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Star Scientific falls as settlement disclosed

NEW YORK -- Shares of Star Scientific fell 6 percent on Tuesday as investors likely viewed a $5 million payout in a patent dispute settlement as smaller than anticipated.

THE SPARK: Reynolds American Inc., the country's second-largest tobacco company, disclosed in a filing with the Securities and Exchange Commission that it paid Star Scientific $5 million as part of a confidential settlement agreement. Star Scientific had filed two patent infringement actions against Reynolds American in 2001 and 2002 that were later consolidated. The company claimed that Reynolds infringed on certain claims of its tobacco-related patents during the 2001 and 2002 growing seasons. Star Scientific filed a follow-on lawsuit in 2009.

Reynolds American agreed to the settlement in September and the lawsuits were dismissed with prejudice.

THE BACKGROUND: In August Star Scientific Inc. changed its Nasdaq ticker symbol from CIGX to STSI. The Glen Allen, Va. company used to focus primarily on research of a tobacco curing process that would prevent the formation of carcinogenic toxins in tobacco smoke. It also worked on the development of "smokeless" tobacco products. Star Scientific has shifted its focus more toward the dietary supplements it sells through its subsidiary Rock Creek Pharmaceuticals, including its Antabloc product for anti-inflammatory support.

SHARE ACTION: Star Scientific's stock declined 20 cents to $3.12 in afternoon trading. The shares have traded in a 52-week range of $2.10 to $5.05.