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Creativity, or an unexpectedly costly surprise?

10th October 2018

Creativity, or an unexpectedly costly surprise?

Creativity, innovation and continuous improvement are buzzwords in almost every organisation, as businesses seek to identify something that will give them a competitive edge and ultimately improve their profitability.

Some companies take a structured approach to generating new products and designs, with a dedicated research and development team and active management of their intellectual property assets – from patents and trade marks to designs and copyright.  Universities, business parks and professional firms operate incubator facilities to encourage innovative startups.  In other businesses, ideas might be collected and developed informally via a suggestion box or during a brainstorming meeting at a staff away day.

‘If your business is innovative, but you do not have processes and procedures for capturing and managing your intellectual property then you could find yourself facing a costly surprise in the future.’

Where do your inventions come from?

If you engage external consultants or outsourced contractors to work on projects, then any consultancy agreement or outsourcing contract will need to be clear that ownership of any intellectual property created during the engagement will be owned by the business and not by the third party.

If you are involved in a joint venture, whether with a startup or a large organisation, it is important to be clear about what each party will contribute to the venture, who will own any intellectual protection which is created and how each party will benefit.

Employees who work directly in research and development functions are paid to innovate and their contracts of employment should specifically address the creation of intellectual property.  Where they come up with something new which has potential commercial value, it will be the employer who will invest in obtaining a patent or registering a design and so they will wish to secure the financial returns.  Employment contracts need to spell this out clearly and correctly.

Meanwhile, staff who work in a whole range of other functions can also come up with good ideas which may prove of immense value to their employers. It is rare that the conditions of employment for a receptionist or warehouseman would cover such a situation.

A right to claim a share of profits

Any inventor of something special or out of the ordinary for their employer can make a claim for a share of any profits generated by a successful patent or a registered design.  Although it does not extend to copyright, it could arise where the copyright in a computer programme or app is protected by a business method patent.

An employee or ex-employee can make a claim to either a court or the UK Intellectual Property Office and there is no time limit to make such a claim. The Patents Act has its own definition of ‘employee’, so you may need to consult a solicitor to check whether a subcontractor or joint venture partner would be considered as an ‘employee’.

In one such case, the inventor of a radioactive imaging agent went to court over 20 years after he had retired and was awarded £1million compensation for his contribution to this invention.  He had been able to show that the product cost £2.4million to develop, yet its total value in sales had been over £1.3billion.

In 2019 the Supreme Court will consider a claim against Unilever, in which it will have to rule on what ‘outstanding benefit’ or ‘out of the ordinary’ means. The Court will determine if large companies are ‘too big to pay’ these sorts of outstanding benefit claims or not after a case was brought by Professor Shanks who claims his biosensor invention for monitoring glucose, insulin or immunoglobulin levels in diabetics has had an outstanding benefit to Unilever of £24.5million.

A calculable risk

All businesses need to innovate to survive, and so it makes sense to ensure that you receive the maximum benefit from those innovations.  It is important to plan ahead to cater for the situation where there has been an accidental invention.

The right to make these claims has existed for over 40 years, and some inventors have benefited by up to one third of the invention’s value.

It is rare for cases to reach the stage where a court gives a final public judgment on both liability and the amount of compensation.  Many such claims are often settled in mediation where the outcome will remain confidential to the parties.  It is only by consulting an expert solicitor that you can gauge both the risk and the amount of any potential exposure.

Our solicitors can help you to avoid this by reviewing your commercial contracts and employment contracts and policies to ensure that the intellectual property rights in any invention stays with the business. If you should receive a claim then our dispute resolution team will help you to resolve the matter as swiftly as possible.


The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.