Last week, the Supreme Court handed down its judgment in Shanks v Unilever  which saw Professor Shanks awarded £2 million in compensation for an invention he created whilst employed at a subsidiary company of global giant Unilever.
This decision is highly significant because there are very few cases where employees whose role is to invent have succeeded in such compensation claims.
The invention, which used pioneering technology to detect blood sugar levels, was patented by Unilever and, after commercial exploitation, was estimated to have generated in the region of £24 million for the company.
Although Professor Shanks accepted that Unilever owned the patents relating to the invention, and that they therefore had every right to commercialise the patents, the argument revolved around whether he was entitled to compensation under the Patents Act 1977 (“the Act”).
Section 40 of the Act provided that if an invention made by any employee in the course of employment is of "outstanding benefit to the employer”, he or she may be awarded compensation if that would be just in the circumstances (taking a number of factors into account).
The lower courts had rejected Professor Shanks’ claim for compensation and found for Unilever, mainly on the basis that the £24 million generated was not of outstanding benefit to the employer (taking into account their profits as a whole) and the fact that Unilever had not commercialised the product to its full potential, due to other areas of the business being prioritised.
Professor Shanks argued in the Supreme Court that, on the basis of the lower courts’ reasoning, Unilever would always be regarded as ‘too big to pay’ which could lead to unjust outcomes to compensation claims. He also argued that the profits of the Unilever subsidiary employing Professor Shanks should be considered alone, rather than the Unilever group’s profits as a whole.
On appeal, the Supreme Court concluded that the rewards enjoyed by Unilever were substantial and significant, reflected a high rate of return with little risk and stood out in comparison to the benefit Unilever derived from other patents. Accordingly, the benefit obtained by Unilever was outstanding, within the meaning of section 40 of the Act.
When quantifying the compensation, the court applied section 41 of the Act which states that the employee should be entitled to a ‘fair share’, considering the benefit the employer has derived. The Supreme Court decided that a 5% share of the total benefit received was fair and just in the circumstances and awarded Professor Shanks a substantial sum of £2 million after a long and drawn out legal battle.
The story highlights the importance (both to employers and employees) of considering the possibility of compensation awards to employees who create inventions in the course of their employment, despite the fact that the patentable rights in inventions created in the course of employment belong to the employer rather than the employee.
If you have any questions about this blog and would like to talk to someone about it, please contact our IP Team.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.