GTG celebrates win over Applera in patent battle

An elated Dr Mervyn Jacobson, CEO of Genetic Technologies (ASX:GTG, NASDAQ:GENE), flew back to Melbourne from San Francisco this morning after slaying his company's most reluctant dragon, giant US rival Applera.

After an exhausting mediation session lasting from 9am on December 8 to 3am on December 9, Applera's lawyers agreed to pay an undisclosed fee to license GTG's patented 'junk DNA' gene-testing technology, one of the broadest patents ever issued in the recombinant DNA technology field, and the only US patent on the use of non-coding DNA markers for gene testing.

The commercial terms of the settlement remain confidential, but according an announcement to GTG shareholders today, GTG and Applera have executed several binding agreements, including a final settlement agreement, a licence agreement, and a supply agreement, before Judge Joseph Spero, of the US District Court of Northern California.

The two parties will also move to dismiss all claims and counterclaims in their legal action before Judge Phillis Hamilton, in the same jurisdiction.

Lone holdout

GTG originally sued Applera, and two other US gene testing companies, Novelo and Covance, in March 2003, for refusing to take licences and pay royalties on its patented technologies. Novelo and Covance both submitted and took licences in November 2004, leaving Applera -- the largest gene-testing company in the US -- as the lone holdout.

The first sign of a negotiated settlement came on October 13 this year, when the parties executed a confidential term sheet and agreed to further negotiations before Judge Spero.

Applera and GTG were originally to have reached a negotiated settlement on November 9, but after three extensions, finally settled on December 9.

Jacobson today described the mediation process as "quite strenuous".

"But standing back and looking at it from 38,000 feet, it's a very significant result," he said. "Since GTG launched its licensing program three years ago, we've had people challenging our right to charge licence fees, or telling us to go to hell and sue us.

"It's been constant -- even when we were pursuing licences, there has always been some company or group challenging us, so we've been continually distracted with ongoing legal battles. But this is the end of the seventh and final battle.

"Today, with the Applera matter settled, nobody in the world is challenging our patents. For a little Australian company to file a lawsuit against Applera, and have the resources to see it through, and bear the associated legal costs for three years, is obviously very significant."

Turning point

Jacobson said the research community and commercial gene-testing companies around the world had been watching the case, and would see it as a turning point.

"Lots of people have hidden behind Applera, believed that time was on their side, if Applera could continue to obstruct us, and invalidate our patents -- or simply wait us out," he said. "Now that Applera has come to an agreement with us, they have nowhere to hide."

Jacobson warned that companies that had delayed taking a licence from GTG were now exposed. "The nature of the settlement may justify us repricing," he said. "Our own view on what the patents are worth may need to be reexamined.

"I am now setting my sights on hundreds of targets who, in our view, already owe substantial amounts for past activities, and will owe us more for future activities."

Win for Australian biotech

Jacobson characterised the win as "a great victory for Australia's biotechnology industry too."

"In human terms, this is a case of the little guy taking on a giant and prevailing," he said. "So we have to assume that the little guy had something of great value -- that's now clearly established.

"So much has been written about Australian companies' [lack of success] on the world scene, now here is an Australian company that has gone onto the world stage seven times and won -- and we've not sued anybody within Australia."