“Where it appears to the court or the comptroller on an application made by an employee within the prescribed period that the employee has made an invention belonging to the employer for which a patent has been granted, that the patent is (having regard among other things to the size and nature of the employer's undertaking) of outstanding benefit to the employer and that by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer, the court or the comptroller may award him such compensation of an amount determined under section 41 below.”
“(1) An award of compensation to an employee under section 40(1) or (2) above in relation to a patent for the invention shall be such as will secure for the employee a fair share (having regard to all the circumstances) of the benefit which the employer has derived, or may reasonably be expected to derive, from the patent for the invention or from the assignment, assignation or grant to a person connected with the employer of the property or any right in the invention or the property in, or any right in or under, an application for that patent. (2) For the purposes of subsection (1) above the amount of any benefit derived or expected to be derived by an employer from the assignment, assignation or grant of— (a) the property in, or any right in or under, a patent for the invention or an application for such a patent; or (b) the property or any right in the invention to a person connected with him shall be taken to be the amount which could reasonably be expected to be so derived by the employer if that person had not been connected with him. … (4) In determining the fair share of the benefit to be secured for an employee in respect of a patent for an invention which has always belonged to an employer, the court or the comptroller shall, among other things, take the following matters into account, that is to say – (a) the nature of the employee’s duties, his remuneration and the other advantages he derives or has derived from his employment or has derived in relation to the invention under this Act; (b) the effort and skill which the employee has devoted to making the invention; (c) the effort and skill which any other person has devoted to making the invention jointly with the employee concerned, and the advice and other assistance contributed by any other employee who is not a joint inventor of the invention; and (d) the contribution made by the employer to the making, developing and working of the invention by the provision of advice, facilities and other assistance, by the provision of opportunities and by his managerial and commercial skill and activities.” (a) the property in, or any right in or under, a patent for the invention or an application for such a patent; or (b) the property or any right in the invention to a person connected with him shall be taken to be the amount which could reasonably be expected to be so derived by the employer if that person had not been connected with him. (a) the nature of the employee’s duties, his remuneration and the other advantages he derives or has derived from his employment or has derived in relation to the invention under this Act; (b) the effort and skill which the employee has devoted to making the invention; (c) the effort and skill which any other person has devoted to making the invention jointly with the employee concerned, and the advice and other assistance contributed by any other employee who is not a joint inventor of the invention; and (d) the contribution made by the employer to the making, developing and working of the invention by the provision of advice, facilities and other assistance, by the provision of opportunities and by his managerial and commercial skill and activities.”
“18. Beyond saying that the benefit must be in ‘money or money's worth’ – see section 43(7) – the Act contains no definition of ‘outstanding benefit’. In Memco-Med Ltd's Patent[1992] RPC 403 , Aldous J (as he was then) said at page 414 lines 7-10: ‘The word “outstanding” denotes something special and requires the benefit to be more than substantial or good. I believe that it is unwise to try and redefine the word “outstanding”
‘It is for this reason that the section (section 40) uses the word “outstanding” to qualify the benefit which would make it just that the employee should receive compensation. Moreover it is noted that the word “outstanding” is used rather than “significant” or “substantial” or other such term. It must be something out of the ordinary and not such as one would normally expect to arise from the results of duties that employee is paid for. It is, I think, for this reason that reference is made to the size and nature of the employer's undertaking, and that the benefit (to the employer) must be looked at in the total context of the activities of the employer concerned to see whether it is outstanding." 20. Aldous J also did not disagree with a statement made by a superintending examiner in British Steel PLC's Patent (Monks' Application)[1992] RPC 117 in which it was said that: ‘While Mr Tritton was plainly correct in describing “outstanding” as a comparative term, I would regard it as going further than that, implying a superlative.’ 21. Quite apart from the problem of a term being both a comparative and a superlative, Aldous J's summary, which I have already set out, does not suggest that he read the statement in Monks' Application as meaning that the benefit has to be ‘superlative’ in the sense that the benefit is one that could not have been improved upon in some way. There can hardly be a case where the benefit from a patent would satisfy such a test, and I do not believe that the legislator can have intended to create one. 22. Section 40 does not require the Court to value the benefit precisely. The test is a qualitative one, although, as we shall see, in a case where outstanding benefit is shown, section 41 requires the court to secure for the employee ‘a fair share of the benefit which the employer has derived from the patent’
