Inventor rights in the UK – the last word in compensation?

Inventor rights in the UK – the last word in compensation

08.08.2017

It is well known under UK patent law that “…an invention made by an employee shall, as between him and his employer, be taken to belong to his employer” and in most industries it is considered that employees, at least those involved in technical services and design, are employed to invent. While some companies may introduce incentive schemes to encourage patent application filings, or reward particularly prolific inventors there is no requirement to do so.

If an employee invention, the subject of a granted patent, is found to have been of outstanding benefit to the employer then there is a provision under which the employee can be awarded compensation by the employer. The procedure involves an application to the court or to the comptroller by the employee and an assessment of the merits of the case and the size and nature of the employer’s undertaking. It is interesting to note here that ‘outstanding’ is not defined in the statute but that ‘benefit’ is described as ‘benefit in money or money’s worth’.

Disputes between employee inventors and employers are rarely litigated, perhaps with cases being settled or dropped before the court room. In recent months though, a long running battle for inventor compensation between employee-inventor Prof Shanks and Unilever has been heard by the Court of Appeal, following appeal from the decision of the hearing officer at the UK Intellectual Property Office and then at the High Court.

The judgement (Shanks v Unilever PLC and others [2017] EWCA Civ 2.) gives some direction as to how to assess outstanding benefit, in particular with regard to the employer’s turnover and profitability.

The Shanks patents at issue (EP 0170375 and family members) is related to capillary devices used in chemical test procedures. The patents claimed priority from original applications on which Prof Shanks was named as the sole inventor. The parties agreed that Prof Shanks was employed to invent and was rewarded for his work with a salary and a car. Between 1992 and 2001 Unilever used the patents to negotiate and require non-exclusive licences with most companies in the field of blood glucose testing – this was obviously of benefit to Unilever. In addition, the hearing officer and the High Court had heard earlier on in the proceedings how the Shanks patents were assigned to the group’s medical diagnostics business which was subsequently sold to a third party.

At issue was the hearing officer’s assessment that the total gross benefit to Unilever from the Shanks patents, including the licencing revenue and the sale of the medical diagnostics division, was £24.5M, but that this was not an ‘outstanding benefit’. Had the patents been deemed to satisfy the test of outstanding benefit then the inventor would have been entitled to compensation and a ‘fair share’ of the benefit the employer received. The hearing officer had considered 5% to be a fair share.

On the facts, the Unilever team successfully argued that the £24.5M (not a small sum!) was dwarfed in comparison with the profits and turnover figures for the Unilever group as a whole and that the size of the undertaking should be taken into consideration. The Court of Appeal agreed and viewed ‘outstanding’ as a relative concept assessed on a case by case basis evaluating the economic and business position of the employer’s organisation (here a group of companies) and not relying on the size of the employing entity, which in this case was smaller.

This is an interesting decision where economic size mattered. The judge noted that had Prof Shanks been employed by a smaller undertaking or overall smaller group of companies, then the claim might have succeeded and the personal outcome for Prof Shanks could have been very different.

 
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