Unilever has been ordered to pay £2m to a former employee responsible for advances in diabetes testing, in a landmark Supreme Court ruling that could “fundamentally change” employee-inventor compensation cases.
In a unanimous 23 October judgement, Lord Kitchen upheld the appeal of professor Ian Shanks to claw his fair share of the “outstanding benefit” the British-Dutch FMCG giant had received from his capillary fill diabetes testing device, invented in 1982.
The ruling overturns a previous decision by the Intellectual Property Office (IPO), the High Court and the Court of Appeal.
Shanks was employed from 1982 to 1986 by Unilever UK Central Resources Limited, a research facility for the Unilever Group.
It was during this time that he devised a technology that could successfully measure the glucose concentration in blood, serum or urine, which has since benefitted millions of people the world over.
The judgement provides “long-awaited clarification” in how an employer is identified when an inventor works for a company within a multi-national group, according to Henderson Chambers who acted as counsel to Shanks.
“The significance of this decision cannot be underestimated”
Henderson added that Lord Kitchen’s ruling also provides a framework for similar cases in assessing what can be adjudicated as an “outstanding benefit”, or in this case, the comparative financial benefit to Unilever of Shanks’ patent with other inventions in its portfolio.
Shanks had argued during an earlier hearing that Unilever could have reaped royalties approximating “$1bn” had his diabetes invention been “fully exploited”.
The High Court and the Court of Appeal had previously judged Unilever “too big to pay”, according to Henderson Chambers, who rebuked the lower courts’ claim the £24m profit Unilever had made on bare license fees for patents on Shanks’ invention was “dwarfed” by global revenues of the entire Unilever Group.
This despite being derived from “unrelated manufacturing” and Unilever being unable to show examples of another patent from which it had received any similar benefit.
An employee who makes an invention for an employer for which a patent has been granted is entitled to compensation if, having regard to the size and nature of the employer’s undertaking, they can show it is of outstanding benefit to the employer, according to the Patents Act 1977.
“The Shanks patents were of outstanding benefit to Unilever” – Lord Kitchen
In his closing remarks, Lord Kitchen, with Lady Hale, Lord Reed, Lord Hodge and Lady Black in agreement, allowed Shank’s appeal, adding: “In my judgement the Shanks patents were of outstanding benefit to Unilever and CRL and professor Shanks is entitled to a fair share of that benefit amounting to £2m.”
Speaking to the BBC after the ruling, Shanks, 72, said he was pleased his “13-year slog” to win compensation was over. “I would much prefer that employee inventors believe that if they do something that turns out to be really profitable and significant, they may actually stand a chance of getting an award,” he added.
“The significance of this decision for the protection of the rights of employee-inventors working for large companies cannot be underestimated,” said Henderson Chambers.
“Employee-inventors whose employers do not reward them for outstanding contributions to innovation may today share that sense of relief as this decision from the Supreme Court allows the prospect of meaningful claims under this important provision to prevail,” it added.
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By Rory Butler, Digital Journalist
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