Shanks v Unilever [2019]: UK Supreme Court potentially opens floodgates for further intellectual property claims by inventors

The Supreme Court (Lord Kitchin, Lady Hale, Lord Reed, Lord Hodge and Lady Black sitting) this week have handed down the highly anticipated judgment in Shanks v Unilever Plc and others. This has been a long battle for Professor Shanks who has been fighting for compensation for an invention he created in 1982. Professor Shanks has previously failed to receive compensation through a UK IPO Hearing, Patent Court and Court of Appeal. However, his battle has finally concluded this week receiving £2 million from his former employer.

In 1982 Professor Shanks (the “Appellant”) was an employee of Unilever UK Central Resources Ltd (“CRL”), where he created a new way to measure blood sugar levels. Professor Shanks sought his ‘fair share’ for this invention, as it bought his employer over £23 million in revenue. After nearly 13 years of battling through the UK Courts, Professor Shanks has received compensation of £2 million, as the Supreme Court state that the invention was of ‘outstanding benefit’ to his employer.

Shanks v Unilever [2019]: Summary of the facts

In 1982 Professor Shanks observed that a droplet of liquid placed onto the glass plates of a liquid crystal display (“LCD”) was drawn by capillary action into a minute gap between them. He realised that this would occur regardless of the liquid, and utilising enzyme electrochemical techniques, created a system for measuring the glucose concentration in blood, serum or urine.

Professor Shanks proceeded to use his daughter’s microscope kit and bulldog clips to create his first prototype for a system measuring blood sugar, which has since become known as the Electrochemical Capillary Fill Device (“ECFD”). Additionally, he developed another similar system which uses fluorescence rather than conductivity, which is known as the Fluorescent Capillary Fill Device (“FCFD”).

In 1984 Unilever Plc filed a UK patent application for both the ECFD and FCFD but in the following year an EU patent application in relation to the ECFD only. Notwithstanding these applications, Unilever were not interested in pursuing ECFD as it would mean direct competition with companies which were established in the therapeutic sector.

Was there a benefit to Unilever?

In total seven licences of the Shanks patents were granted by Unilever for a net consideration of £19.55 million. In 2001 these were sold to Inverness Medical Innovations (“IMI”) with £5 million being attributed to the Shanks patents. Therefore, Unilever’s total earnings from the Shanks patents amounted to £24.55 million.

It was accepted by the Appellant that the rights in the invention did not belong to him but to CRL pursuant to section 39(1) of the Patents Act 1977 (“PA”), as they were made in the course of the normal duties of the employee [Professor Shanks]. However, the Appellant applied for compensation under section 40 of the Patents Act 1977, as it was his belief that the invention, which he made in 1982, was of outstanding benefit to his employer, CRL.

What determines an “outstanding benefit”?

In its unamended form section 40(1) PA reads:

“Where…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…”

Section 40 Patents Act 1977

At the first instance decision in the Intellectual Property Office (“IPO”) hearing the application under section 40(1), it was held by Mr Julyan Elbro, the hearing officer acting for the Comptroller General of Patents (“the Comptroller”), that:

“Having regard to the size and nature of Unilever’s business, the benefit provided by the Shanks patents falls short of being outstanding”.

IPO BL O/259/13 at para 223

On appeal, the IPO’s decision was further examined in the Court of Appeal (Patten, Briggs and Sales LJJ), considering whether Mr Elbro had erred by only considering ‘outstanding benefit’ comparatively between the benefits from the patents and Unilever’s overall profits.

The Court dismissed the appeal, finding that the Mr Elbro properly considered the issues and that whilst there was a clear benefit to the employer, it could not be deemed to be ‘outstanding’ when considering the wider undertaking.

Where did the Court of Appeal go wrong?

Lord Kitchin in the leading judgment submitted that the previous decisions and judgments had erred in determining whether the Shanks patents had been of ‘outstanding benefit’ to the employer.  He stated that he found it:

“…very hard to see how a failure materially to affect the aggregated sales value or overall profitability of the business could, in and of itself, justify a finding that the benefit of a patent has not been outstanding”.

Shanks v Unilever Plc and others [2019] UKSC 45 at para 54

Additionally, Lord Kitchin believed that the Shanks’ patents clearly had an outstanding benefit to CRL, having regard to their size and the nature of their undertaking, citing the case of Kelly and Chiu v GE Healthcase Ltd, which defined these terms:

“Outstanding’ means ‘something special’ or ‘out of the ordinary’ and more than ‘substantial’, ‘significant’ or ‘good’. The benefit must be something more than one would normally expect to arise from the duties for which the employee is paid”.

Kelly and Chiu v GE Healthcare Ltd [2009] EWHC 181 (Pat) at para 60 (iv)

Lord Kitchin added that this benefit cannot be determined by simply comparing the income derived from a patent with the overall turnover and profitability of the employer’s undertaking. Concluding that:

“a highly material consideration must be the extent of the Shanks patents to the Unilever group and how that compares with the benefits the group derived from other patents resulting from the work carried out at CRL.”

Shanks v Unilever Plc and others [2019] UKSC 45 at para 51

What is a fair share for inventors?

Section 41 of the PA awards compensation to an employee that will secure for them a fair share of the benefit which the employer has derived from the patent, having regard to all the circumstances. It was held that in this circumstance that a fair share would equate to 5% of the benefit which Unilever enjoyed. When taking into account inflation, Lord Kitchin concluded that £2 million represented a fair share for Professor Shanks.

What does the Supreme Court’s liberal interpretation mean for creators of inventions with “outstanding benefit”?

The judgment in this case may open the floodgates for individual disgruntled inventors who now seek compensation for their fair share.

For larger businesses, that heavily invest in research and development, this judgment may mean reconsidering their compensation provisions for employees. Ensuring they get their fair share and are rewarded for their inventions, without the need for legal proceedings.

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