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UK Supreme Court rules on compensation for employee inventors

The UK’s Supreme Court today issued its judgment in Shanks v Unilever, a long-running dispute regarding the issue of compensation of employees for inventions made during the course of their normal duties.

In deciding that an inventor was entitled to an additional £2 million in compensation, the court’s ruling potentially signifies a more inventor-friendly approach to this topic, particularly in the case of large companies or corporate groups having large overall profits much larger than those attributable to any particular invention and its related patents. However, the detailed commercial context will always need to be scrutinised closely in determining whether additional compensation is warranted.

In Shanks v Unilever, Professor Shanks had been employed as a researcher by Unilever UK Central Resources Ltd (CRL) for four years in the 1980s. During this time he came up with an invention which ultimately became widely used in the field of blood glucose testing. The rights in the invention were assigned from CRL to other companies in the Unilever group for consideration of £100. The invention was the subject of a European patent application and various corresponding foreign applications which were filed in the names of those Unilever companies. Unilever was not itself interested in developing a glucose testing business but ultimately made an estimated £24.3 million from a combination of licenses under the patents and the sale of the patent-holding company.

Under UK law, employee inventors are entitled to additional compensation if an invention protected by a patent is ‘of outstanding benefit’ to the employer, having regard to ‘the size and nature of the employer’s undertaking’. The Supreme Court in Shanks v Unilever overturned earlier findings by the Intellectual Property Office, the High Court, and the Court of Appeal, each of which had found that the benefit of £24.3 million was not ‘outstanding’. In reaching this conclusion, the court found that the earlier decisions had erred in considering the benefit only in the context of the business activities and profits of the Unilever group as a whole, rather than in the context of the subsidiary which employed the inventor. The court held that, where a group operates a research-based subsidiary for the benefit of the whole group and the work results in patents which are assigned to other group members for their benefit, the focus of the inquiry must be the extent of the benefit of that patent to the group in comparison to benefits derived by the group from other patents arising from research carried out by the same subsidiary. In these circumstances, Prof. Shanks’ invention was to be considered ‘outstanding’ and additional compensation was appropriate.

The Supreme Court’s judgment clarifies the issues to be considered when identifying what is meant by the ‘undertaking’ of an employer and when determining whether an invention is to be considered of ‘outstanding benefit’. In particular, the judgment appears to emphasise that parties should be careful to avoid an analysis which arrives at the conclusion that an employer is ‘too big to pay’, for example in concluding that a patent has not been of ‘outstanding benefit’ merely because it has had no significant impact on overall profitability or sale value. In this respect, the judgment potentially signifies a lower bar for awarding compensation than has previously been adopted, although it is clear that the specific commercial context and facts will be crucial in any given case.

For further details on this case, or to learn more about our patent expertise in the life sciences sector, contact the author, Alexander Robinson, or a member of our specialist team.

The extended version of this article has been published by The Commercial Litigation Journal – available here.

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Alexander Robinson
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