In Shanks v Unilever, Lord Kitchin, giving the judgment of the Supreme Court, set aside the IPO hearing officer’s decision, upheld by Arnold J and the Court of Appeal, rejecting Prof Shanks’s claim for compensation from his employer, the research arm of Unilever, on grounds that patents for an electrochemical testing device he invented were of outstanding benefit to his employer within the meaning of section 40 of the Patents Act 1977.
Lord Kitchin found that the hearing officer had erred in principle in concluding that the patents were not of outstanding benefit in four ways.
Firstly, he had incorrectly identified the employer’s undertaking as the business of the entire Unilever group, rather than its research arm. The correct undertaking was the research arm’s business of generating inventions and patents and providing them to the group as a whole.
Secondly, his approach of weighing the benefit of the patents against the overall turnover and profits generated by Unilever’s worldwide business was misdirected. Rather, the proper analysis is to examine the extent of the benefit of the patent to the group and how that compares with the benefits derived from other patents arising from the activities of its research arm.
Thirdly, he failed to properly take into account the fact that the group’s overall size and success did not play a part in securing the benefit made from the patents.
Fourthly, despite disavowing this approach, he did assess the benefit derived from the patents simply by comparing it the group’s overall turnover or profits.
Lord Kitchin concluded that, given the Hearing Officer’s factual findings, the benefit derived from the Shanks patents was clearly outstanding when the correct legal approach was applied. Prof Shanks’s claim was therefore upheld.
In assessing the amount of compensation to be awarded to him as a “fair share” of the benefit, Lord Kitchin held that the effects of tax should be disregarded and that award should reflect the deleterious impact of time. He also found that Arnold J had been wrong to interfere with the hearing officer’s conclusion that 5% would have been a “fair share”, overturning his decision to reduce the figure to 3%. Professor Shanks was therefore entitled to £2m compensation.
Daniel Alexander QC and Jonathan Hill, instructed by Herbert Smith Freehills LLP, acted for Unilever.