some info on gtg , page-6

re: some info on gtg/patent insurance Taken from GTG's annual report. Two important points are:

(i) Importantly, the Company is still receiving the benefit of an expired insurance policy that has covered the majority of the legal costs associated with the Applera matter.

(ii) The existence of this court case has temporarily hampered the Company’s licensing activities, as some potential licensees are reluctant to negotiate license terms until such time as the matter has been resolved. Whilst this situation has reduced the rate at which licenses have been secured by the Company in the short term, it is important to note that validation by the Court of the GTG claims should substantially increase the strength and value of the Company’s non-coding DNA patents. In turn, this outcome should increase both the number and value of subsequent licenses.


GENETIC TECHNOLOGIES LIMITED
ACN 009 212 328
The year ahead
Licensing negotiations arise both in response to companies identifying their need for access to the GTG technology and through GTG identifying companies who are using the technology but who may not have been aware that it was covered by these patents. In the main, the negotiations proceed to a mutually acceptable outcome, with a license agreement being executed by the parties and some form of consideration (cash or other assets) being paid to the Company, typically as a signing fee plus an ongoing royalty or annuity stream. Unfortunately however, on occasion the parties are unable to negotiate a satisfactory outcome, leaving GTG (the patent holder) with no option but to commence legal action to have its patent enforced and its position protected. To date, GTG has reluctantly commenced legal action against three such companies to enforce its patents. In two of these cases, satisfactory settlements were subsequently reached by the parties, whilst the third case, against Applera Corporation of Connecticut, USA is progressing through the normal legal processes in the District Court of Northern California, USA. The next major step in this process is the so-called “Markman” hearing at which a judge will make a formal interpretation of the claims of the patents. This hearing is currently scheduled to be heard in September 2004. Importantly, the Company is still receiving the benefit of an expired insurance policy that has covered the majority of the legal costs associated with the Applera matter.

The existence of this court case has temporarily hampered the Company’s licensing activities, as some potential licensees are reluctant to negotiate license terms until such time as the matter has been resolved. Whilst this situation has reduced the rate at which licenses have been secured by the Company in the short term, it is important to note that validation by the Court of the GTG claims should substantially increase the strength and value of the Company’s non-coding DNA patents. In turn, this outcome should increase both the number and value of subsequent licenses. Research Overview GTG continues to support an active program of research in the broad fields of genetics and biotechnology. The key objective of such research is to capitalise on the Group’s existing technology base and its in-house technical expertise and laboratory facilities to create valuable additional intellectual property which can either be commercialised in its own right or licensed out to third parties for a fee. In turn, this strategy provides the Company with further potential sources of income and expansion of its intellectual property portfolio. Importantly, a detailed assessment process is undertaken prior to the Company initiating any new research programs. New research opportunities are evaluated against extensive criteria set within a business case proforma and issues including the project’s technical merit, potential return on investment, intellectual property position and the Company’s ability to fund the project are all carefully examined before any final decision is reached. Once selected, GTG manages each project through a project management team. In addition, at regular intervals, each project is reviewed by the Company’s senior management team to ensure that the progress being made is consistent with project objectives, that the project remains aligned with corporate objectives and that the project plans and budget are updated to reflect any changes. Projects that fail to meet its objectives are either modified or terminated. Where necessary, an external scientific advisory board is established to provide further project governance. For example, an advisory team comprising independent eminent researchers and clinicians regularly reviews the progress made on GTG’s ImmunAid project. At an appropriate stage in the project’s life cycle, external third party funds may be sought to offset the cost of the research programs. GTG has had a long history of building value through investment in research and development. To date, for example, GTG’s non-coding DNA patents have yielded in excess of $7.5 million in license fees.