Compensation and ownership – two thorny issues in employee invention cases

United Kingdom

A recent landmark Supreme Court decision has set out the basis upon which an employee can successfully claim for compensation under the UK patent legislation. The judgment provided that the employee was entitled to £2m in compensation given his invention had been of outstanding benefit” to his employer.

This decision may have significant ramifications for employers, leaving them vulnerable to claims brought by their employees. From this judgment it is clear that the threshold for receiving compensation is still relatively high, however, employers must exercise caution where patentable inventions are created in the course of employment. To date compensation cases of these kind have been extremely rare. However, following this decision, there will be concern amongst large employers of an opening of the flood gates from other employee inventors who feel they have not been adequately compensated.

Whilst this case is clearly of interest to employers whose employees are or could be in inventive roles, it also opens the wider issue of employee inventions. A common issue which arises with inventive employees surrounds ownership of the invention. Generally, the position under the Patents Act 1977 is if the invention comes within an employee’s “normal course of duties” or “specially assigned duties” then it will be owned by the employer. But in the modern world, where businesses and job roles are evolving on a constant basis due to various factors such as technological advances, defining what someone’s employment duties are, can be troublesome. So how can employers address these issues?

There are certain practical steps that employers can take to help ensure their ownership of any employee inventions. Some of these are:

  • Keep employee duties under regular review– employers should keep employee duties under constant review. Whilst duties will likely be contained in written employment contracts or other written policies, often (particularly with long-standing, senior employees) these are out of date. Large business regularly hold annual or quarterly staff appraisals and/or check-ins with employees. Line managers should use these sessions as an opportunity to review employee duties and ensure that they are fit for purpose. Where any changes to duties are made, these should be confirmed in writing, ideally with explicit employee consent (e.g. an email or signature of acceptance).
  • Special Projects –there will be occasions when employees are assigned specific projects which would mean they are working on duties that could fall out with their “normal course”. Again, on these occasions any specifically assigned duties are documented in writing and agreed with the employee in advance of the project being undertaken.
  • Culture of openness - a slightly longer-term objective should be for employers to ensure that they promote an open culture where innovation and creativity is encouraged. This will help employees feel they will be given recognition (monetary or otherwise) for innovations and inventions if they are brought to the employer’s attention at an early stage. One way of helping promote this culture, is for businesses to hold regular innovation sessions with employees where ideas of how the business can perform better are discussed. In addition, ensuring recognition for innovation is given through pay increases and bonus payments will also help.
  • Flexible working – whilst most businesses actively promote flexible working, line managers and supervisors should ensure they are across what employees are doing both at work and when working from home. Arguments about ownership of inventions are much more likely to arise if employees consider they have been created in their “own time” despite the fact that such innovation falls squarely within the employee’s day-to-day job. Additionally, ensuring any employees in an inventive position are supplied with company owned IT equipment will help maximise the chances of any invention being created on company property – thus helping employers argue that they are the rightful owner of the invention.
  • Written policies – businesses should ensure that there are clear, written policies in place that deal with employee inventions. This includes ensuring that employment contracts provide that all inventions (including any technical and confidential information and “know-how” related to the invention) are owned by the employer. In addition, implementing procedures which make clear what employees should do when inventions are created will help to ensure inventions are discovered at an early stage, which will assist employers in retaining control of the patenting and general invention protection process.

Despite all of the above steps being taken, arguments about ownership of inventions will inevitably arise. When such disputes do arise, employers should seek specialist legal advice at an early stage. Such a course of action will aid employers in making decisions at the right time and for the right reasons and where appropriate, avoiding the time, cost and adverse publicity that a lengthy court case may bring.

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Article co-authored by Cara Aquilina.