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Cite as: [2015] EWCA Civ 787

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Neutral Citation Number: [2015] EWCA Civ 787
A3/2014/2556

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION (PATENTS COURT)
(MR JUSTICE ARNOLD)

Royal Courts of Justice
Strand
London, WC2A 2LL
17 June 2015

B e f o r e :

LORD JUSTICE FLOYD
____________________

IAN ALEXANDER SHANKS Appellant/Claimant
-v-
UNILEVER PLC & ORS Respondents/Defendants

____________________

(Computer-Aided Transcript of the Stenograph Notes of
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____________________

Mr Patrick Green (instructed by Beresford & Co) appeared on behalf of the Applicant
The Respondents did not attend and were not represented

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Lord Justice Floyd: 1. This is a renewed application for permission to appeal from the judgment of Arnold J dated 23 May 2014 and his orders of 23 May and 15 July 2014 which he made in consequence of his judgment. By the 23 May order he dismissed an appeal in an employee inventor's compensation case brought by the applicant, Professor Ian Shanks, from a decision of Mr Julian Elbro, a hearing officer acting on behalf of the Comptroller of Patents dated 21 June 2013. This is therefore a second appeal. The provisions of CPR 52.13(2) do not apply to it directly. Nevertheless it is material to bear in mind that the claim has already been considered twice by specialist tribunals, namely the IPO and the Patents Court.

