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Of Molecules & Medicine: Supreme Court gives Sweetener to Inventor

By Alex Rogers, Partner

In a landmark Supreme Court ruling, an inventor has won £2m compensation from Unilever for his invention for monitoring glucose levels in diabetics.

The UK Supreme Court has already delivered a historic ruling this month on the legality of the proroguing of parliament. Yesterday, they delivered another landmark judgment, this time on a topic closer to the hearts of many research scientists and the companies that employ them – fair compensation for inventions. As a result of the judgment, a Professor, who developed a disposable sensor for monitoring glucose levels in diabetics, has been awarded £2m from Unilever. Very few claims for compensation have succeeded in the past, and some may view this as a victory for hard-working scientists who have developed hugely important inventions for their companies.

The UK Patents Act has a provision that allows employees to claim compensation from their employer if they feel they were not justly rewarded by their normal pay and benefits for an invention they devised.  However, according to the Act, it must be shown that the invention (or patent covering it) is of “outstanding benefit” to the employer. This has proved an extremely high hurdle in the past. Of the few scientists who have tried to claim compensation under the Act, only a handful have succeeded.  In this case, Professor Shanks had been unsuccessful at the Patent Office and the High Court, which both ruled that the benefit had fallen short of “outstanding”. The Court of Appeal had partially allowed the appeal, but then ruled that Professor Shanks was not entitled to compensation. Undeterred, he took his case to the Supreme Court, which, finally, ruled in his favour.

The Supreme Court decided that the approach taken by the Patent Office and the lower Courts had been wrong. In the Supreme Court’s assessment, those lower forums had given too much weight to the overall income and profits received by Unilever (billions of pounds), which dwarfed the licensing revenue received from the patents (£24m) – this made it hard for the benefit to seem outstanding.  Instead, the Supreme Court indicated that the assessment must be judged against the benefit received from other patents of the employer. In this case, the Supreme Court ruled that the benefit from the patent “stood out in comparison with the benefit Unilever derived from other patents”. The Supreme Court indicated that this “could not be attributed to the deployment or application of Unilever’s wider business assets or infrastructure; nor were they found to be the consequence of any leverage Unilever could exert because of its size”. The benefit was therefore outstanding.

They then went on to assess what was a “fair share” of the benefit. Professor Shanks had argued that 10% – 20% would be realistic, given that he devised the invention in addition to his assigned role, and that the licence fees had represented an entirely new income stream for Unilever. Unilever had argued that 3% was more appropriate, as this was the amount awarded to inventors in a previous successful action.  The Supreme Court found neither convincing.  It indicated that, in the particular circumstances of the case, 5% was more appropriate – this was closer to compensation awarded to inventors under university licence arrangements and, furthermore, this case was not comparable with the earlier case, in which the employer was manufacturing the invention (here, Unilever’s benefit was from the licensing income). The Supreme Court also indicated that it was fair to take into account inflation. The end result was £2m.

So what now for inventors and employers? The case may give hope to inventors working within companies, but the hurdle of showing “outstanding benefit” remains. The case indicates that it would still be necessary to show that an invention or patent has, compared to other inventions and patents, resulted in significantly greater benefit to the company.  Moreover, few working scientists may have the financial means and the courage to even start a legal case against an employer, let alone take it as far as Professor Shanks. Many companies have compensation schemes for inventors – this ruling suggests that they may want to review how to reward research scientists whose inventions are really outstanding for the company.