“A specifically-reactive electrochemical test device, comprising electrodes, and a cavity (1-3, 51-2) having a dimension small enough to enable sample liquid to be drawn into the cavity by capillary action, the electrodes being arranged to contact the liquid, characterised in that the electrode structure (10-11, 61-2) for making one or more measurements of one or more electrically measurable characteristics of the sample is included within said cavity (1-3, 51-2), and in that optionally a surface or wall (51) of the cavity carries a coating (63,83) of a material appropriate to the test to be carried out in the device. ”
“ … This is an expert tribunal charged with administering a complex area of law in challenging circumstances. To paraphrase a view I have expressed about such expert tribunals in another context, the ordinary courts should approach appeals from them with an appropriate degree of caution; it is probable that in understanding and applying the law in their specialised field the tribunal will have got it right: see Cooke v Secretary of State for Social Security[2002] 3 All ER 279 , para 16. They and they alone are the judges of the facts. It is not enough that their decision on those facts may seem harsh to people who have not heard and read the evidence and arguments which they have heard and read. Their decisions should be respected unless it is quite clear that they have misdirected themselves in law. Appellate courts should not rush to find such misdirections simply because they might have reached a different conclusion on the facts or expressed themselves differently. … ”
“… any increase of the benefit on this account would have to be matched by an equal percentage increase to the rest of Unilever’s income that it is being compared to. I see this as a needless complication that would add nothing to the comparison.”
“…. Dr Osborn’s approach appeared too arbitrary to be justified, and I was particularly unconvinced by his failure to discount losses made in years that no income was received on the grounds that Unilever overall was profitable and so paid tax in those years. That may be so, but equally it would have saved some tax payment on his logic as a result. (This particular point does not have a direct effect as I held above that costs should not in fact be taken into account and so these losses and tax savings were not relevant – but it well illustrates the arbitrariness of his calculation). In particular, for the purpose of determining whether the benefit was outstanding, the comparators, as near as I could discern, did not appear to have taken tax into account. I further note that in Kelly, which looked at sales values for the relevant products, no account seems to have been taken of tax.”
“182. … Certainly, the sums of money that Unilever invested in the invention are by the defendants’ own account of the order of£2 million which by their own submission is not a large sum by Unilever’s standards, and I saw no real suggestion in the evidence that a lack of a patent would have meant no pursuit of research in this area. What I should therefore do, as Floyd J did in Kelly, is assume that the work had gone ahead, but there were no Shanks patents, and consider how Unilever’s income would have been affected. 183. This is far more straightforward than it was in Kelly. Without the patents, the licensing income and benefit from the Unipath sale would have been zero – all the income determined is directly attributable to the patents. Equally, the expenditure on licensing and related work would not have taken place, so these costs should be deducted from the benefit. The other work would have happened anyway by the above hypothesis, so the cost of doing so should not be deducted from the benefit. …”
“I prefer the evidence of Mr Emanuel. Dr Osborn’s approach to this question is rather sweeping and is primarily based on an assertion, without specific reasoning, that on reading the licensing files he came to the view that 20-25% was an appropriate value but he settled on a ‘conservative’ 15% in light of one licensee (Company D) reducing their payment when they decided they did not want the Birch patents. Mr Emanuel, by contrast, analysed the licences on an individual basis, and made more comprehensive comparisons between what the different licensees were willing to pay with the Birch patents included with a final price agreed with them excluded.”
“In the event, on the facts of this case I find that the reality of the situation is that described by the defendants: regardless of how the various companies in the Unilever group have been structured, researchers at Colworth (employed by CRL) were doing work which was going to be exploited by the group as a whole. Indeed, it is notable that the whole benefit from the Shanks patents was generated by licensing activity operated out of the central Unilever companies. Having regard to the size and nature of the employer’s undertaking therefore requires me to have regard to whether the benefit from the patents is outstanding in the context of the Unilever group as a whole.”
