HIGH COURT AWARDS EMPLOYEE INVENTORS SUBSTANTIAL SUMS

In a recent groundbreaking decision, the High Court ordered an employer to pay two employee inventors £1m and £500,000 under Section 40 of the Patents 1977 Act.

Employers generally assume that they automatically own the intellectual property rights in anything created by employees in the course of their employment. To a large extent this is true, and any well-drawn employment contract will seek to protect the employer in this respect. The general rule applies to any patentable invention invented by an employee in the normal course of his employment. However, in its current form Section 40 of the 1977 Act gives the employee a right to compensation if “having regard among other things to the size and nature of the employer's undertaking, the invention or the patent for it ... is of outstanding benefit to the employer”. Section 40 applies regardless of the terms of the employment contract.

Although there have previously been a number of out-of-court settlements under Section 40, the decision in Kelly v. GE Healthcare Ltd. is the first reported case where a court has awarded compensation under the Section. K and C were research scientists employed by what is now GE Healthcare. They were part of a team that first synthesised P53 - a compound that went on to form the basis of a patented radioactive imaging agent. R & D costs were in the region of £2.4m. Marketed under the name “Myoview”, the resulting product proved to be outstandingly successful. By 2007, total sales had exceeded £1.3bn. The Judge also found that Myoview’s success had allowed GE Healthcare to effect a number of highly beneficial mergers and acquisitions which had transformed its position within the industry. The Judge concluded that the outstanding benefit test had been satisfied.

Although this case is certainly newsworthy it is difficult to gauge its true significance. It is likely to have its greatest impact in the life sciences and in the drug and other research-based industries. It is worth noting that the claims succeeded despite being based on the law as it relates to patents filed before 1st January 2005. In such cases, the outstanding benefit must be attributable to the patent itself. In the case of patents filed on or after 1st January 2005, the outstanding benefit must be attributable to the patent or the invention that incorporates the patent. This change may well make it easier for employees to bring successful claims for compensation.

If you would like to know more about the implications of the Kelly or want advice as to whether your employment contracts protect your position so far as possible, please contact David Dees or Nick Crook

Filed: 17/06/2009 13:27:01