The UK Supreme Court last week awarded a former employee £2 million as a fair share of the approximately £24.3 million benefit that his employer had derived from patents to his inventions. [Shanks (Appellant) v Unilever Plc and others (Respondents)  UKSC 45]
The Supreme Court discussed and clarified several issues, but perhaps most noteworthy was their rejection of the notion that some employers may be "too big to pay".
Under UK law, where an employee makes an invention
- in the course of their normal or specifically assigned duties, where an invention might reasonably be expected to result from the carrying out of these duties; or
- in the course of their normal duties where the employee has a special obligation to further the interests of their employer
then the invention belongs to their employer.
However, where the employee has made an invention that is of "outstanding benefit" to the employer, then an award of compensation may be given where the court deems it just to do so.
The Supreme Court decision settles many issues, but a key outcome is the guidance provided on how "outstanding benefit" is assessed. The statutory scheme requires that the size of an employer's undertaking is a factor in assessing whether a patent is of "outstanding benefit", and this had led many to conclude that inventions of equal monetary benefit would be assessed as outstanding if the employer was a small concern, but not outstanding if the employer was a large business or part of a large group of companies.
The decision clearly indicates that many factors need to be assessed, including (for example) whether the benefit:-
- is more than would normally have been expected to arise from the duties for which the employee was paid;
- was arrived at without any risk to the business;
- was not enhanced by factors unconnected with the value of the patent, e.g. intensive marketing;
- represents an extraordinarily high rate of return;
- was the opportunity to develop a new line of business or to engage in unforeseen licensing opportunities.
In the case in question a highly material consideration was the extent of the benefit of the patents to the group of companies of which the employer was a part, and how that compared with the benefits the group derived from other patents resulting from the work carried out at the employer.
In the case in question the benefit was found to be outstanding as the rewards the employer enjoyed "were substantial and significant, were generated at no significant risk, reflected a very high rate of return, and stood out in comparison with the benefit Unilever derived from other patents".
Each case depends upon its facts, but we note the following:-
- The case was decided under "old" law, under which only the benefit of the patents is to be assessed. Since the Patents Act 2004 came into force [1st January 2005] the benefit has to be assessed of both the invention and the patents and this may lead to higher rewards in some cases.
- Presumably under the new scheme the benefit of an invention will have to be assessed by comparison with other inventions of the employer (or the group they are part of).
- The various factors discussed as relevant appear to revolve around whether the patent (or invention) provided much more benefit than was to be expected from the ordinary business of the employer. The evidentiary burden of showing this will be high, but less so than the burden of showing near "earth shaking" benefit that has been the standard applied in previous cases.
- Comparison with other patents of the same employer may lead to some interesting results. If an employer files many patents and weeds these down to those of significant benefit to the business, are they automatically providing a pointer to "outstanding benefit" [by comparison with all the applications filed], or is the assessment to be based on patents maintained and exploited?
As in all cases where what people thought was the law is shown to be wrong, the consequences and interpretation will take some time to settle: and "over-interpretation" (such as the last bulleted point above) is likely to be rife.
One conclusion appears to be safe however – employers of inventors may find it prudent to re-assess the contribution to their business that has been made by current or former employee inventors, to ascertain whether there is a risk of a claim being made. One point worth noting is that in the specific case before the Supreme Court, the claim for compensation was made after the patents in question had expired, and so such assessment may need to go back a long way.
All cases depend on their own facts, and we are happy to advise in this matter.