Inventors given £1.5m by High Court
Patents win prizes
Posted in Management, 17th February 2009 09:17 GMT
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Two researchers have been awarded £1.5m under a little-used section of patent law which allows employees extra compensation for inventions which are of "outstanding benefit" to employers.
Companies which hire employees to invent things for them generally retain the patents and other intellectual property for those inventions. By owning those rights the companies in turn control the earnings that result from the inventions.
But a clause of the Patents Act allows for extra payments to be made in exceptional circumstances. The High Court has just made the first public award of such a payment to two scientists from Amersham International, now a subsidiary of GE Healthcare.
Duncan Kelly and Kwok Wai Chiu invented a cardiac imaging product which the High Court found had earned £50m for Aversham. In fact the Court said that the benefit was "very much greater" than that figure, but chose £50m as "the absolute rock bottom figure" for the patents' benefit.
The invention earned £1.3bn in revenues up to 2007, the Court said. It found that not only did the invention earn the company significant sums outright, but it protected the company from competition from generic products, and protected its high profit margins. It also helped Amersham to win lucrative corporate deals and without it the company would have been in "crisis".
"The patents have helped transform Amersham," said Mr Justice Floyd in the High Court ruling. "I had no difficulty in recognising that the patents were of outstanding benefit to Amersham."
Section 40 of the Patents Act says that where an employee invents something which is of "outstanding benefit" to the employer and the employer owns the patents, "it is just that the employee should be awarded compensation to be paid by the employer".
The Court awarded a payment of £1.5m in this case.
Many intellectual property law experts have believed in the past that the bar was set too high for inventions to qualify for extra payments, but IP expert Deborah Bould of Pinsent Masons, the law firm behind OUT-LAW.COM, said that cases have been successfully settled but have just not been the subject of public judgments.
Mr Justice Floyd looked at what would have happened had the patented product not been invented. He said that in accounting for an invention's contribution to a company it did not need to be the sole factor in earnings or success, it could be one of a number of factors.
"A patent may be of benefit to the employer even where there are multiple causes for the profits under consideration," he said. "The existence of multiple causes is not a reason for disregarding a given benefit altogether, although it may prevent the benefit of the patent alone from being outstanding."
"There may be cases where it is possible to say that the benefit was too remote from the existence of the patent, or no genuine causal relationship existed. But where there is a causal relationship, the next question is how much of that benefit can be attributed to the patent," said the ruling. "This may require an apportionment of the benefit, and may raise difficult questions. The court should then go on to consider whether that benefit is outstanding."
The company argued that it is the employer that assumes all the risk in its employees' inventing activity, and it should receive the benefit, and that the employees are compensated for their work through their wages and benefits.
Former Glaxo chief executive Sir Richard Sykes gave evidence in the company's support, saying that inventions were a corporate effort involving teams of people.
The Court, though, found that the contribution of Kelly and Chiu was outstanding, and awarded Kelly £1m and Chiu £500,000.
Bould said that in light of the ruling companies which depend on their employees' research should be reviewing how they reward inventors.
"They should be reviewing their compensation policies, should be looking at whether they are awarded a percentage of benefits and how benefits are calculated," she said. "This is a complicated area, and compensation plans should be sophisticated, staged to deal with different circumstances."
See: The ruling
Copyright © 2009, OUT-LAW.com
OUT-LAW.COM is part of international law firm Pinsent Masons.
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COMMENTS
@Stephen
So the senior executives are worth performance bonuses, regardless of whether their performance was obviously crap, because they have worked hard to get to the top. The engineer does not deserve a bonus, even when his performance was obviously outstanding, because he didn't work hard. The way we know he didn't work hard is that he is not an executive.
So, by extension, the only reason a clever person would work as an engineer or scientist is if he likes the work more than money or recognition. Do you see any long-term problems with this policy? Have you read how companies complain they can't hire competent technical workers, although the schools keep producing graduates?
I'm not saying your opinion is out of step with standard British management. I am just saying that it goes a long way towards explaining the number of clever British scientists and engineers working abroad. If the companies that rely on hiring these people are too thick to do something about it, maybe inspired rulings like this will help them see their way clear to preventing their own eventual collapse.
And So It Goes
I work in a field where a single "bright idea" can bring millions in revenue. My employers "own" my bright ideas. I have my name on a patent (which the [now prior] company owns) that gives them an edge in a highly competitive market. I got a cheque amounting to less than half a week's wages for my trouble. If the company makes a single sale of a single system based on that feature, they will be paying the sales droid a bonus of about my annual salary, and the execs will each see double that.
Ironically, though _their_ bonuses will buy them a car or a boat -- even a house, for the veeps, mine wasn't enough for a new computer, or even a new flat screen monitor.
The only real benefit has been that it scored me some points on my resume. When I left there. And went to work for the competition.
Not that I'm being paid more now. Less, in fact.
Oh well. I shouldn't gripe. I'm still working.
That's more than my old boss can say.
Pirates, the lot of them.
@ Anon Coward
You mean the CEOs that started, invested and worked their way up companies? People choose their jobs and know what their wage is, if they don't like it then they can feck off and get another job.
I'm not sure I like this
To be sure, it is nice to see employees getting paid for a great contribution to their company. You even feel in this case, they should have gotten more...
However, I do not like the idea of having more and more expensive lawsuits between companies and employees who disagree on the exact amount they should be paid. In my ideal world, such compensation would be fixed by the law, and not subject to vague words like "outstanding benefits", whose meaning can be decided only in court.
BTW, saw today an ad for a management school:
"Ideas do not rule the world, but their management does"
How's that for an absolute statement of superiority of management over techies?
W3 0wnz j00r @$$
@ Stephen
"can I force my employers to pay me more because I did my job well?"
Yes, 'cos that's what patent law says.
Unlike, say, the corporate insanity which automatically rewards CEOs with millions regardless of company performance, yet chooses to fight legitimate claims like this in court.
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