Intellectual property and employees: case update

Last month the Supreme Court passed down its judgment in a much-anticipated case looking at whether an employee should be compensated for inventions he created over 30 years ago.  

From 1982 to 1986, the Claimant was employed by Unilever UK Central Resources Ltd (CRL) to develop technology devices.  During that time, he invented two devices to test glucose levels.  The rights to these inventions were subsequently sold to Unilever Plc, which filed UK patents for these devices in 1984 with the Claimant named as inventor.  Over time Unilever Plc was approached by organisations interested in taking a licence for one of the devices.  From these licences (and a subsequent sale of the patent) Unilever Plc received a net benefit of about £24 million.

The law

Under section 39(1) of the Patents Act, inventions made by employees belong to the employer:

1. if an invention might reasonably be expected to result from the employee's duties; or 
2. where it was made in the course of the employee's duties and, because of the nature of the duties, the employee had a "special obligation" to further the employer's interests.

Under section 40 of the Patents Act, employees are entitled to compensation in certain circumstances including where the patent is of "outstanding benefit" to the employer.

The Supreme Court's decision

In 2006, the Claimant applied for compensation on the basis that Unilever had received "outstanding benefit" from his invention.  The case was appealed all the way up to the Supreme Court, which ruled that the Claimant should be awarded £2 million.

There are 3 key takeaways from this case:

1. It's a reminder that even though a patent might be owned by an employer by virtue of section 39(1) of the Patents Act, an employer may still be pursued at a later date for compensation by an employee inventor.  In this case, Professor Shanks built the first prototype of his invention at home using part of his daughter's microscope kit and bulldog clips; but because of section 39(1) of the Patents Act the invention belonged to his employer and because of section 40 of the Patents Act he was able to pursue a claim for compensation 20 years later.
2. When assessing whether an employer had received "outstanding benefit", the Supreme Court held that it should not look at the value of the patents compared with the turnover of the Unilever group as a whole (which would make it much harder for employees of large/successful companies to bring claims under s.40). Instead, a key consideration was how the economic benefit of the patents to Unilever compared with the benefits the group derived from other patents developed from CRL work – thus comparing like for like. 
3. This case clarifies what an employer may be required to pay by way of compensation, if an invention is found to have been of an outstanding benefit.  The Supreme Court considered a "fair share" of the benefit of the invention to be 5% (plus an adjustment for inflation).

This case demonstrates the strength of protection offered to employees in the Patents Act.  Although it is prudent to include detailed intellectual property clauses in employment contracts (particularly for staff involved in research and development), such clauses don't override the compensation requirement under the Patents Act.    Businesses should nevertheless take care to ensure that they have the correct protection in place for all intellectual property generated by staff.