Patent lessons for both the employer and the employee

Posted by Joanna Corbett-Simmons on
Many of you may have heard, over the past few years, of the plight of Professor Ian Shanks, the inventor of an electrochemical test device used to monitor the level of blood glucose levels in diabetics. Professor Shanks brought a claim for inventor’s compensation under s.40 Patents Act 1977 against his former employer, a UK subsidiary of Unilever.

Background

In the 1980s Professor Shanks had, during the course of his employment, invented a pocket sized blood glucose testing device. Unilever patented the invention in a number of countries but, as diabetes management was not relevant to its business, licensed the patents out to other companies. The patents were subsequently sold by Unilever for a significant sum.

The test

Section 40(1) states that where the employee can show that:

  1. “the employee has made an invention belonging to the employer for which a patent has been granted,
  2. having regard among other things to the size and nature of the employer’s undertaking, the invention or the patent for it (or the combination of both) is of outstanding benefit to the employer, and
  3. by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer”

the employee may receive compensation for the invention, which must be a “fair share” of the benefit derived by (or to be derived by) the employer, whilst “having regard to all of the circumstances”.

Outstanding Benefit

Professor Shanks claimed that his invention (for which the patents had been obtained) had been of ‘outstanding benefit’ to Unilever and, as such, he was entitled to a fair share of that benefit.

The IPO hearing officer concluded that the benefit Unilever had derived from the patents was £24 million. Whilst this would appear to many of us to be outstanding, when considered in light of Unilever’s commercial activities as a whole (including its size and the nature of its business) it was not thought sufficient to fall within the definition of “outstanding”.

To add insult to injury, having decided that Professor Shanks was not entitled to any compensation, the hearing officer went on to consider what share Professor Shanks would have been entitled to if the benefit had been outstanding, taking the High Court case of Kelly v GE Healthcare into account. In the Kelly case, all parties had made huge efforts to develop the product which was incredibly successful, so much so that the Judge found that, without it, the employer would have been in crisis (this was clearly not the case for Unilever). As such Dr Kelly was entitled to a 2% share of the benefit derived by the employer. Despite the facts in this case, the IPO decided that, had the benefit been outstanding to Unilever, Professor Shanks would have been entitled to around a 5% ‘fair share’, higher than that of the successful Dr Kelly.

Lessons

The lesson to be learnt from Professor Shanks’ fruitless claim is that the ownership of any IP and entitlement to any value of that IP should be discussed at the outset of the employer-employee relationships and recorded appropriately. Agreements should be drafted recording exactly who will own the IP in any invention produced during the course of research or other business and, if appropriate, how any profits are to be divided. Many consultants insist on retaining the rights in any products their work produces, thus avoiding disputes such as this. If you require any advice on drafting agreements to deal with IP ownership, or if you are involved in any sort of dispute involving IP please get in touch to see how we can be of assistance.

About the Author

Joanna is a Senior Associate in the Litigation & Dispute Resolution team in Cardiff specialising in corporate and shareholder disputes, professional negligence and contentious intellectual property matters.

Joanna Corbett-Simmons
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029 2068 6156

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