Note 7 - Commitments and Contingencies	9 Months Ended
Dec. 31, 2014
Notes to Financial Statements
Commitments and Contingencies Disclosure [Text Block]	7. COMMITMENTS AND CONTINGENCIES On September 12, 2012, the Company entered into an agreement with ThyssenKrupp Industrial Solutions (USA), Inc. (“TKIS”), formerly Uhde Corporation of America, for the purchase of supercritical carbon dioxide extraction equipment to be used in the processing of its natural astaxanthin (“Equipment”). Pursuant to the terms of the agreement, TKIS will build, ship and provide assistance in installing the Equipment. The Equipment, which was originally scheduled for delivery approximately 14 months from the date of the agreement, was delivered in the third quarter of this fiscal year. The Company will pay TKIS an aggregate of $3,222,000 for the equipment and services, of which $323,000 remains unpaid as of December 31, 2014. Progress payments through December 31, 2014 of $2,899,000 have been classified in construction in progress in the consolidated balance sheet. The Company is subject to legal proceedings and claims from time to time in the ordinary course of business. Although management cannot predict with certainty the ultimate resolution of legal proceedings and claims asserted against the Company, management does not believe that any currently pending legal proceeding to which the Company is a party is likely to have a material adverse effect on its business, results of operations, cash flows or financial condition. We previously disclosed the negative effect of the legal costs of one pending patent lawsuit against the Company and a related administrative proceeding initiated by the Company to challenge the validity of the patent which is the subject of the lawsuit.¹ Our legal costs grew significantly in the first quarter of this fiscal year due to costs related to development of reports by our medical and economic experts, the extension of discovery and deposition deadlines, and costs related to preparation for the oral hearing with the Patent Trial and Appeal Board (“PTAB”) on our Inter Partes Review (see Risk Factors , pages 14-15, and discussion of increase in Operating Expenses , page 16). Patent litigation and Inter Partes Review matters : On June 29, 2012, U.S.Nutraceuticals LLC, d/b/a Valensa International [“ Valensa ”] and The Board of Trustees of the University of Illinois [the “ Patent Owner ”] filed a lawsuit against Cyanotech Corporation and Nutrex Hawaii, Inc. in the U.S. District Court for the Middle District of Florida, Ocala Division (the “ Litigation ”) primarily alleging infringement of U.S. patent no. 5,527,533 ²(the “ ’533 Patent ” or “ Patent ”). In an effort by the Company to accelerate a determination of the invalidity of the ‘533 Patent, the Company petitioned the PTAB of the U. S. Patent and Trademark Office on June 28 and 29, 2013 to conduct an administrative review of the validity of the ‘533 Patent, as challenged in our Petition; PTAB instituted an Inter Partes Review of 18 of the 27 Claims within the ‘533 Patent on December 19, 2013 (“ IPR ”). The Patent Owner is the respondent in the IPR. _________ ¹Form 10-K, Item 3 – Legal Proceedings, dated March 31, 2014 (filed June 27, 2014), Form 8-K, Item 8.01 – Other Events, dated June 30, 2013 (filed August 26, 2013); and Forms 10-Q for the quarter ended September 30, 2013 (see Item 2 – Management’s Discussion and Analysis, Operating Expenses , page 16); and Form 10-Q/A (filed February 14, 2014) for the quarter ended December 31, 2013 (see Item 2 – Management’s Discussion and Analysis, Operating Expenses , page 16). On December 17, 2014 all existing litigation and administrative proceedings between the Company and U.S. Nutraceuticals LLC d/b/a Valensa International and The Board of Trustees of the University of Illinois were amicably resolved. The tentative resolution was reported on a Form 10-Q/A filed November 13, 2014. In Reports covering periods beginning in Fiscal 2013 the Company had disclosed significant increases in legal expenditures as a component of general and administrative expenses due to pending litigation ² and administrative proceedings ³ . The Company also stated in those prior Reports that it did not believe that the ultimate resolution of pending legal proceedings was likely to have a material adverse effect on the Company’s business, results of operations, cash flows or financial condition. All litigation and related administrative proceedings involving the Company are being, or have already been, dismissed with prejudice or otherwise effectively terminated. [See Form 8-K, Item 801 – Other Events dated December 17, 2014 (filed December 19, 2014)].

