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Too big to pay? Compensating employee inventors

Monday 10 June 2019

Often, inventions created by employees in the course of their employment will belong to their employer. Different jurisdictions around the world have different rules and laws for dealing with the compensation of employee inventors in these circumstances. For example, in Germany, an employee who invents is entitled to additional remuneration, calculated on the value of the invention.

Here in the UK, employee inventors are not typically entitled to further remuneration beyond their usual salary and benefits for inventing. Instead, the law allows the inventor to claim additional compensation only where it can be demonstrated that the invention or the patent are of outstanding benefit to the employer. The law explicitly requires the assessment of what constitutes outstanding benefit to consider the size and nature of the employer’s undertaking.

The outstanding benefit test is a very high bar to meet. There have been precious few awards made in the UK courts to inventors. The most recent reported case to be decided in favour of the inventors is now 10 years old (Kelly and Chiu v GE Healthcare [2009] EWHC 181 (Pat)). In Kelly, the inventors demonstrated that the employer was in dire straits before the invention, and that their invention effectively saved the business. 

However, in normal circumstances, proving that a single invention is of outstanding benefit is very difficult, especially if the employer is a multinational company with a large patent portfolio.

However, the highest court in the land – the UK Supreme Court – recently heard an appeal (Shanks v Unilever Plc and others, UKSC2017/0032) that has the potential to change the inventor compensation landscape in the UK. As a result of Shanks,compensation could be due in a wider range of cases. We examine the circumstances of Shanks, below.

Background

Professor Shanks was employed by a company in the Unilever group (Unilever UK Central Resources Ltd – “CRL”). Whilst employed by CRL, he invented a device for testing glucose levels in blood. CRL assigned the rights in the device to Unilever plc, which then in turn assigned the rights for some jurisdictions to Unilever NV.

Unilever, who had an interest in pregnancy and fertility testing but not blood glucose testing, subsequently licenced the resulting patents to a number of third parties, generating a high return for relatively little effort. This licencing model was highly unusual for Unilever, who typically profited at a much lower rate of return on consumer goods.

Earlier decisions

This case was originally heard by a UKIPO Hearing Officer (BL O/259/13), who calculated the benefit to Unilever as £24.5m. Despite the fact Unilever could not identify any other patent with a comparable rate of return, the Hearing Officer came to the view that the total benefit of £24.5m was not a sum that could be considered outstanding, given the size and nature of the Unilever Group as a whole.

The decision was upheld on appeal, with both the High Court ([2014] EWHC 1647 (Pat)) and the Court of Appeal ([2017] EWCA Civ 2) deciding that the Hearing Officer had not made an error of law.

Supreme Court Appeal

The Supreme Court heard the appeal on 6 and 7 February 2019. We expect to hear the Supreme Court’s guidance on the following issues:

  • How should the benefit to the employer be calculated?
  • How should the “employer’s undertaking” be determined? In this case, should the group as a whole be taken into account, or just CRL, or perhaps even just a division within Unilever?
  • In what circumstances can the benefit be outstanding, and, in particular, is it correct that the sheer size of the employer means that it is too big for any benefit to ever be outstanding?

In an area of UK patent law with sparse precedent, the Supreme Court’s decision may result in a system which is less favourable for employers.

At Appleyard Lees, we regularly advise employers in relation to a wide range of patent ownership and inventorship issues. If you would like further information please contact Andrew McKinlay, or your usual Appleyard Lees attorney.



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