Category Archives: Employment

Hopeless student IP disputes

Complaints between PhD students and their supervisors seem to be on the rise. IP Draughts has been instructed on several in recent years, both on behalf of the student and on behalf of the supervisor and university (but not all at the same time!)

Memories of these cases came flooding back when IP Draughts read the recently-published court judgment in the case of Ukoumunne v The University of Birmingham & Ors [2020] EWHC 184. This was a preliminary decision in the Intellectual Property Enterprise Court (a low-cost court for smaller disputes) on whether to strike out the former student’s claims against various supervisors, the university and an academic publisher.

Nearly all of the claims were struck out, and those that remained were in the “last chance saloon” – the claimant, who was not legally represented, was required to be more specific as to what she was claiming.

An interesting feature of this case for IP Draughts is the discussion of the difference between plagiarism (copying ideas, not attributing them, etc, in breach of academic norms) and infringement of copyright (typically copying lines of text rather than underlying ideas, though occasionally the organisation and structure of a work can be the subject of a copyright claim). In IP Draught’s experience, academics are sometimes unclear about the differences between plagiarism and copyright infringement. Plagiarism claims may be referred to an academic committee (eg if there is a claim of research misconduct) – this happened in the present case and the claims were dismissed.

Copyright claims are ultimately for a court of law to decide. The claimant in this case was unable to persuade the judge that she had an arguable case on copyright infringement. This claim was struck out, as were claims of negligence, racial harrassment, bullying and sex discrimination by the university .

The claimant also made allegations of breach of confidence in relation to her thesis, and breach of contract (seemingly the terms on which she became a PhD student, though this was unclear to the judge). On these allegations, the judge gave the claimant one last chance to improve her case (clarity of argument and supporting documents), failing which these claims would also be struck out.

IP Draughts wonders whether the claimant really thought she had a good legal case, or was just hoping for the best, and determined to pursue her dispute. He also wonders whether any attempt was made to negotiate a settlement or refer the matter to mediation. Sometimes, people just want to be heard, and there may be less expensive ways of enabling that to happen than going to court. The money saved might be better spent on a settlement with the student than on court fees and lawyers.

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Filed under Employment, Intellectual Property, Legal Updates, universities

Unlawful discrimination against copyright philosopher?

Under UK employment law, if you dismiss an employee for asserting their “religious or other philosophical belief[s]”, they may have a claim against you for unfair dismissal.

Question: if an employee (in this case, a market support assistant):

  • is “passionate about [her] belief in the right of an individual, not only to own, but to profit from and receive credit for their own work if they wished”
  • and as a result refuses to sign her employer’s standard intellectual property agreement
  • and (after an extended negotiation) the employer then dismisses her on notice, in accordance with the terms of her contract of employment
  • can she claim unfair dismissal on the grounds of discrimination against her philosophical beliefs?

Answer: no.

See the recent Court of Appeal decision in Gray v Mulberry Company (Design) Ltd [2019] EWCA Civ 1720 (17 October 2019).

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Outstanding, professor

The UK Supreme Court has been hearing some important cases recently. As well as the constitutional cases about Brexit, this week it has been hearing joined appeals in relation to FRAND licensing, including the Huawei v Unwired Planet case. It has been interesting to watch the live streaming of the case, in which a commercial silk, Mark Howard QC, has been conducting advocacy on an IP and competition law case.

Perhaps slightly overlooked among these heavy cases, today saw the publication of the Supreme Court’s decision in a case about employee compensation for patents. In Shanks v Unilever Plc & Ors [2019] UKSC 45, the newly-elevated Supreme Court justice (and former IP barrister) Lord Kitchin gave the judgment of the court.

Under UK patent law, an employee is entitled to compensation if they make an invention that is of “outstanding benefit” to their employer. See sections 39-43, Patents Act 1977 (the Act). For many years, this entitlement seemed more theoretical than real, with very few reported cases that actually awarded compensation. This all changed with the case of Kelly and Chiu v GE Healthcare Ltd in 2009. The two inventors in that case were awarded £1.5M between them. Overnight, employee compensation became an important aspect of UK patent law.