“222. Considering the totality of the evidence, I was left with a clear impression. The benefit provided by the Shanks patents was a substantial and significant one in money terms – the sort of sum Unilever would, on the evidence, worry about (cf. Project Hyacinth). Furthermore, in comparison to the benefit from other patents to Unilever, from the evidence before me it does, in Mr Emanuel’s words ‘stand out’. But Unilever makes profits at an order of magnitude greater on other inventions – albeit primarily by manufacture and at a much lower rate of return than was provided by the Shanks patents. Further, this is not such a case as Kelly, where Floyd J held that without the patents in that case, Amersham would have faced a crisis. There was no suggestion from either party that the Shanks patents were crucial to Unilever’s success. 223. In my view, taking account of the size and nature of Unilever’s business, the benefit provided by the Shanks patents falls short of being outstanding.”
“Unilever were (and according to Mr Alexander still are) contending that although£23m royalties might be a lot for some companies, by Unilever standards it is not a lot and so the patent was not of outstanding benefit to Unilever. He pointed to the words in s.40(1) ‘having regard to the size and nature of the employer's undertaking’, suggesting they meant that inventor/employees of big companies had to show a larger benefit to their employer than inventor/employees of smaller companies. I am far from convinced that Parliament meant that inventor/employees of large companies should get less or no compensation for a particular invention compared with what they would get if they had been employed by a small company. It may indeed be the other way round in that a large payment may be too much for a small company to able to afford and that was what Parliament had in mind. The point does not immediately arise – the Comptroller will have to consider it in due course if it is persisted in.”
“201. The defendants argued that in context the benefit was clearly not outstanding. To make this point, Mr Alexander submitted a graph illustrating revenue from the Shanks patents compared to Unilever’s overall profits, together with the remark ‘The Comptroller may be wondering why the bars for the licence income and the sum attributed to the Unipath sale in the years 1996 to 2004 can hardly be seen. Nothing has gone wrong with the printing. Even with an elongated y axis, they are so small as to be virtually invisible – and for the majority of its life there was no annual income realised at all’. Less colourfully, Dr Osborn made a number of comparisons on the benefit as a percentage of Unilever’s and CRL’s profits, turnover, or R&D budget either considered over the lifetime of the Shanks patents, the years in which licensing income was received, or considered relative to a single year. He was using a value of the benefit about half what I have found above, but the essential point is the same as Mr Alexander’s. 202. Mr Samuel took this line in his evidence, stating that a£18 million additional write-down had not required a restatement of the accounts and that£23 million is not even material at management group level. In my view, he somewhat overstated his case and was challenged in cross-examination being shown evidence of top-level Unilever management being concerned about losses of£15 million in another context (‘Project Hyacinth’) which he admitted being surprised by. However, I have no difficulty finding that the size of benefit being considered in this case is small compared to Unilever’s overall profits. But that does not mean that Mr Alexander’s argument immediately carries the day. 203. Mr Green characterised Mr Alexander’s approach as ‘too big to pay’. He argued that given the size of companies such as Unilever, on one level it would be impossible for any benefit to be ‘outstanding’ in the context of profits of hundreds of millions of pounds and more. An approach such as urged by the defendants would inevitably mean that any claim against a large company would fail, and it was impossible that this was the legislature’s intention. … Mr Green also referred to the comments of Jacob LJ in the Court of Appeal’s judgment in Shanks v Unilever, where he had thought it unlikely that a large company could escape liability in such a way. … 207. I agree with Mr Green to the extent that I think it is too simplistic to simply look at overall turnover, or profits, of an employer’s undertaking and then simply state that a given benefit is a small percentage of that. At the same time, it is necessary, as the statute says, to take account of the size and nature of the employer’s undertaking. Different undertakings will have different leverage to be able to make more or less benefit out of their activities. I see this as being illustrated by Mr Emanuel’s comment in evidence that£50,000 would be an excellent return for a small company to get from licensing its patents. Clearly, that would not be an excellent return for Unilever, which by its nature, for example by being able to contemplate greater expenditure on litigation, is able to get higher returns in negotiations than a smaller entity would, as Mr Emanuel conceded. So it seems totally logical to me that a given monetary benefit might be outstanding for a small entity, but not for a larger one. 208. Ultimately, I do not think this reduces to a simpler test than that laid down in the statute – it is a matter of looking at the benefit in the overall context and determining whether in view of all the facts the benefit to the employer was outstanding. Sometimes that might be because of the benefit being in fact a large portion of the employer’s profits or turnover. Other times it may be possible to see the outstanding nature from the effect it had – for example in Kelly, where Floyd J is able to determine the benefit is outstanding before determining its precise value in money terms.”
