Ownership of Inventions and Compensation

Under UK law, ownership of inventions by employee inventors is determined by statute (Patents Act 1977) which overrides contract law and specifically any items in contracts of employment. In the UK, contract law is therefore generally only relevant in determining ownership of inventions made outside of employment, e.g. by consulting engineers or scientists.

For a UK-resident employee inventor, the UK Patents Act states that the first owner of an invention made by that employee will be the employer, if the invention was made during the course of the employee’s normal duties, or during course of duties specifically assigned to the employee, Section (s.) 39(1)(a) Patents Act 1977 (PaA). These provisions apply provided that the duties were such that an invention might reasonable be expected to result.

In addition, UK-resident employee inventors in more senior positions, e.g. directors, may be considered to have a special obligation to further the interests of their employer. As a consequence, any invention made by such employees in the course of their duties will belong to the employer as the first owner of an invention, s.39(1)(b) PaA.

If the above circumstances do not apply, the first owner of an invention will be the inventor.

The UK Patents Act also allows non-employed inventors to assign any future patent rights in an invention before an invention is made, s. 7(2) PaA. For example, a contract may assign to an employer any future patent rights that arise from research work commissioned by a non-employee such as a PhD student.

The first owner of an invention may subsequently assign the invention to other parties.

What are the rights of an employee inventor?

A UK-resident employee inventor may be entitled to additional compensation for an invention that is of outstanding benefit to the employer, s.40 PaA. The rights for the invention may have passed to the employer because one of the above three circumstances apply. Alternatively, the rights may have been assigned from the employee to the employer, or the employee may have provided the employer with an exclusive licence for an application or a patent for the invention, s.40(2)(b) PaA.

In order for such an employee inventor to be entitled to compensation the following conditions must apply:

(a) a patent must have been granted for an invention;

(b) the invention or the patent must be of outstanding benefit to the employer; and

(c) by reason of those facts it is just that the employee be awarded compensation

To decide if an invention is of outstanding benefit to an employer, a court will consider the size and nature of the employer’s business. A court will determine the amount of the benefit that is attributable to the invention and then decide whether this benefit is outstanding in the circumstances.

The English High Court has only ever awarded compensation in one case, Kelly and Chiu v GE Healthcare. In that case, two co-inventors and former employees of GE Healthcare were awarded £1.5 million in recognition of their contribution to an invention of a diagnostic tool for heart defects, although this award was mainly negated by the legal costs payable by the successful inventors.