The English High Court has awarded two employee inventors £1.5 million under the Patents Act 1977 as compensation for the “outstanding benefit” that a patent in respect of one of their inventions conferred on their employer. This is the first reported decision where an English court has found in favour of an employee bringing a claim for compensation and has generated a great deal of interest amongst employees and employers alike. In previous cases the employee inventors had failed to persuade the court that their patent conferred an “outstanding benefit”.

Section 40 of the Patents Act 1977 provides that where an employee has made an invention belonging to his employer and a patent is granted in respect of that invention then, if the patent is of outstanding benefit to the employer, the employee can be awarded compensation to be paid by the employer.

In Kelly & Chiu v GE Healthcare Limited (GE), the claimants were two research chemists who worked for Amersham International PLC (now GE) in the 1980s. In the course of their work they synthesised and patented a molecule which subsequently formed the basis of a medical imaging agent marketed under the brand name “Myoview”. Myoview was a very successful product and the value of its first year sales alone exceeded the total R&D spend on its development. The court held that the patent was of outstanding benefit to GE and it had been effective in keeping generic competitors out of the market place, so enabling GE to maximise its sales revenue. The court then assessed what a fair and just amount of compensation would be. It estimated that the financial benefit of the patent to GE was £50 million. Of that the court awarded the two claimants 2 per cent and 1 per cent respectively, totalling £1.5 million.

Section 40 was amended in respect of patents filed after 1 January 2005 (so too late for the claimants in this case) with the effect that employee inventors are now entitled to compensation where the invention itself not just the underlying patent is of outstanding benefit. This should be an easier test for employees to satisfy. In any event we must wait and see whether the recent decision will lead to a raft of claims by employee inventors who feel that they have not been justly rewarded for the benefit their patents and inventions have brought to their employers.

Click here for a link to a Norton Rose briefing on this case which includes steps employers could take to mitigate the risk of claims being brought.