UK: Will You Have to Pay Your Employee Inventors an Extra £1.5m?

Last Updated: 23 June 2010
Article by Esther Gunaratnam

In the first decision of its kind, two employee inventors of GE Healthcare (the former healthcare division of Amersham) have won compensation of £1.5m for the outstanding benefit brought to their employer from patents they invented. At first sight this may send shock waves to the industries but on closer look this is a case with quite a unique combination of facts and so the floodgate is not as widely opened as some may fear.

Background of the Case Kelly and Chiu were two scientists employed by Amersham who contributed to the development of the ultimately highly successful patented radioactive imaging agent known as Myoview.

Under the Patents Act 1977 (the "Act"), inventions made by an employee in the course of his normal duties automatically belong to his employer. Where the employer obtains a patent for the invention and that patent (subsequently widened under the Act to cover the invention and not just the patent) is of outstanding benefit to the employer, the employee inventors are entitled to a fair share of the benefit derived by the employer from the patent.

The employees claim that their fair share should be £7m and the Court ultimately awarded £1.5m. Floyd J's decision made detailed analysis of a number of issues:

  • To qualify for compensation in the first place, the benefit must be "outstanding", i.e. something special and more than substantial or good – the Court found that there was outstanding benefit because not only have the patents provided an extended monopoly period which contributed to increased sales and sustainable higher prices, the patented Myoview was a significant factor in enabling Amersham to achieve a number of corporate deals which gave Amersham the critical mass to become a significant player in the market.
  • One needs to compare what "would have been" if the patents were not granted, and "what was" as the patents were granted.
  • The patent must have been a cause of the benefit, although it does not have to be the only cause.
  • Once the employee has shown that the patent has been of outstanding benefit, the amount of compensation is to be determined in light of all available evidence so as to secure a just and fair reward to the employee.
  • In considering what is just and fair, the Court took into account:
  1. The very high profits of Myoview compared with the relatively small R&D costs for Amersham - this has the effect of increasing the award;
  2. Other people's contribution to the invention - the Court found that it is not possible to single out any individual who contributed significantly to the inventions apart from the claimant employees. Interestingly, the Court accepts that although it could be invidious to single out individual inventors for an award in the context of a truly corporate research effort, the nature of the Act dictates that this cannot be a factor which renders it unjust to make the award;
  3. Amersham's contribution - the Court recognised that the success would not be possible without the significant investment by Amersham and that Amersham took all the risks. This has the effect of decreasing the award;
  4. Other licence arrangements and royalties Amersham has agreed to pay third parties - this gave the Court a feel of a fair percentage share for the employees;
  5. Ultimately, the Court decided that the benefit attributed to the patents was of the order of £50m and that Kelly (the more senior employee) was entitled to 2% and Chiu 1%.


This decision is heavily based on its rather specific circumstances. The main hurdle for employee inventors to show "outstanding" benefit (which must be special and not just substantial) remains. The considerations for what would be just and fair compensation are complex and seldom with certainty of a substantial enough award to warrant the risks and expenses of court proceedings, particularly as individual employees generally tend to have limited resources. Some companies have set up their own employee inventor reward schemes which could serve as an incentive as well as discourage employees feeling under rewarded in the first place.

It is worth noting that only employees and not external contributors are eligible for compensation under the Act. However, the employer could remain liable even if it has disposed of the patents/inventions. In this case, the whole of the employer's business (the Amersham healthcare division) was acquired and became GE Healthcare and so the employer's liability for employee compensation transferred with it. However, if the patents or the inventions (rather than the whole business) had been sold, the liability to compensate could remain with the original employer. It is therefore worth bearing this in mind, both for the purchaser and the vendor, when considering the sale and purchase of businesses and their assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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