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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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