Note 13 - Contingencies

On June 7, 2004, the Company and Enzo Life Sciences, Inc., filed suit in the United States District Court for the District of Connecticut against Applera Corporation and its wholly-owned subsidiary Tropix, Inc., now Life Technologies, Inc. (NASDAQ:LIFE) which was acquired by Thermo Fisher Scientific, Inc.(NYSE:TMO) on February 3, 2014. The complaint alleged infringement of six patents relating to DNA sequencing systems, labeled nucleotide products, and other technology. Yale University is the owner of four of the patents and the Company is the exclusive licensee. These four patents are commonly referred to as the “Ward” patents. On November 12, 2012, a jury in New Haven found that one of these patents (United States Patent No. 5,449,667) was infringed and not proven invalid. The jury awarded $48.5 million for this infringement. On January 6, 2014, the judge awarded prejudgment interest of approximately $12.5 million and additional post-interest on the full amount will also be awarded starting November 7, 2012 until the total award is satisfied.  The final award to Enzo could be reduced or be subject to possible claims from third parties. On February 3, 2014, Life Technologies filed a notice of appeal and there can be no assurance that the Company will be successful in this litigation. Even if the Company is not successful, management does not believe that there will be a significant adverse monetary impact on the Company.

As of August 1, 2013, the Company, as plaintiff, was engaged in litigation in the United States District Court for the Southern District of New York against six parties (and certain of their related companies): Amersham plc, PerkinElmer, Inc., Molecular Probes, Inc., Orchid Biosciences, Inc., Affymetrix, Inc., and Roche Diagnostic GmbH (“Roche”). These cases were commenced at various times from October 2002 to June 2004. In each of the six cases, the Company had asserted similar (with some differences) causes of action against the defendants which can be generally described as contract, tort, fraud, and patent claims, except that no patent claims are asserted against Affymetrix. In the Roche case, Roche seeks a declaratory judgment of non-breach and patent invalidity against the Company. The cases were consolidated for pre-trial purposes in 2004 and there has been extensive discovery among the parties. In 2011, the defendants moved for summary judgment of non-infringement regarding the Company’s patent claims. In 2012, those motions were granted in part and denied in part. In December 2012, all six defendants moved for summary judgment on the Company’s non-patent claims. Additional discovery was taken and the Company responded to the motions in May 2013. On October 22, 2013, the Court granted Amersham’s motion for summary judgment.  Thereafter, on November 26, 2013, the parties settled and dismissed the Amersham case. On October 28, 2013, the Court granted in part and denied in part PerkinElmer’s motion for summary judgment. A jury trial in that case was scheduled for March 18, 2014, but has since been adjourned without date. By decisions dated December 6, 2013, the Court granted in part and denied in part the summary judgment motions by Roche and Affymetrix. Jury trials have been ordered in both cases; Affymetrix was originally scheduled for April 14, 2014, but has been rescheduled for May 12, 2014 and Roche on a date to be determined. On the same date, the Court granted the remaining two summary judgment motions by Molecular Probes and Orchid.

In 2012, the Company received a Subpoena Duces Tecum (the “Subpoena”) from the federal Department of Health and Human Services, Office of Inspector General (“OIG”). The Subpoena was issued as part of an investigation being conducted by the US Attorney’s Office for the Eastern District of New York in conjunction with the OIG. While a number of potential issues were raised initially by the government, the investigation has come to focus primarily on certain practices relating to an alleged failure to collect diagnosis codes from physicians who ordered tests through Enzo Clinical Labs. The time period covered by the investigation is from 2004 through 2011. In response to the Subpoena, the Company is cooperating with the government and has provided documents as requested and no claim has yet been asserted by the OIG. The Company continues to review the methodologies around the matters raised as well as the facts that impact them. The process in these on-going discussions includes the Company reviewing the government’s methodology, the submission of additional information for the government’s review and consideration, and meetings with the government to discuss various facts and issues surrounding this matter. Due to the on-going review, various questions of fact and the continuing discussions with the government the Company is unable at this time to predict the outcome or estimate the potential impact that could result from the final resolution of the investigation. The results of this matter could have a material effect on the Company’s business, results of operations, financial condition and cash flow.

The Company is party to other claims, legal actions, complaints, and contractual disputes that arise in the ordinary course of business. The Company believes that any liability that may ultimately result from the resolution of these matters will not, individually or in the aggregate, have a material adverse effect on its financial position or results of operations.