Ian Alexander Shanks (Claimant and Appellant) v Unilever Plc and Others (Defendants and Respondents)
| Jurisdiction | England & Wales |
| Judge | The Hon Mr Justice Arnold,Mr Justice Arnold |
| Judgment Date | 23 May 2014 |
| Neutral Citation | [2014] EWHC 1647 (Pat) |
| Docket Number | Case No: CH/2013/0414 |
| Court | Chancery Division (Patents Court) |
| Date | 23 May 2014 |
[2014] EWHC 1647 (Pat)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Rolls Building
Fetter Lane, London, EC4A 1NL
The Hon Mr Justice Arnold
Case No: CH/2013/0414
Patrick Green QC, instructed by, and Keith Beresford of, Beresford & Co, for the Appellant
Daniel Alexander QC and Jonathan Hill, instructed by Herbert Smith Freehills LLP, for the Respondents
Hearing dates: 13–15 May 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Contents
| Topic | Paragraphs |
| Introduction | 1–2 |
| The statutory provisions | 3–5 |
| Earlier case law regarding employee compensation | 6–7 |
| Brief summary of the factual background | 8–26 |
| The role of the appeal court | 27–28 |
| The structure of the hearing officer's analysis | 29–30 |
| What was the benefit to Unilever? | 31–60 |
| Time value of money | 32–43 |
| Tax | 44–54 |
| Research and development costs | 55–58 |
| The Birch Patents | 59–60 |
| The employer's undertaking | 61–64 |
| Was the benefit outstanding? | 65–90 |
| Too big to pay | 66–71 |
| Disparity | 72–73 |
| How the benefit was obtained | 74–75 |
| Commercial risk and rate of return | 76–78 |
| The context of the Unilever group | 79–81 |
| The value of Unilever's other patents | 82–83 |
| The value of patents in general | 84–85 |
| Unipath | 86–89 |
| Conclusion | 90 |
| What would a fair share be? | 91–122 |
| The situation postulated by Floyd J in Kelly | 94–96 |
| Time value of money | 97–98 |
| Costs | 99–100 |
| Unilever's licensing efforts | 101–109 |
| Rate of return | 110 |
| The contribution of the other inventors | 111–119 |
| Inconsistency with Kelly | 120–122 |
| Conclusion | 23 |
| Postscript | 124 |
Introduction
This is an appeal by Professor Ian Shanks OBE FRS FREng against a decision of Julyan Elbro, Divisional Director acting for the Comptroller-General of Patents, dated 21 June 2013 ( BL O/259/13) dismissing a claim by Prof Shanks against Unilever plc, Unilever NV and one of their subsidiaries (collectively "Unilever") for employee compensation in respect of European Patent (UK) 0 170 375 ("EP375") and related patents (collectively "the Shanks Patents") pursuant to section 40(1) of the Patents Act 1977. In a careful and detailed decision running to 257 paragraphs, which was arrived at following a nine day hearing at which the hearing officer heard oral evidence from eight witnesses, including three experts, and consideration of about 30 files of documentary material, the hearing officer concluded that (i) the benefit to Unilever from the Patents was £24.5 million, (ii) that benefit was not outstanding, and (iii) if (contrary to his conclusion) the Shanks Patents were of outstanding benefit, a fair share of the benefit for Prof Shanks would be 5%. Prof Shanks challenges both the hearing officer's conclusion that the Shanks Patents were not of outstanding benefit and his conclusion as to fair share. By a respondents' notice Unilever challenge his conclusions as to the amount of the benefit and as to fair share.
It is worth observing at the outset that this is an unusual case. As explained in more detail below, the Shanks Patents were licensed by Unilever to third parties, making it unusually easy to identify the monetary benefit obtained by the patentee from the patents, as opposed to the invention. On the other hand, the fact that Unilever exploited the Shanks Patents by licensing gives rise to arguments which do not appear to have been considered in previous cases.
The statutory provisions
The relevant legislation has been amended by the Patents Act 2004, but only with effect for patents applied for after 1 January 2005. Accordingly, it is the unamended legislation which applies to the present case. Section 40(1) of the Patents Act 1977 provides as follows:
"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."
Section 41 provides, so far as relevant, as follows:
"(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."
Section 43(7) defines "benefit" as meaning "benefit in money or money's worth".
Earlier case law regarding employee compensation
The law with respect to employee compensation under section 40(1) of the 1977 Act was comprehensively reviewed by Floyd J (as he then was) in Kelly v GE Healthcare Ltd [2009] EWHC 181 (Pat), [2009] RPC 12 at [5]–[60]. I shall follow that exposition, which for the most part I shall take as read. It is nevertheless convenient to quote part of what Floyd J said on the question of "outstanding benefit":
"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". Courts will recognise an outstanding benefit when it occurs.'
19. I agree that it is not advisable to redefine the word 'outstanding'. In Memco Med Aldous J said that he did not disagree with a statement by the Superintending Examiner in GEC Avionics Limited's Patent (Ellis' Application) [1992] RPC 107, to the effect that the rationale for the use of the word outstanding was that the employee had already been compensated for the invention through remuneration for his employment. The superintending examiner in that case had said at page 115, lines 1–12:
'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...
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