Employee Wins £2m Pay-out from Unilever for Invention of Outstanding Benefit
After a 13-year fight, Professor Shanks has finally won his case against Unilever Plc, his former employer, and has been awarded £2m in respect of an invention which proved to be of outstanding benefit to Unilever.
UK Patent Law – Some Basics
A patent is an intellectual property right. It is granted by the relevant authority in each country. A patent is generally more difficult to obtain than other intellectual property rights. Under UK law, an invention or process is only patentable if it is new, it involves an inventive step and is capable of industrial application. Basically, it must represent a real advance on previous knowledge. On the other hand, a patent is probably the most valuable intellectual property right. It gives the patent owner the exclusive right to make, use, sell or import the invention. In order to sue for patent infringement, the owner does not need to establish copying. So, a business may stop a competitor from utilising the patented invention or process even if the competitor has developed the same invention or process wholly independently.
Once granted, a UK patent lasts for 20 years.
The general rule is that the person who is entitled to apply for a patent for an invention is the inventor. It is particularly important for a business not to lose sight of this general rule when commissioning design work from an independent third party. Unless the contract with the third party contains appropriate provisions all intellectual property rights in any invention or design will belong to the third party, not the commissioner.
The general rule does not apply where – in broad terms – an invention is made by an employee in the course of his or her employment. In such a case, the invention belongs to the employer. However, where an invention is of outstanding benefit to the employer, the employee may make a claim under Section 40 of the Patents Act 1977 for a fair share of the benefit that the employer has derived, or may reasonably be expected to derive, from the invention.
Shanks v Unilever PLC
Professor Shanks was employed for about four years by Unilever UK Central Resources Ltd (‘Central Resources’), a wholly owned subsidiary of Unilever PLC. During that time, he invented a system for measuring the glucose concentration in blood, serum or urine. This invention resulted in two European patents. The parties were agreed that at all times the patents belonged to Central Resources. The latter had assigned the patents to various members of the Unilever group which, in turn, exploited them through licensing. This resulted in a financial benefit to the group of about £24.5m. Professor Shanks brought a claim under Section 40 of the 1977 Act.
For slightly different reasons, the Intellectual Property Office, the High Court and the Court of Appeal all dismissed Professor Shanks’ claim. He appealed to the Supreme Court. The Court had to rule on two issues:
- Who has to derive the outstanding benefit? The Patents Act says it has to be the employer, but what happens when the employer is part of a larger group?
- Where there is an outstanding benefit, how does one ascertain what share of the benefit should be awarded to the employee?
On the first issue, the Supreme Court looked at the commercial reality of the situation. Where a group of companies has a research function which operates for the benefit of the whole group, the focus must be on the extent of the benefit of the relevant patent to the group, and how that compares with the benefits derived by the group from other patents resulting from work carried out by the same research function. On this basis, the Court held that the Intellectual Property Office’s hearing officer had adopted the wrong starting point. Central Resources’ undertaking had been the generating of inventions and patents for Unilever PLC to licence. The hearing officer had been wrong to focus on the size and profitability of the group as a whole.
Turning to the second issue, the Supreme Court reinstated the Intellectual Property Office’s award of 5% (the High Court had subsequently reduced the award to 3%). However, this still fell some way short of the 10%–20% share being sought by Professor Shanks.
At first sight, the Supreme Court’s decision seems to tip the law more in favour of employees. Certainly, the £2m award was a headline-grabbing figure. From now on, it will not be enough for employers simply to point to their global size and profitability and argue that the benefit to them of any particular invention was not outstanding. But it is not all bad news for employers. If the employee is employed by an entity dedicated to a research and innovation function, the employee will need to show that the relevant patent was of outstanding benefit to the employer when compared with other inventions or patents.
To find out more, please visit our contract dispute page or contact David Dees on 01908 662277.