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.