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August 13, 2003 | Genetic Technologies (GTG) is a small biotech firm based in Fitzroy, a suburb of Melbourne, Australia, that few scientists in the United States have heard of — until now. The company owns a handful of key patents controlling broad genetic applications of noncoding, or junk, DNA, which potentially impacts the work of hundreds of biotech companies, service providers, and nonprofit organizations — particularly in the pharmacogenomics arena. While the original patent inventor, Malcolm Simons, left the company after it went public in 2000 (see First Base), GTG is increasingly exercising its patent rights, targeting not only biotech companies that may be violating the patents, but academic institutions as well.

Bio·IT World Editor-in-Chief Kevin Davies reached GTG co-founder and Executive Chairman Mervyn Jacobson in Colorado to discuss the latest — and perhaps biggest — patent controversy in the world of bio-IP. Reaction to GTG's patent from geneticists, licensees, and patent experts follows online.

Q: Mervyn, when exactly were the first noncoding DNA patents issued?

A Patent's Place 
Six contrasting views on the noncoding DNA patents and business strategy of Genetic Technologies (GTG).

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A: The first patent was on the HLA gene family in 1993. When we published, other people were interested to repeat those experiments on other human genes, animals, and plants ... and all were able to show with us that [the importance of noncoding DNA] is not limited to HLA. That is, this is essentially a paradigm.

So based on the new data, we filed an extension covering all genes, all species. The 'analysis' patent has been granted in about 30 countries; the mapping patent has been granted in 20 countries, most recently Japan.

Q: The patents were originally awarded to GeneType, based in Switzerland. How does that relate to Genetic Technologies?
A: The original company was GeneType, and it was incorporated in Switzerland because it was hard to raise risk capital, especially in an area as extreme as noncoding DNA. Then in August 2000, as we started to become successful and patents began to be issued, we needed to become a public company. As our roots were still in Australia, we chose to fast-track onto the Australian stock exchange ... We found a dormant public company and invited them to acquire us [in a reverse takeover]. The new parent company had its name changed to Genetic Technologies Ltd. (listed on the Australian Stock Exchange as GTG).

Q: What is your current relationship with company co-founder Malcolm Simons?
A: Malcolm started as a 50-percent shareholder on day one of the company in May 1989. Progressively, he used his stock for other obligations, and so started to dilute his own holdings ... He's a free spirit who likes to take walks on the beach; he's not a 9-to-5 researcher.

My view is he's our intellectual fountain, so I don't care where he is in the world. Malcolm felt he couldn't be in that [conventional] sort of a role in a public company, so he left (in 2000). In December 2002, he came back to GTG and was a consultant until June 30, when he terminated his consulting agreement once again.

Q: What do you say to those who criticize the novelty and breadth of these junk DNA patents?

Simons Says: Junk DNA Has Value 
Two patents, awarded to Malcolm Simons in the mid- to late-1990s, consign far-reaching rights to the forerunner of Genetic Technologies for gene mapping and haplotype analysis using noncoding DNA.

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A: We believe these inventions are significant. We are keen to make the technology and methodologies available as broadly as possible. We are a small group ourselves; we're not a Hoffmann-La Roche or a GlaxoSmithKline — [we want] to make them very widely available to all groups, whether making products in genetics, platforms, or service providers.

The old days of researchers being in academia and not being commercial are not true any more — it's very blurred. U.S. academic institutes generate $870 million in licensing fees in a year, which is wonderful if they're making inventions and then licensing technology. But doing it utilizing the inventions of others? It seems to be hypocritical that they want the right to commercialize their own inventions without paying those on whose shoulders they're standing.

Q: You signed a deal with Myriad Genetics for the breast cancer gene patents and then gave them to the Australian people?
A: In Australia, once the Myriad [breast cancer gene] patents were issued, many people just ignored the patent, including government agencies ... I went to Myriad and persuaded them that they needed a license to our noncoding [DNA] patents, and for us to handle the licensing of the Myriad patents in Australia and New Zealand. When I returned to Australia, I announced that we had secured those rights, and we were going to make them available as a gift to other service providers. We're not going to charge other groups using the Myriad patent, and we do not intend to be the Myriad policemen.

Meanwhile, we are ourselves setting up a focused state-of-the-art testing service in Fitzroy for breast cancer genetic susceptibility. We aim for a 30-day turnaround. We're going to try to be the best.