COMMITMENTS AND CONTINGENCIES

On September 12, 2012, the Company entered into an agreement with ThyssenKrupp Industrial Solutions (USA), Inc. (“TKIS”), formerly Uhde Corporation of America, for the purchase of supercritical carbon dioxide extraction equipment to be used in the processing of its natural astaxanthin (“Equipment”). Pursuant to the terms of the agreement, TKIS will build, ship and provide assistance in installing the Equipment. The Equipment, which was originally scheduled for delivery approximately 14 months from the date of the agreement, was delivered in the third quarter of this fiscal year. The Company will pay TKIS an aggregate of $3,222,000 for the equipment and services, of which $323,000 remains unpaid as of December 31, 2014. Progress payments through December 31, 2014 of $2,899,000 have been classified in construction in progress in the consolidated balance sheet.

The Company is subject to legal proceedings and claims from time to time in the ordinary course of business. Although management cannot predict with certainty the ultimate resolution of legal proceedings and claims asserted against the Company, management does not believe that any currently pending legal proceeding to which the Company is a party is likely to have a material adverse effect on its business, results of operations, cash flows or financial condition.

We previously disclosed the negative effect of the legal costs of one pending patent lawsuit against the Company and a related administrative proceeding initiated by the Company to challenge the validity of the patent which is the subject of the lawsuit.¹ Our legal costs grew significantly in the first quarter of this fiscal year due to costs related to development of reports by our medical and economic experts, the extension of discovery and deposition deadlines, and costs related to preparation for the oral hearing with the Patent Trial and Appeal Board (“PTAB”) on our

Inter Partes

Review (see

Risk Factors

, pages 14-15, and discussion of increase in

Operating Expenses

, page 16).

Patent litigation and

Inter Partes

Review matters

On June 29, 2012,

U.S.Nutraceuticals LLC, d/b/a Valensa International

[“

Valensa

”]

and The Board of Trustees of the University of Illinois

[the “

Patent Owner

”] filed a lawsuit against

Cyanotech Corporation and Nutrex Hawaii, Inc.

in the U.S. District Court for the Middle District of Florida, Ocala Division (the “

Litigation

”) primarily alleging infringement of U.S. patent no. 5,527,533 ²(the “

’533 Patent

” or “

Patent

”).

In an effort by the Company to accelerate a determination of the invalidity of the ‘533 Patent, the Company petitioned the

PTAB

of the U. S. Patent and Trademark Office on June 28 and 29, 2013 to conduct an administrative review of the validity of the ‘533 Patent, as challenged in our Petition; PTAB instituted an

Inter Partes

Review of 18 of the 27 Claims within the ‘533 Patent on December 19, 2013 (“

IPR

”). The Patent Owner is the respondent in the IPR.

_________

¹Form 10-K, Item 3 – Legal Proceedings, dated March 31, 2014 (filed June 27, 2014), Form 8-K, Item 8.01 – Other Events, dated June 30, 2013 (filed August 26, 2013); and Forms 10-Q for the quarter ended September 30, 2013 (see Item 2 – Management’s Discussion and Analysis,

Operating Expenses

, page 16); and Form 10-Q/A (filed February 14, 2014) for the quarter ended December 31, 2013 (see Item 2 – Management’s Discussion and Analysis,

Operating Expenses

, page 16).

On December 17, 2014 all existing litigation and administrative proceedings between the Company and U.S. Nutraceuticals LLC d/b/a Valensa International and The Board of Trustees of the University of Illinois were amicably resolved. The tentative resolution was reported on a Form 10-Q/A filed November 13, 2014. In Reports covering periods beginning in Fiscal 2013 the Company had disclosed significant increases in legal expenditures as a component of general and administrative expenses due to pending litigation

and administrative proceedings

. The Company also stated in those prior Reports that it did not believe that the ultimate resolution of pending legal proceedings was likely to have a material adverse effect on the Company’s business, results of operations, cash flows or financial condition. All litigation and related administrative proceedings involving the Company are being, or have already been, dismissed with prejudice or otherwise effectively terminated. [See Form 8-K, Item 801 – Other Events dated December 17, 2014 (filed December 19, 2014)].