Are exceptional rewards justified?
Posted: 1st February 2017
Companies are entitled to reap the benefits of their employees’ inventiveness – but patent law does require compensation to be paid to those whose ideas make an outstanding contribution to profits. In an important test case, the Court of Appeal analysed the circumstances in which such exceptional rewards are justified.
Professor Ian Shanks employed by a Unilever had invented a novel blood glucose testing device that, after it was patented, generated benefits worth £24.5 million to his employer. Part of his work in developing the device had been carried out in his own time and it had been produced at almost no cost to the company. He argued that his invention had brought an outstanding benefit to his employer and sought compensation pursuant to Section 40(1) of the Patents Act 1977.
His claim was, however, rejected by a hearing officer appointed by the Comptroller-General of Patents and that ruling was subsequently confirmed by a judge. Amongst other things, the hearing officer noted that the profits generated by the device were dwarfed by Unilever’s overall multi-billion-pound turnover.
Professor Shanks pointed to the great disparity between the level of his remuneration and the profits yielded by his invention. No other single patent had achieved an equivalent rate of return for his employer. Had he worked for a smaller company, the outcome might well have been different and his employer had, in effect, been found to be ‘too big to pay’.
The Court accepted that it would be wrong to focus solely on a simple comparison between the benefits generated by the invention and the company’s overall profits. In dismissing the appeal, however, it found that the hearing officer had taken all relevant matters into account before concluding that the outstanding benefit test was not satisfied in the context of the Unilever's overall performance.