“The claimant makes an initial point regarding Floyd J’s holding in Kelly that under section 41(1) the employee will only succeed where, with the benefit of hindsight, the disparity in benefit between employee and employer is extreme. The claimant argues that this is surely satisfied as Unilever have received tens of millions of pounds and Professor Shanks nothing more than his contracted remuneration and£100 assignment fee. In simple numerical terms, this is plainly so, but I do not read Floyd J as meaning to create an alternative test to ‘outstanding’; there is a need to consider the disparity in the overall context of the size and nature of the employer’s undertaking.”
“213. In the context of Unilever’s business, which is in making products and not substantially engaging in patent licensing, Mr Emanuel agreed in cross-examination that if it gets any significant level of fees from the odd patent license, that is always going to be unusual because that is not its business, and he commented that if it is a substantial amount of money then it is remarkable. It would ‘stand out’. He emphasised that Unilever don’t normally do this, but on this occasion, not only did they do it but they made ‘a ton of money’ out of it. 214. There was scant evidence in relation to Unilever’s other licensing activities. In particular, no examples were provided of other licensing deals which have provided Unilever with income at or above the levels of the Shanks patents. Dr Mulder’s evidence was that Unilever is not a licensing out company but rather a company focussed on products. It therefore seems, as Mr Emanuel said, that the Shanks patents could ‘stand out’ in terms of the licensing income they have brought in. 215. It does not however follow that the benefit, in money or money’s worth, is outstanding. On this I agree with the point Mr Alexander put forward, which was that how the benefit was made is not relevant to whether it is outstanding – what matters is whether the benefit in money or money’s worth is outstanding in the context of the undertaking as a whole. Just because a company does not usually make money in a certain way does not mean that any sum, no matter how small relative to the size of the company’s usual business, is of outstanding benefit for it.”
“219. Dr Mulder in his evidence, in a part he was not challenged on, identified a number of highly successful products manufactured by Unilever, including Vienetta ice cream, spreads and deodorants. He referred to incomes of ‘many billions of pounds’ over the lifetime of the patents protecting the products, ‘with profits over the same period of at least many hundreds of millions of pounds.’ I believe that this gives some indication of the sorts of benefits generated by highly successful products, and so the sorts of sums which can be considered to be of great benefit to Unilever, which are an order of magnitude greater than the benefit in this case. 220. There is one noticeable difference between the benefit in cases such as Vienetta and the present case: the amount spent by Unilever to get the benefit. Profits of ‘hundreds of millions’ on revenues of ‘billions’ necessarily implies expenditure in the hundreds of millions. In this case, even on the defendants’ case, the expenditure was no more than around£2 million . Under my own approach, which is to look at the benefit of the patent, even most of those costs can be ignored, giving a very high rate of return. I agree with the suggestion from the claimant that this is relevant in his favour, but bear in mind that under this approach all successful patents will have a high rate of return, and a small sum generated by a still smaller sum is still a small sum.”
“On balance I conclude that Professor Shanks was made to understand that he should not stray too far from his brief of biosensors for process control and process engineering, although he was given a wide remit within this brief. I however believe that he did have at least some freedom to develop his ideas in other areas, even if the level of interest for these ideas within Unilever was in question, a point I come back to below.”
“216. In an effort to assess the benefit obtained from the Shanks patents to that from other patents owned by Unilever, Dr Mulder provided some evidence in relation to patent value and patent metrics based on an attempt he had made some years previous to ‘value’ Unilever’s patents. However, in cross-examination he conceded that this was not really related to the money value of the patents as such, more their value in general terms, relating patents to relevant products sales value rather than determining the value of the patent compared to the product. I do not consider this evidence to be of great assistance. 217. Mr Emanuel commented that if Unilever had provided evidence that there were a high number of patents which had a clear value attributable to them similar in size to that of the Shanks patents (e.g. 20 of them in the last year), then the Shanks patents would not be exceptional, although if there were only one or two a year they may be exceptional. … 218. I think to an extent that this suffers from the same problem I identified looking at only licensing above – Unilever generally uses patents to protect its products, so the value of a patent is only going to be a subset of the value of the product – and for determining outstanding benefit it is going to be necessary to compare with the benefits obtained from those products. Had Dr Mulder’s efforts to disaggregate the benefit from patents shown convincingly that other patents were more beneficial than the Shanks patents that might have pointed away from the Shanks patents providing outstanding benefit. Dr Mulder’s failure to do that does not, I think, indicate anything one way or the other.”
