Genus damages over US patent infringement case lower than feared

After losing its long-running US court case last week, Genus has been ordered to pay its opponents $2m upfront in damages plus an ongoing royalty for two patents its Genus Sexed Semen (GSS) processing technology was ruled to have infringed.

However, Genus will be free to commercialise its GSS technology in the US and globally, with analysts saying the royalty charges were lower than feared and would allow the company to enter the market with relatively low ongoing payments.

The jury's decision emerged from the US District Court for the Western District of Wisconsin on Wednesday and the damages verdict was announced late on Friday.

The jury agreed with Genus that US-based Sexing Technologies (ST) had wilfully maintained monopoly power in the market for sexed bovine semen processing in the US since July 2012, so the FTSE 250 group has filed for an injunction to allow its ABS subsidiary to terminate a 2012 semen sorting agreement with ST on ninety days notice and to provide relief from the restrictive provisions under that agreement.

Genus has been ordered to pay ST an upfront payment of $750,000 and an ongoing royalty of $1.25 per straw of semen on commercialisation of the GSS technology for the use of one of ST's US patents, and $500,000 upfront and $0.50 per straw royalty for another patent, both of which had been determined by the jury to have been infringed.

In respect of Genus/ABS's breach of the confidentiality obligations under the 2012 semen sorting agreement between the parties, damages were determined by the jury to be $750,000.

House broker Peel Hunt said the resolution of the case "may not be the perfect outcome, but is an excellent result" for the company, with the proscribed level of royalty enabling Genus to enter the market with a "relatively low ongoing payment".

"To put it in perspective, we forecast the royalty payments will amount to circa £1.5m per annum versus the current royalty of circa £12m," Peel Hunt said, adding that while there are a number of further motions to be determined, the key ones have been decided.

Analysts at VSA Capital agreed these were "fairly light" damages given previous settlements in the sector and that with Genus able to commercialise its own version of the technology, this will likely result in an operating cost saving of circa £5m, minus the royalties paid to Sexing Technologies.

"Whether this is launched earlier than September 2017 (when the 2012 agreement is scheduled to end) will depend on the result of GNS’ application for termination of the agreement, which is due to be decided upon in the coming days," VSA said, suggesting that GNS confidence in the sexed semen technology led them to forecast GNS will "rapidly gain market share in this area".

Shares in Genus were up 1.5% to 1,809p just before noon on Monday.