  1. Professor Shanks made the invention with which this case is concerned whilst employed by Unilever UK Central Resources Limited ("CRL"). The invention is concerned with a test for determining the glucose level in blood. This is useful in the monitoring of patients with diabetes.
  2. CRL is a wholly owned subsidiary of Unilever Plc. It was not a trading company but employed all Unilever's UK-based research staff. Blood testing kits were not a market in which Unilever had any existing presence. Thus, once the patent was granted, Unilever exploited the invention by granting lump sum licences to the major players in the field of blood test kits. The hearing officer found that the benefit obtained by Unilever from the exploitation of the invention was some £24 million before tax, but nevertheless concluded that the invention was not of outstanding benefit to the company.
  3. The hearing officer expressed his conclusions on outstanding benefit at paragraphs 222 and 223 of his decision. He said this:
  4. "222. Considering the totality of the evidence, I was left with a clear impression. The benefit provided by the Shanks patents was a substantial and significant one in money terms – the sort of sum Unilever would, on the evidence, worry about (cf. Project Hyacinth). Furthermore, in comparison to the benefit from other patents to Unilever, from the evidence before me it does, in Mr Emmanuel's words 'stand out'. But Unilever makes profits at an order of magnitude greater on other inventions – albeit primarily by manufacture and at a much lower rate of return than was provided by the Shanks patents. Further, this is not such a case as Kelly, where Floyd J held that without the patents in that case, Amersham would have faced a crisis. There was no suggestion from either party that the Shanks patents were crucial to Unilever's success.
    223. In my view, taking account of the size and nature of Unilever's business, the benefit provided by the Shanks patents falls short of being outstanding."
  5. In order to succeed on the appeal, it is necessary for Professor Shanks to overturn the current findings on outstanding benefit. As both Arnold J and Lewison LJ when refusing PTA on the papers held, whether an invention is of outstanding benefit is an evaluative judgment of the kind which appellate courts are very slow to interfere with in the absence of any clear error of principle by the judge, or in this case the hearing officer.
  6. On this renewed application, Mr Green tackles that observation head-on. He says that the hearing officer and the judge applied too severe a test of outstanding benefit. He says that this is a case where all the identifiable factors pointed in favour of a finding of outstanding benefit. The evidence, as the passage which I have quoted from the hearing officer's judgment shows, established that the invention stood out. The one factor he submits which told in the end against Professor Shanks was the fact that Unilever made much greater profits on other inventions, albeit at a much lower rate of return.
  7. Mr Green points to the fact that the invention, he submits, did not lie at the core of Professor Shanks' contractual duties; it was made, he tells me, at Professor Shanks' home using his daughter's chemistry kit. The invention was made over and above the full discharge of his contractual duties which were centred on inventions concerned with process control in manufacturing.
  8. Mr Green also attaches importance to a dictum of Jacob LJ in this very case, when it came before this court, consisting of Longmore, Jacob and Kitchin LJJ (see Shanks v Unilever Plc [2010] EWCA Civ 1283; [2011] RPC 12). Counsel for Unilever in that case had drawn attention to the very large profits which Unilever made on their business. Jacob LJ observed at paragraph 17:
  9. "Unilever were (and according to Mr Alexander still are) contending that although £23m royalties might be a lot for some companies, by Unilever standards it is not a lot and so the patent was not of outstanding benefit to Unilever. He pointed to the words in s.40(1) 'having regard to the size and nature of the employer's undertaking', suggesting they meant that inventor/employees of big companies had to show a larger benefit to their employer than inventor/employees of smaller companies. I am far from convinced that Parliament meant that inventor/employees of large companies should get less or no compensation for a particular invention compared with what they would get if they had been employed by a small company. It may indeed be the other way round in that a large payment may be too much for a small company to able to afford and that was what Parliament had in mind..."
  10. In his skeleton argument, Mr Green characterises this as the "too big to pay" argument. The hearing officer did address that aspect of the case in paragraphs 201 to 208 of his decision, quoting directly from the passage of Jacob LJ's judgment to which I have just referred. In paragraphs 207 and 208 he says this:
  11. "207. I agree with Mr Green to the extent that I think it is too simplistic to simply look at overall turnover, or profits, of an employer's undertaking and then simply state that a given benefit is a small percentage of that. At the same time, it is necessary, as the statute says, to take account of the size and nature of the employer's undertaking. Different undertakings will have different leverage to be able to make more or less benefit out of their activities. I see this as being illustrated by Mr Emmanuel's comment in evidence that £50,000 would be an excellent return for a small company to get from licensing its patents. Clearly, that would not be an excellent return for Unilever, which by its nature, for example by being able to contemplate greater expenditure on litigation, is able to get higher returns in negotiations than a smaller entity would, as Mr Emmanuel conceded. So it seems totally logical to me that a given monetary benefit might be outstanding for a small entity, but not for a larger one.
    208. Ultimately, I do not think this reduces to a simpler test than that laid down in the statute – it is a matter of looking at the benefit in the overall context and determining whether in view of all the facts the benefit to the employer was outstanding. Sometimes that might be because of the benefit being in fact a large portion of the employer's profits or turnover. Other times it may be possible to see the outstanding nature from the effect it had – for example in Kelly, where Floyd J is able to determine the benefit is outstanding before determining its precise value in money terms."
  12. Arnold J also considered those passages and at paragraph 71 said this:
  13. "In my judgment it is clear both from this passage and from his subsequent reasoning leading to his conclusion in [222] that the hearing officer did not make the error he is accused of. He did not decide that Unilever was too big to pay or that no benefit could be outstanding however large because of the size and nature of Unilever's business. Nor did he decide that £24.5 million was not an outstanding benefit simply because it was an arithmetically small sum compared to Unilever's profits over the same period. On the contrary, the hearing officer undertook a multi-factorial assessment which including having regard to the size and nature of the relevant undertaking, as the statute required him to do."
  14. Mr Green submits that, nevertheless, when one stands back from this case all the factors pointed in favour of the existence of an outstanding benefit but for the relative size of the Unilever organisation. He described it as, I think, a paradigm case of an outstanding benefit and he questioned what more it would be necessary for an inventor to do to establish the existence of outstanding benefit if Professor Shanks had not succeeded in doing so in the present case.
  15. I have wavered on the issue of granting permission, but in the end I have decided that it would be appropriate to do so. The Court of Appeal has not previously looked at these important provisions in the Patents Act 1977 and all the existing authority is authority at first instance. Secondly, it seems to me that there is at least some merit in Mr Green's point that, however one slices it up, there was little to be said on Unilever's side beyond the size of their overall organisation.
  16. I have been concerned that large sums in costs will have been expended thus far in the litigation and that it does no kindness to either side by extending the litigation for one further stage. But it seems to me that the issues involved in this case are of sufficient importance and the merits are sufficiently arguable to justify granting permission to appeal and I do so despite the fact that the case has been reviewed once by Arnold J.
  17. Professor Shanks seeks a protective costs order, but both parties have I think invited me not to resolve that question today and I will hear counsel on the appropriate directions to give.


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