“I do not believe these comparisons are of much assistance. The question of outstanding benefit must be considered in the context of an employer’s undertaking. A patent might very well provide outstanding benefit in that context even if it did not stand out among patents generally. Conversely, I find it hard to see how a benefit of£50,000 could be considered an outstanding benefit in the context of Unilever’s overall budget, even if generally patents are licensed for much less.”
“Finally, I note there was some suggestion from Mr Green that the inclusion of the Shanks patents in the sale was particularly important because it turned projected income in the immediate future for Unipath from profit into loss. In a sense this is true, but equally it is true of any arbitrary division of Unipath’s assets. To the extent that the Shanks patents made a difference, that has been accounted for in my calculations above.”
“As a result, I would consider 5% would have been an appropriate fair share of the benefit for the claimant had I held the benefit to be outstanding.”
“I do not think that the position of academic inventors is comparable with the position of the inventors in the present case. I suppose if an inventor in industry made an invention which created an entirely new product and income stream for his employer without any substantial input from the employer, a share in this region or even higher might be justifiable. But that would be a very different case.”
“My view on this is that is that trying to determine how much money the defendants would have been able to reap as a result of the income they received is highly speculative given the evidence available. As Mr Alexander pointed out, there was no evidence as to what Unilever had actually done with any of the benefit (or, put another way, what they would have not done if they had not had it). Perhaps they would, absent the benefit from the Shanks patents, simply have made lower dividend payments to shareholders – in which case, they did not benefit from any time value of the money at all. The speculative nature of all this was illustrated, in my view, by Mr Emanuel’s neglect of it in his first expert report, and by the somewhat meagre justification he gave. It seemed to me that framed as a factual issue, there was not enough evidence to justify increasing the benefit in any way.”
“The defendants’ contribution here was mainly significant in its work to obtain licenses for the Shanks patent. Unilever made a very small effort (by its standards in money terms) to commercialise the invention. The licensing efforts I have found to be serious, but not exceptional in terms of commitment made. There was no significant risk to the defendants as a result of their efforts. Certainly the defendants’ efforts pale in comparison to the funding of the full research programme in Kelly, and the amount Amersham had potentially to lose had the research failed. ”
“Overall, it appears that Unilever did not devote a relatively great (for itself) deal of effort and energy into licensing the Shanks patents, but it kept the patents in force and did put in a serious effort which secured the non-negligible (to put it at its lowest) returns it did. It is clear that there was significant effort and skill in the licensing negotiations, albeit not at the level a dedicated skilled licensing team would have provided.”
“Even with hindsight, it is not clear that with greater resource and more investment in the licensing, Unilever would have secured any greater returns. It is speculation, for example, that a faster response to Company A post-July 1992 would have secured a much better licence from Unilever’s perspective. But equally it might have been that locked into an expensive licence, Company A might have more aggressively pursued validity, consumed more of Unilever’s resources in litigation and potentially invalidated the Shanks patents, knocking out the revenue stream entirely. The only certain fact is that the approach taken by Unilever and the work of Mr Tate in particular secured licenses from all but one of the major players worth millions of pounds to Unilever.”
“I note that the independent claims in EP0170375 as granted are based on subject matter also found in the priority application and I therefore conclude that the invention defined in at least the independent claims was invented by Professor Shanks. Bearing in mind all the evidence I have heard concerning how the invention was devised, the nature of discussions between Professor Shanks and Unilever’s patent department, the demonstrations he said he did of the ECFD device, and the evidence on the contribution of the other inventors, I am satisfied that Professor Shanks’ account of who invented what is accurate. The other inventors did contribute to the patent, but I am satisfied that Professor Shanks invented the invention claimed in the independent claims, had contemplated the use of electrodes apart from tin oxide and ion-selective membranes, and also had in mind the application to glucose testing. Professor Shanks’ evidence was overall convincing, the defendants had no witnesses who could contradict it, and the contemporaneous documentation in evidence was consistent with Professor Shanks’ evidence.”
“I have found above that Professor Shanks contributed the key aspects of the patented invention. His co-inventors clearly had a role in fleshing out the invention sufficiently for the ultimate patent application, but this was a lesser role. …”