The Supreme Court considered, in the 2019 case of Shanks v Unilever, a claim by an inventor for a share of the benefit received by his employer from his inventions. The case involved the rather narrow construction of section 40 of the Patents Act 1977 which provides for compensation if an invention has been of outstanding benefit to the employer.
The Appellant, a professor, was employed by CRL, a subsidiary of Unilever. He invented a glucose monitoring device that belonged to his employer under s39 Patents Act 1977. CRL assigned the invention to Unilever for a notional sum and Unilever licensed its use by third parties, resulting in royalties of around £24.3m. The professor applied for compensation under the 1977 Act due to the outstanding benefit to his employer, having regard to its size and nature. The lower courts found that he could not satisfy this requirement because the returns Unilever received from the patents were dwarfed by the group’s overall profits.
The Supreme Court overturned this on appeal. They held that the outstanding benefit test applied to the professor’s legal employer, namely CRL, not the business activities of the wider Unilever group. The benefit of the invention to CRL was not the notional sum actually received but was deemed to be the £24.5m received by the Unilever group from third parties. The Supreme Court was of the view that this reflected the commercial reality of the situation. It was an outstanding benefit because:
- the patent had produced a very high rate of return;
- Unilever have been able to show that other CRL patents had a similar rate of return;
- the professor had developed his invention without exposing Unilever to any significant risks; and
- the invention’s success had been due to the value of the technology and not the active exploitation of the patents.
The professor was entitled to £2m, representing 5% of the benefit to CRL, set at its current value. This was held to be a fair share of the benefit as required by the Patents Act.
Interestingly, under the 1977 Act, employers cannot limit or exclude an employee’s right to bring a compensation claim in a contract of employment. The case may result in uncertainty for employers regarding the extent of their intellectual property rights over patented inventions. Employers may need to consider how their research and development departments are run. For example, if teams of people work on a project, this may make it more difficult for a particular individual to argue that their contribution resulted in the outstanding benefit.
For further information in Intellectual Property or Employment Law in general, why not contact one of Alexander JLO’s expert lawyers in the fields and see what we can do for you?