has not filed its brief, but that will be added when it is. The “Files” section is organized to provide information separated into subjects of interest, but there is no “easy read” of the situation.

My apologies for being so late in adding to this material. The story continues, now with Star entering the pharmaceutical realm. If I can, I will someday write “Chapter II”.

Al Cinelli August 17, 2011

Big tobacco has much power through its advertising over the newspaper industry. Maybe this is the reason this trial gets no publicity. Looks like politics came into play when a new judge was inserted in this case.

Sandy Hoff October 19, 2011

This material was posted elsewhere and I do not have time to tailor it to eliminate redundant material (not much).

***********

The Path to Star Pharmaceuticals … in Brief

Star Scientific is what may seem to be an odd combination (re its wholly owned subsidiaries): a tobacco company (Star Tobacco), and a pharmaceutical company (Rock Creek Pharmaceuticals). The following is a brief explanation as to the connection: how we got “to here” “from there”.

There is a “tobacco side” … the company makes the only virtually cancer-safe tobacco products (Ariva and Stonewall) on the planet (well, Swedish snus is “virtually safe”, and Star’s products have ten or more times fewer of the carcinogens, “TSNA”, than does that). Then there is a pharmaceutical side.

The company … the tobacco part (Star Tobacco) … has a huge infringement law suit against RJ Reynolds, going on now for 10+ years. The entire tobacco industry stands to lose a lot if Star wins any such suit against one of its big players. The industry has pulled out all stops in trying to make sure that does not happen. By that, I mean including what we believe to be “influencing”, if you know what I mean, “someone” very central to the case.

(Is it paranoia if it’s true?)

You would have to have been here for the last 12 years to believe it, much less understand it. Here is a link to a piece that tells that story, up to just before the June 2009 jury trial (which is in appeal, now, and the decision on which has led to the stock’s current low price).

[[ was link to story above these comments ]]

(It currently looks as though Star will wind up with its tobacco curing patents intact, but with no infringement against RJR for the first two years of the suit period. Prospects for proof of infringement in later years is in doubt right now.)

The technology that led to the development of these products was mostly the work of a man who has a genius and drive that is quite a phenomenon … Jonnie Williams. He is a person with a great innovative genius and a very strong desire to be very rich.

Having made a sizeable fortune (in a partnership) in the early use of lasers to correct vision acuity (“Laser Vision”, etc.), Mr. Williams acquired, not on purpose, a tobacco business (being in Virginia) in the early 1990s. Out of curiosity, he then set out to find out “what is wrong with” tobacco.

In large part he succeeded (on a shoestring budget, in a few short years) where the industry had spent 100s of millions of dollars and more than a decade failing to do so.

The genius of Mr. Williams, working with a neurology professor in Virginia named DeLorenzo, was to recognize from their research into the background of components of tobacco that it looked like “the minor tobacco alkaloids” … nornicotine, anabasine, and anatabine … were “the mystery components” of tobacco which produced many of the known “benefits” from it. (Few people are aware that there are benefits, thanks to the tobacco smear campaign, mostly deserved, by the health care menagerie.)

Williams and DeLorenzo (and Burton) began patenting the use of these to treat disease, suggested by epidemiological evidence. These substances turned out to be MAO inhibitors, they discovered, but ones with a special property: they are self-limiting. Their dose/response curve levels off at, for example, about 60% MAO inhibition for anatabine (thus removing the huge disadvantage [tyramine hypertension] which makes difficult the widespread use of this property in other “drugs”, because they do not self-limit).

(Nornicotine MAOI is around 90%, anabasine around 13% … if I remember correctly. Nornicotine is also a major metabolite of nicotine in the body.)

Thinking that this was “THE mechanism” that made them beneficial, the patents were based on using the minor tobacco alkaloids in their MAOI capacity. See for example

http://www.freepatentsonline.com/6929811.pdf

While developing a suitable product (CigRx) from anatabine, intended for enabling reducing smoking and other tobacco use … for it is in fact this true benefit that tobacco seekers depend on … Star simultaneously began having researchers look into anatabine’s safety (in a “make sure” sense), and its possible application (from tobacco epidemiological study suggestion) in diseases like Alzheimer’s. Enter the Roskamp Institute and famous researchers Mullan and Crawford.

While running preliminary tests on anatabine under contract to Star, they (apparently, from what I can glean) discovered, about 2.5 years ago (my guess), that anatabine is apparently an outstanding … and likely superior … anti-inflammatory substance (that being entirely apart, apparently, from its MAOI property).

Not only is anatabine a direct calming influence on major inflammatory pathways … thus avoiding the side effects of ALL the other NSAIDs (which act in “shotgun” fashion) … but it has been, as a natural plant substance, via tobacco use, ingested to excess for generations by millions of people; and so it is known to be safe enough to be use as a dietary supplement (if not extracted from tobacco, but synthesized … to satisfy FDA rule re tobacco derivatives).

Needless to say, Star and its subsidiary Rock Creek Pharmaceuticals are filing a string of patent applications to do with this pharma effort (including for the novel little dispenser for CigRx … please recycle).

The rest, as they say, is (extremely recent) history. This story has far outrun Mr. Williams and his early failures and missteps in his ventures. It has, in fact, outrun everything but the imagination.

That’s it in a nutshell. The big picture is millions of words.

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