Employee Compensation

It has been a long time coming, but the UK courts have for the first time made an award to compensate an employed inventor.

The first successful case of an award of compensation under Section 40 Patents Act 1977 (unamended) was reported in February 2009. The action was taken by Drs Kelly & Chiu against GE Healthcare Limited.

Section 40 provides that where an employee establishes that he has made an invention belonging to the employer for which a patent has been granted; that the patent (now also the invention under amended law) is of outstanding benefit to the employer, the employee should be awarded compensation to be paid by the employer. The award of compensation under the Act secures for the employee a fair share of the benefits which the employer derives from the patent.

In Kelly and Chiu v GE Healthcare Limited, the judge found that the patents resulting from the research by Drs Kelly and Chiu had allowed GE Healthcare to enter into major corporate deals. Furthermore, the product of the patents, a radioactive imaging agent branded MYOVIEW, had seen sales between the years 2002 to 2007 of approximately £1 billion. The judge estimated that if the patents had not been in existence, generic brands entering the market would have reduced GE Healthcare revenues by £50 million in this 5 year period. With this in mind, the judge decided that the benefit of the patent was £50 million.

Justice Lloyd commented that a fair share of the benefit “was somewhere in the broad range from nil to as much as 33% or beyond” and he considered “that 3% of the value of the benefit represents a just and fair award”.

The outcome of the case was that Dr Kelly was awarded £1 million in compensation and Dr Chiu awarded £500,000 in compensation. This development of the law opens the door for employed inventors to share in the success of inventions made in the course of their employment, although the number of successful applications is likely to remain low. If you would like advice or more information, please contact us.