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Who wants to be a millionaire?
1 April 2009
February 2009 saw a landmark UK ruling in Kelly and another v GE
Healthcare Ltd whereby, for the first time, two employee inventors
were awarded statutory compensation for making a patented invention
which proved to be of outstanding benefit to their employer.
Section 40 of the UK’s Patents Act 1977 (PA) provides that
compensation may be awarded where “the employee has made an
invention belonging to the employer for which a patent has been
granted, that the patent is (having regard among other things to
the size and nature of the employer’s undertaking) of outstanding
benefit to the employer and that by reason of those facts it is
just that the employee should be awarded compensation…”.
Invention belonging to the employer
Kelly and Chiu were employed as research scientists and were
named as inventors of the patented radioactive imaging agent, which
was sold under the trade mark Myoview.
The patent is of outstanding benefit
‘Outstanding’ is interpreted to mean “something special” or “out
of the ordinary” and denotes “more than substantial or good”.
In assessing whether the patent provided an outstanding benefit,
the UK High Court adopted the “but for” test by comparing the
position of the employer with the position he would have been in
had the patent not been granted, commenting that the “patent must
have been a cause of the benefit, although it does not have to be
the only cause”.
The Court concluded that the patent had indeed provided an
outstanding benefit in two ways, namely by:
- protecting sales of Myoview against generic competition after
expiry of regulatory data exclusivity (with the consequent reduced
profits estimated at an “absolute rock bottom figure” of £50
million); and
- assisting GE in securing various mergers and providing leverage
in corporate deals.
By reason of those facts it is ‘just’
Slightly unhelpfully, the Court declined to comment on the types
of situation which may be considered unjust, merely stating that
“the Court will recognise such situations where they arise”.
Compensation
Compensation is calculated using section 41 of the PA, taking
into account factors such as the nature of the employee’s duties,
his remuneration, the effort and skill of both the employee and
others devoted to making the invention, and the advice and
assistance contributed by the employer and non-inventors, to
determine the “fair share of the benefits” that the employee should
receive, as opposed to compensation for loss or damage.
The Court acknowledged that the doctors were reasonably well
remunerated and that Kelly received a modest ex gratia payment and
share options on retirement, in addition to the promotions and
reputation each of them had secured as inventors of the
patents.
However, taking into account the fact that Kelly “directed the
Project to a successful conclusion on a modest research spend, and
under considerable pressure to produce results” and Chiu “made
monumental efforts in his own sphere of responsibility”, the Court
took “a very conservative figure” of 3% to be the value of the
benefit that represented a fair and just reward and accordingly
awarded Kelly £1 million and Chiu £500,000.
Looking forward
The extension of section 40 by the Patents Act 2005 to make
compensation payable when the invention (not just the patent) has
been of outstanding benefit (for patents applied for after 1
January 2005), will almost inevitably lead to increased interest in
actions of this type.
Moreover, the fact that this decision was decided under the
narrower old law makes it all the more significant, as it is the
first award made by a UK Court of compensation to employee
inventors, despite section 40 having been in force for over 30
years.
However, the threshold is still high and it is predicted that
few claims will succeed. Nevertheless, for those claims that
succeed, the award may be significant based on the Court’s comment
that the employee’s share of the benefit “might, in principle, lie
in the broad range from nil to as much as 33% or beyond”.
This decision provides a reminder to companies which benefit
from their employees’ research and development to review their
current compensation schemes and, potentially, the wording of any
compromise agreements, to assess whether they reward inventors
adequately to mitigate such claims.
This article was first published in
WIPR
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