Blog: Fair interpretation of ‘fair share’?

Yann Robin looks at employee compensation for inventions of outstanding benefit to employers in the UK’s patent regime.

Under UK patent law, an invention made by an employee during the course of his or her normal duties will belong, by default, to the employer – unless there is an express agreement specifying otherwise.

This may not, in itself, be entirely surprising. In return for remuneration to employees, an employer will normally expect to own the intellectual property related to any inventions made by those employees.

Assessing the potential financial benefit that will come from an invention, or patent(s) protecting the invention, is often impossible to predict at an early stage.

While an employer will often derive some – and in some cases substantial – revenues, there are exceptional cases where an invention will generate unusually large profits.

Therefore it might appear reasonable to many that an employee who generates an invention that proves to be a financial goldmine should receive some form of reward commensurate with benefit derived by the employer.

UK patent law addresses this point by having an “employee compensation” provision. It states that where an employee’s invention (or the patent) is of “outstanding benefit” to his/her employer, the employee should be awarded compensation, and that the award should provide a “fair share” of the benefit.

However, in practice, it has proved extraordinarily difficult over the past four decades for employees to obtain such an award from the UK courts. In fact, only one case has ever led to compensation being awarded.

So it is not surprising that the latest appeal decision, in the most recent case trialled by a UK court on this topic, was greatly anticipated.

The employer was Unilever, a global company operating worldwide in a multitude of sectors, particularly food, household and personal care products.

Professor Ian Shanks, a Scottish scientist, was hired by Unilever Central Resources Ltd (CRL) and carried out research and development with a focus on biosensors. His invention was a device for monitoring blood sugar levels, with useful applications in the treatment of diabetes.

Unilever had no particular interest in directly commercialising this type of product, but maintained its patents and licensed the technology to third parties for a number of years.

The benefit to Unilever from the commercial exploitation was considered to be around £24 million. Despite this, Professor Shanks was unsuccessful in seeking additional compensation under the UK Patents Act 1977.

Why? Because, while £24m might be considered a significant sum by many, the core consideration was whether or not this represented an “outstanding benefit” to a very large company like Unilever.

When assessing the potential outstanding benefit, one interesting consideration was which undertaking (ie which company) should be considered relevant. In this case, despite Unilever operating in many different and often distinct areas of technology, the relevant undertaking was deemed to be the entire Unilever group, rather than the particular business unit in which the employee was employed.

This is of critical relevance. While £24m might have been considered to represent an outstanding benefit to a specific business unit of Unilever, the sum became less significant in view of the group’s total revenues.

It was therefore concluded that, based on this interpretation, the benefit the employer derived could not be considered “outstanding” – meaning no compensation was awarded to the employee.

Some companies may welcome this judgment, reducing a potential threat of being forced to pay

large sums to employees generating particularly lucrative inventions.

However, it may have come as a disappointment to those who believe that creative, innovative, and productive employees should be rewarded for the financial gains an employer derives from their inventions.

It would also appear that, based on the current approach, those working for a large business perhaps have smaller prospects of obtaining compensation than those working for a smaller company. There may, of course, still be developments in this nebulous area of UK patent law – not least because this decision can be appealed before the Supreme Court.

However, for the time being, the likelihood of obtaining a financial reward for an employee-inventor may be more realistic through the implementation of certain provisions in employer/employee contracts, rather than by relying on compensation provisions of UK patent law.