Partner Article

Inventor Employee Compensation

With Watson Burton LLP Law Firm

In a legal first, the High Court of Justice has awarded success to employee inventors in their efforts to extract compensation for profits from an invention they helped develop, pursuant to section 40 and 41 of the Patents Act 1977 (“the Act”).

The claimants in this action, Duncan Kelly and Kwok Wai Chiu, were two research scientists at Amersham International Plc (“Amersham”) which subsequently became GE Healthcare Limited (“GE”). They were involved with the first synthesis of a compound called P53, which later formed the basis of a patented radio active imaging agent, which was a highly successful product for their employers sold under the trade mark “Myoview”.

Section 40 purports that where it appears to the court that the employee has made an invention belonging to the employer for which a patent has been granted, and that patent is 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 may award him compensation. In the past, this section has presented difficulties of interpretation and application and to date there has been no reported case of a successful contested award made under it, although there have been some settlements out of court.

In reaching its decision, the UK Court applied section 41 of the Act, which states that an award for compensation could be a “fair share” of the benefit that the employer received from the patent. The fair share may take into account factors such as the employee’s duties, the effort and skill that the employee devoted to the invention, the effort and skill which others devoted to the invention and the contribution made by the employer.

Lord Justice Floyd commented in his judgment that the overall benefit of the invention was outstanding and submitted that the overall research and development costs in the case were extremely small, in relation to the profits generated. He further stated that neither of the employees were carrying out routine operations as their jobs involved significant thought and creativity and this was a reason for justifying the compensation award given.

The court concluded that the profits GE had gained from Myoview had been due, at least in part, to the patents, and it did not hesitate to conclude that these benefits were also “outstanding”. It noted in particular that patent protection for the Myoview assisted greatly in securing profitable deals, and this had transformed the company. It valued the benefit of the patents to be at least £50 million, and hence the court decided that Drs Kelly and Chiu deserved compensation for inventing the patents. The court finally took 3% of the £50 million as a fair and just figure.

The main difference between this case and those previously heard, is that the patents in question here had expired, and accordingly the court took the view that it was able to quantify the benefit of those patents to the employer. Previous cases have been brought at a much earlier stage and the courts had been unwilling to speculate on future benefits in such cases.

If you have any questions about this article or any employment matters, please contact Jill Dalkin of Watson Burton LLP at jill.dalkin@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .