Employee Inventors - An Award of Compensation

An invention which is made by an employee in the course of employment belongs to the employer, by virtue of s.39 of the Patents Act 1977. Such an invention may be patented by the employer, and as such could become a very valuable asset to the employer's business, and in some cases, it may be the employer's most valuable asset.

The Patents Act 1977 grants employees the right to claim compensation from their employer for the value added to the business by the patent. This right to make a patent compensation claim has since been extended by the Patents Act 2004, to the value added by the invention itself, and not just the patent.

It should be noted that the compensatory award is not designed to compensate for any loss, but to reward the employee a share of the benefit accrued, where it is just to do so.

A recent ruling which was heard by the High Court on 11 February 2009; the case of Kelly and Chiu v GE Healthcare Ltd, represents the first reported example of a successful award of compensation to an employee inventor.

The basis of the claim was under the older Patents Act, as the 2004 Act only applies to patents applied for after 1 January 2005. As such, the employees had to satisfy the harder test of proving that the outstanding benefit derived from the patent itself, rather than from the invention.

The employees were involved in the first synthesis of a chemical compound, which later formed the basis of a radioactive imaging agent. The employer protected this with a patent, and it became an extremely successful product for their employers. The employees consequently brought a claim for a share of their employer's benefit conceived from the patent.

Section 40 of the Patents Act 1977 provides that where an employee makes an invention which is patented, and that patent is of outstanding benefit to the employer such that it is just that the employee should be awarded compensation, then that employee may bring a claim. It was held in the above case that a section 40 claim was available only to the ‘actual deviser' of the invention, and not a mere contributor. The employee may make such an invention in the ordinary course of his employment. ‘Outstanding' was interpreted by the court as a benefit beyond that which would normally expect to arise from the duties for which the employee was paid. The patent had to be the cause of the benefit; however it did not have to be the only cause.

The compensation awarded to the employee is that which would "secure for the employee a fair share of the benefit the employer has derived, or may reasonably be expected to derive, from the patent" (s.41 Patents Act 1977), taking the following matters into account (amongst others):

  • the nature of the employee's duties and advantages of his employment;
  • the effort and skill which the employee has devoted to making the invention;
  • the effort and skill which any other person has devoted to making the invention; and
  • the contribution made by the employer to the invention.

In the above case, the tests were satisfied, and the senior researcher was awarded 2% of the calculated benefit, in the sum of £1 million, and the junior researcher, £500,000.

However, it is important to note that this patent compensation claim case is not likely to open the floodgates in practice, due to the specific circumstances surrounding the invention and the fact that it was in the medical field. This allowed for an easier assessment of the advantages of the patent to specialists. The advantages of the patent were also higher than might otherwise have been the case in a more public commercial field, where many more factors might contribute to a success, for example, design and/or marketing considerations.  

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