By Dennis Crouch
Ian Shanks v. Unilever,  EWHC 1647 (England & Wales High Court of Justice, Patents Court) [Shanks v Unilever judgment]
Ian Shanks invented the disposable personal glucose meter back in the 1980s while an employee of Unilever and wants his just compensation. At the time, his salary was £29,000 and a BMW to use with no bonus for successful inventing. However, as in a number of countries, a UK employee-inventor’s compensation is not solely governed by an employment agreement. Rather, the 1977 Patents Act additionally requires that the compensation be “just” and that the employee be given a “fair share” when the employee’s patented invention results in an “outstanding benefit” to the employer.
The Statute provides:
40(1): Where it appears … that the employee has made an invention belonging to the employer for which a patent has been granted, that the patent is (having regard among other things to the size and nature of the employer’s undertaking) of outstanding benefit to the employer and that by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer, the court or the comptroller may award him such compensation of an amount determined under section 41 below. . . .
41(1) An award of compensation to an employee … shall be such as will secure for the employee a fair share (having regard to all the circumstances) of the [monetary] benefit which the employer has derived, or may reasonably be expected to derive, from the patent for the invention or from the assignment, assignation or grant to a person connected with the employer of the property or any right in the invention or the property in, or any right in or under, an application for that patent. . . .
(4) In determining the fair share of the benefit to be secured for an employee in respect of a patent for an invention which has always belonged to an employer, the court or the comptroller shall, among other things, take the following matters into account, that is to say –
(a) the nature of the employee’s duties, his remuneration and the other advantages he derives or has derived from his employment or has derived in relation to the invention under this Act;
(b) the effort and skill which the employee has devoted to making the invention;
(c) the effort and skill which any other person has devoted to making the invention jointly with the employee concerned, and the advice and other assistance contributed by any other employee who is not a joint inventor of the invention; and
(d) the contribution made by the employer to the making, developing and working of the invention by the provision of advice, facilities and other assistance, by the provision of opportunities and by his managerial and commercial skill and activities.”
Here, the Comptroller-General of patents (UKIPO) took the case originally and determined that Unilever’s monetary gain from the patents Shanks patents was £24.5 million and that a fair compensation for Shanks was 5% of that – resulting in £1.2 million. Not bad, but a fairly small amount of the multi-billion-dollar industry that Shanks invention helped to spark. However, the Comptroller also held that the contribution was not of “outstanding benefit” to the company as required by the statute – the result then was that Professor Shanks received nothing.
Shanks then took his case to the High Court in London, but Mr. Justice Arnold has now rejected the appeal affirming that the “the Shanks Patents were not of outstanding benefit to Unilever, and therefore Prof Shanks is not entitled to an award of employee compensation under section 40(1).”
Not outstanding?: To be clear, Shanks invention here was not directly related to any ongoing Unilever project, but one that he figured out on his own initiative and that was aided by the use if his daughter’s toy microscope in his home. The result here is that, without Shanks, Unilever’s profits on this invention would have been none and this particular innovation had a very high rate of return.
Of course, Unilever’s profits overall are in the billions of pounds per year. A £25 million project is so small that it does not even reach Unilever company management – how then could it be outstanding? Here, the judge agreed that Unilever’s size was important – confirming that:
£50,000 would be an excellent return for a small company to get from licensing its patents. Clearly, that would not be an excellent return for Unilever, which by its nature, for example by being able to contemplate greater expenditure on litigation, is able to get higher returns in negotiations than a smaller entity would, as Mr Emanuel conceded. So it seems totally logical to me that a given monetary benefit might be outstanding for a small entity, but not for a larger one.
Shanks will now have an opportunity to appeal this judgment.