IP Cases & Articles

Shanks v Unilever: employee compensation

An inventor has lost his claim for compensation from his employer before the UK Intellectual Property Office (UKIPO).

Section 40(1) of the UK Patents Act 1977:

40(1) Where it appears to the court or the comptroller on an application made by an employee within the prescribed period that the employee has made an invention belonging to the employer for which a patent has been granted, that the patent is (having regard among other things to the size and nature of the employer’s undertaking) of outstanding benefit to the employer and that by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer, the court or the comptroller may award him such compensation of an amount determined under section 41 below.

Professor Shanks, a former employee of Unilever, was named as an inventor on patents directed to an electrochemical test device. The device was developed for use in monitoring the blood glucose levels of diabetic patients.

Unilever were not particular interested in moving into this testing field; however, the patents were eventually licensed. Indeed the UKIPO decided that the total income for Unilever from the Shanks patents, spread over several years, amounted to £24.5 million. The majority of this (£19.5 million) arose from licensing income and the remainder from the portion of the price paid when Unilever sold a subsidiary company.

UK law on employee compensation is intended to provide a means by which employees can obtain a share of an ‘outstanding benefit’ made by one of their inventions. Unilever accepted that if the UKIPO were to find that the Shanks patents were indeed of outstanding benefit to the employer, then it would be just for compensation to be awarded. The UKIPO therefore then went on to consider whether “the patent is (having regard among other things to the size and nature of the employer’s undertaking) of outstanding benefit to the employer.”

The level of benefit is provided by section 41 of the UK Patents Act 1977:

41(1) An award of compensation to an employee under section 40(1) and (2) above in relation to a patent for an invention shall be such as will secure for the employee a fair share (having regard to all the circumstances) of the benefit which the employer has derived, or may reasonably be expected to derive, from the patent or from the assignment, assignation or grant to a person connected with the employer of the property or any right in the invention or the property in, or any right in or under, an application for that patent. 41(2) For the purposes of subsection (1) above the amount of any benefit derived or expected to be derived by an employer from the assignment, assignation or grant of –
(a) the property in, or any right in or under, a patent for the invention or an application for such a patent; or
(b) the property or any right in the invention;
to a person connected with him shall be taken to be the amount which could reasonably be expected to be so derived by the employer if that person had not been connected with him.

Note that section 41(2) is an ‘anti-avoidance section’ intended to deal with the situation where inventions and patents are assigned between related companies for nominal sums for accounting reasons. The section operates so that the ‘benefit’ of the patent is considered to be what it would have been if the assignment had been made without the existence of a relationship between the companies concerned.

The UKIPO acknowledged that the benefit provided by the Shanks patents was a substantial and significant one in money terms. However, this was not a case as in Kelly (see useful links below) where without the patents the employer would have faced a crisis, nor was there any suggestion that the Shanks patents were crucial to Unilever’s success. The UKIPO therefore decided that, taking into account the size and nature of Unilever’s business, the benefit provided by the Shanks patents falls short of being ‘outstanding’.

The UKIPO, with one mind on a possible appeal, went on to form the view that, if the benefit had been deemed outstanding, then a fair share of the benefit would have been 5%.

Curiously this is higher than the 3% awarded in Kelly even though the UKIPO thought that the sort of skill and effort on Professor Shanks’ part was nowhere near that involved in Kelly. Nevertheless the case shows that the award of £1.5 million to the inventors in Kelly may be seen as reflecting the exception circumstances of the Kelly case in which the employer’s business was transformed.

Useful links

  1. Does ‘Myoview’ Show Vision of Future for Employee Inventor Compensation Claims? Commentary of Kelly and Chiu v GE Healthcare Ltd [2009] RPC 12.
  2. UKIPO ruling (PDF) on Shanks v Unilever.
  3. UKIPO website (PDF) The Patents Act 1977.
speechticktitle-abouttitle-careerstitle-clientstitle-contact-ustitle-hometitle-knowledge-banktitle-knowledge-banktitle-news-eventstitle-sectorstitle-servicestitle-team