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Award of Compensation to Employee Inventors

Award of Compensation to Employee Inventors

24/04/09

Kelly & Chiu v GE Healthcare

 

The UK Patents Act 1977 (in its form relevant to the patents at issue) provides that where a granted patent, for an invention made by an employee, is of outstanding benefit to the employer, the employee shall receive a fair award of compensation from the employer. Only the benefit of the patent is considered, for example fees obtained from third party agreements to use the invention covered by the patent, or increased monopoly profit.

 

This case was decided under the 1977 Act because the patent applications were filed before the revision of the Act came into force.

 

Outstanding benefit means something that is out of the ordinary or special, and more than would be normally expected to arise from the normal duties of an employee. The award is not automatic and employee must make an application for compensation to the UK Patent Office or the Court. 

 

In the recent case of Kelly & Chiu v GE Healthcare, the first successful award of compensation to employee inventors under the UK Act was made for patents EP (UK) 0311352 and EP (UK) 0337654. The inventions related to the synthesis of a compound called P53 used in a radioactive imaging agent sold by GE Healthcare under the name Myoview®. The development of Myoview was recognised by a Queen’s Award for Technological Achievement.  Sales of Myoview resulted in nearly £1.3bn.

 

The Claimants, Drs Kelly and Chiu submitted that without the patent protection GE would have been open to competition from generic forms of Myoview. The Court agreed and concluded that such competition would have reduced sales by £50m. Consequently, because they prevented such generic competition the Court valued the benefit in the patents at £50m.

 

In arriving at the award of compensation, the Court concluded that a fair share of the outstanding benefit was 3% (£1m going to Dr Kelly and £500k going to Dr Chiu). The figure of 3% was arrived at by generally considering royalty payments for technologies involving “significant degree of innovation” where inventions involving chemical entities are more likely to fall in the range of 1 to 3%. The Court noted that the award of compensation amounted to about three days of profit from the sale of Myoview at current rates.

 

Under a revision of the Patents Act in 2005, an employee making a claim for compensation can include both the benefit from the invention and also the benefit from the patent when showing the outstanding benefit that has been obtained by the employer. The invention must however be the subject of a granted patent.