someone is on J1 in 4th year

This is true. J1 can be extended up to 5 years. the extention is based on the same research project. No transfers.
Once he /she is over 3 years, say 37th month on J1, he/she can not waive the 2 year home country service. He/she has to leave but can come back 2 years later as a fresh researcher with J1/H1 visa. He can then apply for GC.

Our group has an Indian guy who is on J1 in the 4 th year.