Supreme Court awards £2M under UK inventor compensation scheme for invention of 'outstanding benefit' to employer

The case concerns a statutory regime in the UK intended to provide additional rewards for employee inventors. In the UK, inventions made by anyone in a research role will almost always belong to the employer if made while carrying out their normal or specially assigned duties. It is generally assumed that the employee's salary and other benefits compensate for this. However, for inventions the subject of a patent which proves to be of "outstanding benefit" to the employer, employees are entitled to compensation by way of a "fair share … of the benefit which the employer has derived, or may reasonably be expected to derive".

There are thus two main criteria for an employee obtaining compensation: the invention must have been subject of a granted patent and the benefit that the employer receives must be "outstanding". For older inventions (including Prof. Shanks') the benefit must be derived from the patent but since 2005 this has been broadened to include an outstanding benefit from "the invention or the patent for it (or the combination of both)".

Prof. Shanks claimed compensation for his invention of a biosensor used for diabetics to monitor glucose and insulin levels. The invention was made while he was employed by part of the Unilever group and the patents resulting from it were assigned within the group. These assignments involved nominal sums passing between the Unilever companies. The patented technology was not part of Unilever's main business early in the patents lives but towards the end of the patents' lives the market for blood glucose testing expanded and the patents generated substantial licensing revenue from third party licensees. The gross total benefit obtained by the Unilever group from the patents was assessed at £24.5M.

The statutory regime requires consideration of the "size and nature of" the employer undertaking, among other things, when considering whether the benefit from the invention qualifies as "outstanding". These statutory criteria created significant difficulties for Prof. Shanks in this case since Unilever's revenues and profits are so large that they dwarfed the £24.5M attributable to his invention. He argued that the regime should not be applied such that a business such as Unilever could be 'too big to pay'. His claim, however, was dismissed by the UKIPO, on appeal first to the Patents Court and on second appeal to the Court of Appeal, each of whom concluded that the benefit was not "outstanding". This conclusion flowed in large part from treating the whole Unilever group as the 'employer' for the purpose of the assessment and comparing the £24.5M with the group's enormous revenues and profits. Each tribunal also considered nevertheless how to assess the "fair share" that would be payable, considering here two main points of contention: whether the time value of the money received by Unilever could be included in that assessment and whether the employer's tax liability should be taken into account.

The Supreme Court was asked to consider (1) the principles applicable to assessing whether there is an "outstanding benefit" to an employer; and (2) how the "fair share" of such a benefit should be assessed.

In considering the first point, the Supreme Court sought to analyse "in relation to what must the benefit from the patent be outstanding?" or, in other words, what must the benefit attributable to the patent be compared to so as to determine if it is outstanding? This was in part to address the 'too big to pay' point but it also took into account previous case law in which an outstanding benefit had been recognised where the invention had transformed the fortunes of the employer, diverting a likely financial crisis and achieving billions in revenue. Was such a dramatic effect required in order for a benefit to be "outstanding". The Court acknowledged that the statutory requirement to consider the "size and nature" of the employer's business gave rise to questions as to what is the employer's business for this purpose and what is the relevance of the size and nature of it to whether the benefit is "outstanding".

On the first point, the Supreme Court adopted a position between the two extremes of identifying the 'employer' either as Prof. Shanks' immediate employer company or as the group as a whole. The Court stated that "[w]here, as here, a group company operates a research facility 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 benefits derived by the group from other patents for inventions arising from the research carried out by that company". This appears to be the result of the Court seeking to "compare like with like", thus directing that whether the benefit of an invention is outstanding must be assessed by considering the benefit of other inventions of that company, not other revenue streams. As quoted above, it would…