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Compensation for a Patent

Written by Michael Coyle on 04 March 2009

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The Law on inventor compensation

Section 40 (1) of the Patents Act 1977 provides for compensation of employees for certain inventions where it appears to the court or the comptroller for which a patent has been granted, that the patent is (having regard among other things to the size and nature of the undertaking) is of outstanding benefit to the employer and that by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer, the court or the comptroller may award him such compensation of an amount determined under section 41 of the Act. Section 40 has been amended by the Patents Act 2005 so as to make compensation payable when the invention (and not just the patent) has been of outstanding benefit. The amendments only affect patents applied for after 1st January 2005.

Section 7 of the Patents Act determines who is the actual inventor and refers to the inventor as the -actual deviser of the invention. From this actual denotes a contrast with a deemed or pretended deviser of the invention. It means, as Laddie J said in the University of Southampton the natural person who -came up with the inventive concept-

It is not enough that someone contributed to the claims, because that may include nonpatentable integers derived from the prior art but the -contribution must be to the formulation of the inventive concept-

Section 40 was drafted in the knowledge that it would provide the possibility of compensation to actual inventors, but not to those who merely contribute to the invention. Section 41 expressly contemplates that there will be contributions from employees who are not joint inventors. Section 39 deals with ownership of inventions as between employer and employee. In the course of the normal duties of is not limited to the day to day work of the employee. So an invention may still belong to the employer even if it represents a departure from what he is expected to be working on. In LIFFE Administration & Management v Pinkava [2007] RPC 30, Jacob LJ said -As between the employer and employee the primary source of a duty are the terms of the contract. What is it that he is employed to do must be the key question. Take for instance a research chemist working on a cancer cure for the last 10 years. Suppose he came up with a cure for arthritis. He could not seriously contend that he owned the invention because he was day-to-day working on a cancer cure. His duty as a research chemist is clearly wider than his day-to-day work.

What is outstanding benefit

Only under section 40 must an employee show -outstanding benefit-. Under section 40(2) the employee need only show that the benefit received from the contract of assignment is -inadequate- in relation to the benefit derived by the employer from the patent. The act though is silent as to what constitutes -outstanding benefit-. In Memco-Med Aldous J said -The word -outstanding- denotes something special and requires the benefit to be more than substantial or good. I believe that it is unwise to try and redefine the word -outstanding- Courts will recognise an outstanding benefit when it occurs.-

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