…working in the lab late one night…

Employer’s Intellectual Property Rights

The employer owns designs, inventions, and copyright over abstract creative works developed by its employees – right? Surely this is the case, it even says so in the contract.

Perhaps not…

A Supreme Court case in Autumn last year suggests otherwise, albeit in certain circumstances. In Shanks v Unilever, the court awarded Professor Ian Shanks £2m compensation for something he invented whilst an employee of Unilever nearly forty years ago. How so? Is the door open to a host of employees to make such claims?

Owning and inventing

They are quite different things. The difference is critical in understanding basic IP rights and who makes money from the idea. An ‘inventor’ is the creator of an invention. An owner, in law, has the right to restrict others (third parties) from activities relating to what has been invented. In short, a right to a monopoly over it and the right to legally exploit it for cash. Of course, owner and inventor can be one and the same. But, when they are not, who is what?

If you are not an employee, generally, you will be regarded as the first owner of any invention or other creative work that you have devised and free to commercially benefit from it.

Employee

A UK resident employee that creates an invention will not, under the UK Patent Act 1977, be the owner. The employer will own it assuming it was created by the employee in the course of their normal duties and an invention might reasonably be expected as a result. A classic example of an employee not benefitting from what they create when that’s their job! The 1977 Act overrides contract law. You are even less likely to benefit as an employee inventor if you hold a senior position in the business because of your special obligation to further the interests of your employer.

Under the Intellectual Property Act 2014 the same position holds for designs and, it follows, copyright over abstract creative works.

Exceptions

This is where it gets tricky.

• What if the invention was not made in the normal course of the employee’s duties? If that can be proved, in most cases it will be open to argument, the employee will become first owner.
• What if you are working on a commission-only basis or as a freelancer? You’re not an employee so, it’s possible, you could obtain first ownership as it won’t automatically pass to the business you are working for. For ownership to pass on these facts, a specific contract is required transferring ownership from the inventor or author to the business. A variant of this might be a pre-agreed licensing agreement between the parties.

That brings us back neatly to Professor Shanks and another exception. According to Section 40 of the UK Patents Act an employee (for that is what Professor Shanks was) may be awarded compensation for their patented invention if the patent or invention has provided “outstanding benefit” to the employer entitling him to “fair share” of the profits irrespective of what any contractual provision between the parties might say.

Cases are rare. But Ian Shanks proved this statutory exception is possible despite losing in three courts before succeeding in the Supreme Court. He soldiered on for 13 years before finally being rewarded for inventing the bio-sensing electrochemical capillary device (EDCD) in 1982 whilst working for a subsidiary of Unilever. This device is now the favoured method for diabetics around the world to monitor their blood sugar levels. It is estimated Unilever earned, through licensing, some £24.5m in revenue from Professor Shank’s invention.

Professor Shanks got his “fair share”, will others? There is no doubt the ruling in October 2019 was very significant. Exceptional inventors who are employees in the UK can no longer be ignored. But, the rules of the exception are very narrow and will only apply for a limited number of patents. Still, interesting to see an old statutory provision blaze a trail in modern IP law.

 

Murray Fairclough

Development Underwriter

OPUS Underwriting Limited 

+44 (0) 203 920 9985

underwriting@opusunderwriting.com