Kelly & Chiu v GE Healthcare LimitedFor the first time ever, the High Court has awarded compensation to employee inventors in recognition of their efforts in inventing a patented product.
The claimants were employed by the defendant as research assistants and, as part of that work, they were co-inventors on two patent families covering a radiopharmaceutical heart imaging agent known as Myoview, which went on to generate sales in excess of £1.3 billion.
Law in the UK
Employees can claim compensation under Section 40 of the Patents Act 1977, which provides that a court may award compensation to an employee inventor where a patent is of “outstanding benefit to the employer”.
Section 40 has been amended by the Patents Act 2004 to make compensation payable when the invention, and not just the patent, has been of outstanding benefit. The amendments, however, only affect patents applied for after 1 January 2005 and were not relevant in this case.
The Court held that, in order to assess the level of benefit to the defendant, it was necessary to assume that Myoview had been put on the market without patent protection and then to compare an estimate of how it would have performed with the actual benefit obtained by the Defendant. The Court noted that, as well as enjoying patent protection, Myoview was also protected by regulatory data exclusivity, and accordingly this had to be taken into account in the scenario without patent protection.
The Court found that the defendant had obtained an outstanding benefit from the patent in at least two ways: protection of sales of the product against generic competition after the expiry of regulatory data exclusivity (which would have otherwise resulted in reduced profits); and the value of having the patented product was a major factor in securing various mergers which have transformed the defendant.
The Court assessed the benefit of the patents to the employer to be £50 million as an “absolute rock bottom figure”. The Court rejected the defendant’s argument that any award to the claimants should be based on their existing remuneration and instead awarded the two claimants £1 million (2%) and £500,000 (1%) respectively, as their share of the benefit obtained by the defendant.
What this means in practice
This case is highly significant, as it is the first time that the UK Courts have awarded compensation to employee inventors under this law, even though it has been in force since 1977. As mentioned above, the relevant law was amended in 2005 so as to widen the scope of the relevant outstanding benefit obtained by the defendant to include the invention as well as the patent itself. This case was decided on the old law, but both it and the wider definition will inevitably lead to increased interest in claims for employee inventor compensation in the UK.
It is also important for employers to note that employees cannot contract out of their rights under the provision. Any payment made to an employee in recognition of their efforts in obtaining a patent (eg “invention bonus”) will, however, be taken into account when the court is deciding what constitutes a fair share of the outstanding benefit which was accrued by the employer, and accordingly whether the employee is entitled to any payment over and above what has already been given.