The quick pace of technological advances means that cultivating a culture of creativity within an organisation can be key to getting ahead – something that the oil and gas sector knows all too well. A recent UK Supreme Court case raises some interesting questions as to when an employee should be compensated for their contributions and how organisations can encourage innovation.
Whilst employed by a subsidiary of Unilever, Professor Shanks invented technology which could be used in Glucose testing for diabetics. He did this at home using his daughter's toy microscope kit, but this was considered to fall within his employment.
Unilever was later granted various patents relating to the invention. It was not key technology for Unilever, but it licensed and eventually sold the patents, over time deriving a net benefit of approximately £24.3 million. Professor Shanks raised an action seeking compensation and after a 13-year court battle was awarded £2 million.
The decision here was very specific to the facts of the case and turned on an interpretation of Section 40 of the Patents Act 1977 - which provides that an employee may be compensated for their patented invention if the patent has provided an “outstanding benefit” (which is a very difficult test to meet) to the employer. However, this case highlights important considerations for both employers and employees.
This statutory compensation cannot be written out of an employment contact and indeed applies over and above any discretionary incentivisation schemes. Employers should have processes in place for evaluating whether employees are eligible for such compensation and have transparent policies as to how this will be assessed.
Additionally, whilst the default position with employment is generally that the employer owns the intellectual property in any invention, it is best practice to also have this explicitly written into employment contracts to circumvent any grey areas. Even though Professor Shanks developed his invention at home, Unilever was the ultimate owner of the invention, as it was connected to his day job, working in the area of biosensors.
In an industry where innovation is key, encouraging inventiveness could put oil and gas companies ahead of the curve. This is not restricted to patentable methods and machines. Encouraging employees more generally to get innovative can be critical to success in a fast-moving field.
The technology created by Professor Shanks is now used in most glucose testing products for diabetics. Unilever did not invest heavily in the testing kits. This was important in the context of assessing whether the invention had brought an outstanding benefit to Unilever. Unilever did not invest specifically in the invention and did not instruct Professor Shanks to do the work. Professor Shanks came up with the invention in his own time and using his own equipment. The benefit to Unilever was "outstanding" when compared with the level of investment.
Having built the invention of his own initiative, Professor Shanks demonstrates that people-led innovation can have a significant impact on organisations. The case has a narrow application. If an employee invents something in the usual course of their employment and on the instructions of their employer, it will be very difficult for that employee to argue that the employer has enjoyed an outstanding benefit from the invention.
However, there are other reasons why an employer may wish to remunerate employees for innovation.
Employers should be transparent, support ingenuity and recognise contributions. Bonus schemes and share options can serve as simple ways to incentivise and cultivate ingenuity. Not only can this ensure that employees know their value, but this recognition can lead to higher retention rates, discouraging employees from taking their ideas to competitors offering better remuneration. During this time in lockdown and with homeschooling, who knows what children's toys and games may be being used towards the next technological breakthrough.
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