DuPont Needs to Recover and Keep Rewarding Shareholders

NEW YORK (TheStreet) -- Nobody likes to lose a big lawsuit, but it was especially egregious for DuPont (DD) to lose one to an arch-nemesis concerning a licensing agreement about their agricultural seed business. A "bad seed" can spell trouble for a living, viable entity.

DuPont's loss was at the hands of Monsanto (MON), the company that brought the world Roundup herbicide and a technology called "Roundup Ready."

Analysts don't expect the legal victory/loss to impact upon either company very much in the short term. DuPont said it would appeal the verdict award. One of their spokesmen, Doyle Karr, said the company would not incur a charge against earnings because it anticipates winning the appeal.

"It does not have any impact on our current products or on our pipeline" of products, Karr said. That should help investors to breathe a little easier (unless someone's spraying Roundup in your immediate vicinity).

In a press release, the company's legal counsel gave some details as to why DuPont thinks this legal award won't hold up:

DuPont strongly disagrees with the verdict that was reached in favor of Monsanto in Monsanto's patent case against DuPont in the United States District Court in St. Louis, Missouri.

There were several fundamental errors in the case which deprived the jury of important facts and arguments and led to the disappointing outcome. DuPont will appeal at the earliest possible opportunity and expects to overturn this verdict.

DuPont alleges that several aspects of Monsanto's misconduct involving this patent, which were not tried in this case, will be presented to a different jury as part of DuPont's antitrust and patent misuse case against Monsanto in September 2013.

"DuPont is and always has been committed to innovation and providing farmers with diverse technology options. We continue to stand by our position that we did not infringe the Roundup Ready soybean patent and that the Monsanto patent is invalid. DuPont will continue to fight hard to ensure American farmers have choices and that no one company decides what is best for them," concluded DuPont Senior Vice President and General Counsel Thomas L. Sager.

Monsanto's temporary victory is a rather hollow one, in this author's opinion. It involves the technology it licensed that concerns an ominous aspect of genetically modified seeds that allow crops to tolerate weed killer. My instincts cringe as I imagine eating crops that can tolerate a deadly weed killer.

Let investors and consumers vote on this matter with their wallets. DuPont's stock closed down Thursday by less than 2% at $49.02. With its current $1.72-a-share dividend, the current yield is nearly 3.51%. That represents a rather high 45% payout ratio, which is a concern.

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