Q: What licenses for noncoding DNA have you negotiated with biotech companies so far?
A: Genetic Solutions in Australia was the first one, focused on livestock genetics. The challenge for us is we have very broad patents, and everyone [potential licensees] says 'Why should we be the first? I can do it anyway, why do I need the license?' With PCR, you get a box or a kit [including the license] ... They've already learned the benefits of using noncoding DNA ... but it's our technology!

We had a rational plan of starting modestly and gradually stepping up in value to create some momentum. Then we went to the United States and licensed Nanogen, for a $250,000 one-time payment. Then came Sequenom ($500,000), Perlegen ($860,000), and then Myriad (more than $1 million).

Q: Presumably you plan to extend this licensing strategy with other companies?
A: We've decided to build a database of all kinds of organizations that may benefit from a license: what work they do, what patents they publish, what products they release, what they say on their Web site, what papers they are publishing, etc. Typically now, when we make contact with someone, we can talk intelligently with them about their activities.

We do see ourselves as socially responsible, too — Myriad is one example of that. We're using the leverage of being able to license our patents also to access cutting-edge technology to bring back to Australia. We have also brought rights from Pyrosequencing to Australia, and, more recently with Orchid [BioSciences], we're bringing some of its sophisticated SNP [single nucleotide polymorphism] panels.

Q: What happens when companies you approach refuse to negotiate a license?
A: There is a strategy on the part of some large companies to eliminate small companies as a threat by inducing them to sue and overwhelming them in legal fees. But we did have the foresight to reduce that risk by securing patent insurance in the early days [underwritten by GE]. If we do need to go to litigation, we will not be in danger of being wiped out because of the burden of $5-million to $6- million legal fees.

We have filed action against three American biotech companies, including one large one. There is a 120-day process before we legally serve them, and then they must respond to the court.

Q: You have also started to sign deals with academic institutions. Isn't this crossing the line?
A: I think it's misunderstood. So far, we have one example of one university that signed one license for the life of the patent (15 years), so that probably comes to less than $1 per project per year. It's hard to see how that stifles research. ARUP [Associated Regional and University Pathologists] at the University of Utah has more than 1,000 employees doing commercial genetic testing. We licensed them for a one-time fee of $75,000. The university is also doing research using noncoding DNA patents, and the suggestion was put that this activity should also be regularized.

The $1,000 license fee we charged them didn't even cover the cost of the legal agreement or distributing the press release on PR Newswire. But there's some significance in that in our current risk-reward society, research is now big business for universities, hospitals, companies — they're all in business. The historical boundary of academic and public fund organizations doing research at a pure level is simply not correct anymore.

The patent system works very well: It can also be applied not only to the commercial sector but also to other sectors that are becoming commercial. A lot of academic organizations are under pressure to generate revenue. Why should they be exempt from the rules of the market?

Q: Will you be seeking other academic licenses?
A: Many academic institutions are responsive and sympathetic. A new model is emerging of public-private partnerships. I do think there is a role in the private sector for research and a role in the public sector for commercialization. And the same sorts of ground rules need to prevail, still with a sense of balance and ultimate purpose.

Q: Wouldn't it be easier to turn a blind eye to the academic groups that might technically be violating your patents?
A: That's a possibility, but I don't know many academic institutes that would welcome that. They'd be designated second-class citizens — they'd be illegal. Why not, for a peppercorn payment, be legitimate? What if Mervyn Jacobson gets replaced by an extreme person who might seek to obstruct their work and shut them down? Why not get a license and get the process legitimized? It seems to me that's good insurance.

We are ourselves a research group — we have a large number of joint projects. We do not see the licensing of public groups as an income earner — it's a matter of them prudently covering their rear, or at some point they may come under attack. It's a positive gesture. If the cost is a token and they get licensed, isn't that better than taking a risk?

Q: Junk DNA has been used for human gene mapping and diagnosis for 25 years. Does this not undermine your patent position?
A: No. Patents are very specific things. Ultimately, patents stand on the specific claims and the construction of the patent, which involves recognition of prior art. What we claimed in the analysis patent is inventions that were not known at that time ... What was known was disclosed in prior art [in the application] and not claimed. The Japanese are incredibly thorough — they only just allowed the mapping patent 13 years after we filed it. In Europe, there's a very thorough process ... We satisfied the required level of compliance, and there has never been an appeal. The patent process rewards invention. Broad inventions get broad patents.

Q: And you don't 'own' junk DNA?
A: We didn't file any patents on gene sequences; we don't claim to own the sequence. We simply own a strategy for using information in the noncoding region that is linked to the coding allele or haplotype.

For reprints and/or copyright permission, please contact Angela Parsons, 781.972.5467.