Following the recent English High Court decision1 where two ex-employees were awarded £1.5 million in compensation under the Patents Act for the 'outstanding benefit' that a patent on one of their inventions conferred on their employer, the question is being asked: will this bring a raft of similar claims from employees and ex-employees who feel they have not been fairly rewarded for the financial benefit that their inventions have brought their employers?
This is the first reported decision of such a compensation claim where the English court has found in favour of the employee. All previous cases have either settled before trial or, where they have gone to trial, the court has found in favour of the employer. Showing the required outstanding benefit to the employer conferred by the patent filed on the invention has in the past proved to be very difficult.
The facts of the case
- The claimants were two chemists who, during the 1980s, had worked at Amersham International Plc (now GE Healthcare Limited (GE)). They synthesised and patented a molecule that subsequently formed the basis of a medical imaging agent, marketed under the brand Myoview.
- Myoview went on to become a very valuable product. First year sales alone exceeded the total R&D spend in developing the product and sales peaked in 2006 at £179 million.
- The judge found that the patent was of outstanding benefit to GE. It was effective at keeping out generic competition and, when compared to other similar imaging agents, Myoview generated significantly more revenue for GE.
- After finding that the case was made out for outstanding benefit, the judge then assessed what a fair and just amount of compensation should be. Based on the facts he estimated that the financial benefit of the patent to GE was £50million. Of that, the judge awarded the two employee inventors 2% and 1% respectively (so a total of £1.5million).
The fact that the employees won in this case could trigger further claims. Although each case must be decided on its own particular facts (and in this case the issue of potential generic entry played a big part) the fact that there is now a precedent for an employee succeeding could fuel interest in further claims.
It might also be an area where litigation funding and conditional fee arrangements might be seen as attractive ways for claimants to proceed, which could further increase the likelihood of claims.
A further point to note is that under a recent amendment to the law it is likely to be easier in the future for employees to succeed in claims for patents filed after 1 January 2005. For these patents it will no longer be necessary to show outstanding benefit due to the patent alone. The employee can rely upon benefit conferred by the patent, the invention or both. This removes what has been a real difficulty for the employee inventor: showing outstanding benefit due to the patent, i.e. the legal monopoly position, alone. This GE case was under the old more restrictive law.
Mitigating risk - practical steps
For employers of scientists, engineers and any others whose job is to invent and develop new technologies and products, the decision has been treated with concern.
The difficulty for the employer is that there are limited options available to mitigate against the risk of these sorts of claims arising. It is not generally possible to contract out of the statutory compensation provisions. The compensation is in addition to the remuneration which the employee received for his employment, and any clause in a contract to exclude the right to compensation will be void. Furthermore, the employee or ex-employee has a long period of time to bring a claim, the period being from when the patent grants until it ceases, plus a year.
Perhaps the best practical advice for employers is:
- Try to keep your inventors well rewarded and incentivised by putting in place a voluntary contractual compensation scheme which will reward inventors of very valuable inventions accordingly. This might in principle be structured as an appropriate share in the financial success of the product, where the invention satisfies certain conditions of financial value to the employer. This should hopefully prevent employees from feeling they had not shared in the benefit, and therefore make disputes less likely to arise.
Also, if a claim were to be brought, the fact that the employee received this further compensation could be a factor weighing in the balance as to whether any further compensation should be due, and if so, how much. In addition, voluntary compensation schemes can be considered more generally as good tools to retain talented scientists or engineers, and also help to encourage employees to disclose inventions.
- If claims do arise, to defend them vigorously to ensure that they are not seen as a soft touch and so invite further claims.
Finally, it should be noted that the issue of employee inventors’ compensation is not an issue limited to the UK. A number of other European countries, and Japan, have the concept of statutory compensation available within their domestic patent laws. Fifty years ago Germany took the further step of enacting specific legislation to regulate this issue, the German Employees’ Inventions Act, and has a long tradition of such awards being made to employee inventors.