Ashfords International Patent Services

Employee inventions and additional remuneration

Matters concerning employee inventions are set out predominantly in sections 39-43 of the UK Patent Act 1977, and there have been relatively few court cases over the years that have explored the provisions of section 40 – the additional compensation that employees can receive for certain inventions that are particularly beneficial to their employer.  Shanks v Unilever [2014] and Kelly & Chiu v GE Healthcare [2009] are two decisions that represent contrasting successes of employees securing lucrative additional compensation for inventions that their employers have profitably exploited.  It is perhaps the case that many disputes between employer and employee never arise, or are resolved prior to a court action being taken.

Here are a few practice points that may not be immediately apparent from the legislation:

a)  UK patent law tends to favour the employer more so than other jurisdictions that have inventor compensation legislation.  In most cases where a UK employee is paid a salary to invent, and has the relevant provisions in their employment contract, assignment of patent rights can be for nominal sums, or even automatic.  However, in the latter case, it is prudent to at least draw up confirmatory assignments.

b)  Assignments should be executed as early as possible, and the rightful owner should be  promptly registered before the relevant patent office.  Delay can prejudice the ability to enforce an IP right such as a patent.

c)  Employment contracts should include agreements to assign IP, and also include agreements to cooperate in the future (even after termination of employment) to assist with other administrative and transactional matters associated with IP rights.

d)  There are extenuating factors to be wary of.  For example, under UK patent law, where inventor activities have conferred outstanding benefits to the employer, a fair share of that benefit may be due to the employee beyond their normal remuneration.  Also, the residence or nationality of the inventor may influence the jurisdiction under which he or she may be entitled to additional compensation.  Additionally, the employment relationship must be looked at, and a determination made whether the invention resulted within the normal course of employment.

e)  In terms of managing the employee relationship, many companies utilise inventor recognition and reward schemes, having the dual benefit of enthusing the workforce and reducing the appetite for additional compensation claims.