Hot topic
Employee Compensation for Inventions
A High Court judgment of February
11, 2009, is potentially important to
any business with R&D
programmes. The court ordered the
defendant to pay £1.5 million
compensation to two former
employees for their part in
developing patents of "outstanding
benefit" to the defendant.
Background
Under the Patents Act 1977 (the "Act") an invention
made by an employee will be owned by their
employer if it is made either in the course of their
normal duties, it is as a result of duties specifically
assigned to them, or it is made in circumstances
where the nature of the employee's responsibilities
and obligations mean the that the employee has a
special obligation to further the interests of the
employer.
This position may not be overridden by contractual
terms (other than under a relevant collective
agreement) that have the effect of diminishing the
employee's rights under the Act, for example, a term
which purports to assign all future inventions to the
employer. This situation is distinct to that applying to
independent contractors or consultants who, unless
there is an agreement to the contrary, own any IP
generated in the course of the contracted work.
Irrespective of the employee's remuneration package,
an employee has a right to seek additional
compensation for an invention owned by the
employer under the Act if, having regard to the size of
the business, the invention is "of outstanding benefit
to the employer". The amount of such compensation
must give to the employee a "fair share" of the benefit
derived by the employer from the invention, any
patent or the sale of the same.
Compensation to Employee Inventors
GE Healthcare Limited (the defendant) generated in
excess £1.3 billion in 2007 from sales of its patented
diagnostic imaging agent Myoview™. This imaging
agent is routinely used to detect coronary artery
disease. The court pointed out that "on any view the
product was responsible for a large proportion of the
company’s profits".
Two scientists contributed in the late 1980s to the
development of the patents which form part of the
imaging agent whilst in the employment of Amersham
International (which was acquired by GE in 2004).
They brought a claim against GE Healthcare under
section 40 of the Act for a share of the outstanding
benefit they argued had been derived by GE
Healthcare from the patents.
Section 40 of the Act is available to an inventor (who
is an employee) in the sense that they are the "actual
deviser" of the invention, but not those who merely
contribute to the invention without being joint
inventors.
In determining what constitutes an "outstanding
benefit", the court indicated that, having regard
among other things to the size and nature of the
employer’s undertaking, it meant "something special"
or "out of the ordinary" and more than "substantial" or
"good". The benefit in other words has to be
something more than one would normally expect to
arise from the duties for which the employee is paid.
It is also important that the invention has to be the
cause of the benefit, but it does not have to be the
only cause. The existence of multiple causes for a
benefit does not exclude the benefit from
consideration, although the benefit might have to be
apportioned to isolate the benefit derived from the
patent (i.e. other causes can be taken into
consideration when determining the amount of
compensation under section 41 of the Act).
If the employee successfully shows that an invention
has an "outstanding benefit", the amount of
compensation has to be determined having a regard
to all the circumstances so as to secure a "just a fair
reward to the employee".
Applying these tests, on 11 February, 2009, the
Chancery Division of the High Court ruled in favour of
the scientists awarding £1.5 million compensation
between them (Kelly and another v GE Healthcare
Ltd [2009] All ER (D) 114 (Feb)) .
Organisations employing individuals in R&D roles
should review their employee compensation
schemes, in particular for those staff likely to be
disproportionately involved in "devising" an
invention (rather than in merely contributing to
them) to consider whether there is adequate
financial remuneration for such staff including, for
example, through a bonus schemes. Reviewing
or implementing employee IP policies may also
be appropriate.
What constitutes adequate financial
remuneration will depend on the all
circumstances surrounding the R&D programme
and the employee’s role in it. For example, if
large teams are involved in developing the
product, then the likelihood of any one individual
bringing a claim successfully is probably quite
low. In contrast, where only a few identifiable
individuals are disproportionately involved, in
particular in creating patented inventions which
give a significant commercial advantage to the
company, then more care is warranted in
determining whether, and how much, financial
compensation might be payable for their
contributions.
Recommendations
This is the first successful claim by an employee for
compensation under the Act (which has been in force
for over 30 years) and it remains likely that the
threshold for claiming compensation under the Act
will remain high.
While it is not possible to override the statutory
compensation right, thus potentially allowing
employees to seek compensation from their
employers at any time during the life of the patent
even if they have been well paid, it may be possible
to mitigate that risk.
osborneclarke.com
Regulated by the Solicitors Regulation Authority
Sean Jauss
Associate
sean.jauss@osborneclarke.com
These materials are provided for general purposes
only. Osborne Clarke does not accept liability for the
contents of these materials and legal advice should be
taken in respect of a particular matter.
© Osborne Clarke February 2009
Publication number 6617069