Section 41: Amount of compensation

Sections (41.01 - 41.11) last updated: January 2020.

41.01

This is the third of the group of sections relating to inventions made by employees, and concerns the amount of compensation to be awarded to an employee inventor by the court or the comptroller in proceedings under s.40(1) or (2), see 40.04-15 It also makes provision for further applications under s.40 after refusal to order an award of compensation, for variation of such an order and for enforcement of such an order made by the comptroller. This section was amended by the Patents Act 2004 in consequence to the changes made to section 40 to allow compensation to be awarded in respect of all outstanding benefits deriving from a patented invention, applying to patent applications made from 1 January 2005 onwards (see 40.02).

41.02

For the applicability of s.41 and interpretation of certain terms used therein, see 39.01-04.

Section 41(1)

An award of compensation to an employee under section 40(1) and (2) above in relation to a patent for an 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 any of the following ­ (a) the invention in question; (b) the patent for the invention; (c) the assignment, assignation or grant of ­ (i) the property or any right in the invention, or (ii) the property in, or any right in or under, an application for the patent, to a person connected with the employer.

Section 41(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.

Section 41(3)

Where the Crown , United Kingdom Research and Innovation or a Research Council in its capacity as employer assigns or grants the property in, or any right in or under, an invention, patent or application for a patent to a body having among its functions that of developing or exploiting inventions resulting from public research and does so for no consideration or only a nominal consideration, any benefit derived from the invention, patent or application by that body shall be treated for the purposes of the foregoing provisions of this section as so derived by the Crown, United Kingdom Research and Innovation or the Research Council as the case may be). In this subsection “Research Council” means a body which is a Research Council for the purposes of the Science and Technology Act 1965.

Section 41(4)

In determining the fair share of the benefit to be secured for an employee in respect of 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 41(5)

In determining the fair share of the benefit to be secured for an employee in respect of an invention which originally belonged to him, the court or the comptroller shall, among other things, take the following matters into account, that is to say (a) any conditions in a licence or licences granted under this Act or otherwise in respect of the invention or the patent for it; (b) the extent to which the invention was made jointly by the employee with any other person; and (c) the contribution made by the employer to the making, developing and working of the invention as mentioned in subsection (4)(d) above.

Section 41(6)

Any order for the payment of compensation under section 40 above may be an order for the payment of a lump sum or for periodical payment, or both.

41.03

s.43(7) is also relevant.

An award of compensation should be such as to secure for the employee who made the invention a fair share (having regard to all the circumstances) of the benefit derived or reasonably expected to be derived by the employer. Benefit means benefit in money or money’s worth and, where the employer has died, is determined in accordance with s.43(5) (see 40.07).

41.04

Where the property or any right in the invention or any patent for it or application for such a patent has been assigned or granted to another person or body, s.41(2) and (3) may be applicable to assessment of the benefit to the employer. Subsection (2) applies where it has been assigned or granted to a person connected with the employer, The effect of this subsection is that the award is based on the benefit that the employer would have been expected to derive from the transaction had that person not been connected to the employer. The test for determining whether the other party is connected to the employer is set out in s.43(8).

The Supreme Court in Shanks v Unilever [2019] UKSC 45 held that, although s.41(2) says that it has effect for the purposes of s.41(1), it must also have effect for the purposes of s.40 for the legislative scheme to operate effectively.

41.04.1

The Court of Appeal in Shanks v Unilever [2011] RPC 12 held that “that person” in s.41(2) refers to the actual assignee, with the same attributes as the real person, but without the connection to the employer. Therefore, if the actual assignee had not fully exploited the invention or patent, then this would be reflected in the value of the compensation. This overturned the decision of the Patents Court (Shanks v Unilever [2010] RPC 11), which had held that the assessment of this hypothetical benefit should be based on the premise that the transaction with “that person” was with a notional non-connected counterparty operating in the appropriate market at the appropriate time. At the same time, the Court of Appeal held that the compensation should take account of the actual benefit that the assignee had derived from the patent or invention to date, together with the likely future benefit if the patent is still in force. The Court rejected the argument (from the employer and assignee) that the compensation should be based on what the likely value of the transaction would have been on the open market at the time it was made, without the benefit of hindsight. It was considered that this would lead to an unjust result as in many cases the value of a patent is not known at the time of assignment.

41.05

Matters to be taken into account in determining a fair share of the benefit are set out, where the invention has always belonged to the employer, in s.41(4) and, where the invention originally belonged to the employee, in s.41(5). Kelly & Anor v GE Healthcare Ltd [2009] EWHC 181 (Pat), [2009] RPC 12 was the first successful s.40 employee compensation claim in the UK. In this case, having determined the benefits of the patents to the company under the pre-2005 form of s.40, Floyd J took each of the factors set out in s.41(4) into account before deciding what was a fair and just share of the benefit for each of the employees concerned.

41.06

The court or the comptroller may order payment of a lump sum and/or periodical payment as compensation, to be paid by the employer. For enforcement of orders made by the comptroller for such payment, see 41.11.

Section 41(7)

Without prejudice to section 32 of the Interpretation Act 1889 (which provides that a statutory power may in general be exercised from time to time), the refusal of the court or the comptroller to make any such order on an application made by an employee under section 40 above shall not prevent a further application being made under that section by him or any successor in title of his.

Further applications under s.40

41.07

The refusal of the court or the comptroller to order the payment of compensation under s.40 does not prevent the employee or any successor in title from making a further application under s.40. The reference to the Interpretation Act 1978 in s.41(7) replaced the previous reference to the Interpretation Act 1889, this amendment having been effected by s.25(2) of the 1978 Act.

Section 41(8)

Where the court or the comptroller has made any such order, the court or he may on the application of either the employer or the employee vary or discharge it or suspend any provision of the order and revive any provision so suspended, and section 40(5) above shall apply to the application as it applies to an application under that section.

Variation of order for payment of compensation

41.08

Where the court or the comptroller has made an order for the payment of compensation under s.40, the employer or the employee may under s.41(8) apply for any provision of the order to be varied, discharged, suspended or revived. The application may be made to the court or to the comptroller.

41.09

PR part 7, r.51(3)(a) is also relevant.

Such an application to the comptroller under s.41(8) should be made on Patents Form 2 accompanied by a copy thereof and a statement of grounds in duplicate. This starts proceedings before the comptroller, the procedure for which is discussed at 123.05 – 123.05.13 Documents filed at the Office in connection with the application are not open to public inspection unless the comptroller otherwise directs.

41.10

The comptroller may, under s.40(5), decline to deal with the application made under s.41(8) (see 40.17-18).

Section 41(9)

In England and Wales any sums awarded by the comptroller under section 40 above shall, if the county court so orders, be recoverable by execution issued from the county court or otherwise as if they were payable under an order of that court.

Section 41(10)

In Scotland an order made under section 40 above by the comptroller for the payment of any sums may be enforced in like manner as an extract registered decree arbitral bearing a warrant for execution issued by the sheriff court of any sheriffdom in Scotland.

Section 41(11)

In Northern Ireland an order made under section 40 above by the comptroller for the payment of any sums may be enforced as if it were a money judgment.

Section 41(12)

In the Isle of Man an order made under section 40 above by the comptroller for the payment of any sums may be enforced as if it were a judgement or order of the court for the payment of money.

Enforcement of order made by the comptroller

41.11

Orders made by the comptroller for the payment of compensation under s.40 may be enforced in different parts of the UK as set out in s.41(9) to (12). Subsection (12) was added by S.I. 1978 No. 621, which has since been replaced by S.I. 2013 No. 2602.