In a battle which has taken 13 years to conclude, the Supreme Court has decided that a former Unilever employee’s invention was ‘outstanding’ and that he was entitled to £2 million in statutory compensation. This is only the second successful case of its type since the late seventies.
Under s40 of the Patents Act 1977, employees are entitled to compensation from their employers for patented inventions made during their employment in certain unusual circumstances. The following conditions must be met:
- the patent is of ‘outstanding benefit’ to the employer; and
- it is just to award compensation.
Employers are not permitted to contract out of these provisions.
During the 1980s Professor Shanks invented a highly successful system which measures the glucose concentration in blood, serum or urine. This invention was duly patented by his employer, Unilever. A decade later Unilever sold licences for the patents and was found to have made a profit of around £24 million. Professor Shanks sought statutory compensation.
The Supreme Court found that Professor Shank’s invention was indeed of ‘outstanding benefit’ to Unilever, holding that ‘outstanding’ means ‘exceptional or such as to stand out’. Unilever argued somewhat optimistically that £24 million was relatively insignificant given the group’s overall size and profitability. However, in essence, the court held that the outcome of Unilever’s argument would lead to a scenario where certain companies would be “too big to pay” and that could not be correct. Therefore the court ordered that £2 million be paid to Professor Shanks in compensation, that being around 5% of the profits earned by Unilever on his invention.
It is unusual for this type of case to be litigated and unlikely that this decision will open the floodgates for similar cases. The case took 13 years in total and relates to an invention which is almost 40 years old. However, employers who are in the business of making patentable inventions, for example in the tech, life sciences, engineering, pharmaceutical and medical sectors, may find that their employees are now more alive to their statutory rights, so might consider introducing alternative compensation schemes for their employees’ inventions or perhaps reorganising how research work is carried out to reduce the risk of significant statutory compensation claims.