BioScience Today article: Shanks v Unilever – An opening of the claim floodgates?

Solicitor Varuni Paranavitane writes for BioScience Today on the subject of Shanks v Unilever – An opening of the claim floodgates?


This article was originally written for BioScience today, you can find Varuni’s article below, or read the full magazine here.

 

BACKGROUND

In 2006 Professor Shanks claimed compensation under s40 of the Patents Act on the basis that an invention he made as an employee was of outstanding benefit to his employer and that he was entitled to a ‘fair share’ of that benefit.

The Hearing Officer rejected the claim on the basis that his contribution fell short of being outstanding. This was appealed to the High Court, the Court of Appeal and finally the Supreme Court which decided in Professor Shank’s favour.

 

THE FACTS

Professor Shanks was employed by a wholly owned subsidiary of Unilever PLC (‘Unilever’), which carried out research for the Unilever group and was not a trading company.

He was interested in bio-sensors for monitoring glucose in diabetics and built a prototype of his invention using his daughter’s toy microscope kit.

In 1984 Unilever filed a UK patent application, and subsequently filed world-wide applications, for the invention and named Professor Shanks as an inventor.

At the time, the type of technology covered by the patent was highly sought after and Unilever granted 7 licences of the Shanks patents for a revenue of £19.55 million. In 2001 the Shanks patents and associated business were
sold for £5 million. Therefore, Unilever’s earnings from the Shanks patents, was around £24 million.

 

THE DECISION

The Supreme Court had to determine whether the Hearing Officer applied the correct principles to assess ‘outstanding benefit to an employer’ and also whether the ‘fair share’ of an outstanding benefit was assessed correctly.
In making the assessment of whether the patent was an outstanding benefit, Lord Kitchin looked at the Patents Act which set out that the court must regard the ‘size and nature of the employer’s undertaking’. Here the employer is
a company that sits within the Unilever group.

Lord Kitchin held that “the focus of the inquiry into whether any one of those patents is of outstanding benefit to the company must be the extent of the benefit of that patent to the group and how that compares with the benefits derived
by the group from other patents for inventions arising from research carried out by that company’” It is well known that Unilever makes a variety of products from Vienetta ice cream to deodorants and generates billions of pounds in sales, and hundreds of millions of pounds in profits, over the life of patents related to the products. In considering the relevance of the size and nature of an undertaking to assess outstanding benefit, Lord Kitchin held the following factors were relevant:

  • whether the benefit would normally have been expected to arise from the duties for which the employee was paid;
  • whether the benefit was arrived at without any risk to the business;
  • whether the benefit represents an ‘extraordinarily high rate of return’;
  • and whether it may have been the opportunity to develop a new line of business or to engage in unforeseen licensing
    opportunities.

Lord Kitchin held that the Hearing Officer was incorrect on a number points when considering whether the benefit was outstanding, including that there was no justification to simply weigh the sums Unilever generated from the Shanks patents against the size of its turnover and overall profitability. Lord Kitchin held that the Shanks patents were of outstanding benefit to the employer.

Lord Kitchin agreed that the Hearing Officer’s approach to arriving at figure of 5% of the total earnings was a ‘fair share’ and awarded Professor Shanks £2 million. This comprised the 5% of £24m (£1.2m) plus a sum of £0.8m to take into account of inflation.

 

FLOODGATES?

It is unlikely that this decision will open the floodgates to successful employee inventor claims in the pharmaceutical industry as the facts are very specific, but it is reasonable to think that we might see more claims being considered in view of this success. Employers may be able to reduce the risks of a successful claim by adopting a robust inventor reward scheme so that inventors are appropriately rewarded early on.

 


If you wish to discuss this topic or any other topic in this article, please contact the writer, on another member of the team.


Category: Latest Insights | Author: Varuni Paranavitane | Published: | Read more

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