Then along came the Shanks case, which until the decision today had seemed to pour cold water on the idea of employees getting compensation, particularly if they worked for a large organisation. All the decisions of the lower courts in this case had rejected Professor Shanks’ claim for compensation. A main reason for the rejection was the wording of section 40 of the Act, which requires that the employee’s invention is:

(having regard among other things to the size and nature of the employer’s undertaking) of outstanding benefit to the employer…

The benefit in this case to the employer was determined to be around UK£24M, which is a substantial amount of money. But is it an “outstanding benefit”? Unilever is a huge multinational group of companies, and £24M is a drop in the ocean for a group of this size. The lower courts held that the benefit was not outstanding in relation to Unilever’s size.

Pausing for a moment, what did the legislature intend when they included the words quoted above in the Act? One may speculate that they were trying to ensure that a small financial benefit could be outstanding in the context of a small company. Whatever their intentions, multiple courts have held that a large amount of money could be considered not to be outstanding in the case of a very large company.

But today, the Supreme Court has overturned the lower courts and held that £24M could be considered an outstanding benefit, even to a company like Unilever.

There is much to be gleaned from today’s judgment about the thought process that should be applied when considering whether a benefit is outstanding. For practitioners engaged in arguing cases of this kind, the judgment provides useful material. But the high level point is that it is too simplistic just to compare the financial benefit from the invention (or, under the earlier law, from the patent) with the turnover of the employer group, when making that assessment, as the lower courts and hearing officer had appeared to do.

Other points of detail were considered in Lord Kitchin’s judgment. Can you take into account the time value of money (yes), should corporation tax be deducted when deciding what benefit the employer has had (no), and should the commercial strength of the employer in making favourable licensing deals result in a reduced percentage to the employee (not in this case).

The hearing officer came up with a figure of 5% of the benefit received by the employer, and Lord Kitchin followed his approach, rejecting Arnold J’s reduction to 3% (the percentage awarded in Kelly and Chiu v GE Healthcare). Allowing for the time value of money and inflation, Lord Kitchin awarded Professor Shanks compensation of £2M.

The invention in this case was concerned with test kits, such as those used by diabetics to measure blood glucose levels. Professor Shanks had built a prototype, if not quite in his garden shed, at least at home, using parts from his daughter’s toy microscope set. This happened in the early 1980s. It has taken over 35 years for him to be awarded compensation – a nice retirement bonus.

IP Draughts usually avoids the hard sell in his articles. But if you would like to instruct his firm in claiming or defending a case for employee compensation, he would be pleased to hear from you.

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Post-employment restrictions on scientists

The judge referred to this leading textbook in his judgment

The case of Invista Textiles (UK) Ltd & Anor v Botes & Ors [2019] EWHC 58 (Ch) (Birss J) has now been published. It is a good illustration of how difficult it is for an employer to impose post-termination restrictions on scientists.

General context

Disputes with ex-employees tend to take several, related forms. They include:

  • has the individual taken documents that belong to the employer;
  • has the individual used the employer’s trade secrets; and
  • has the individual become involved in a competing business, in breach of a non-compete clause in their contract of employment

Defences to such actions tend to include:

  • the information that the individual is using is part of their “general skill and knowledge” rather than their employer’s trade secrets
  • the non-compete clause is “in restraint of trade” and therefore unenforceable, e.g. because it is too widely drawn in terms of territory, field, or duration, and doesn’t focus on a legitimate interest of the employer (such as to protect the employer’s trade secrets)

Some of the leading cases in this field concern obvious wrongdoing with clear evidence, e.g. a salesman taking a list of customers with him when he leaves the company, or someone setting up a rival business in the same town in breach of a non-compete clause. In other words, many of the cases are about local businesses and sales activities.

When IP Draughts has drafted non-compete clauses for high-tech clients, it has sometimes been difficult to apply the case law to the facts of those clients’ employees. For example, in the case of a molecular scientist working for a biotech company, the company’s main competitors may be based in another continent. Case law about territorial restrictions of a few miles is of limited relevance. There has been very little English case law about scientific staff working for a technology-based, internationally-focussed company.

Background to this case

Invista is part of a large, international group that owns the Lycra trade mark. The first three defendants were scientists employed in Invista’s Sustainability Group (SG). The SG was researching the possibility of genetically engineering microorganisms for use in the production of polymers such as nylon, as an alternative to generating polymers from oil.

After the defendants left Invista, their employer discovered that they might have taken documents relating to their employment. Invista sought an interim injunction against them, which was compromised on terms that allowed Invista to conduct forensic searches of their laptops and other devices. Thousands of documents were discovered, many of which had been deleted (and emptied from the deleted box) from the computers but which could be recovered from the hard drives using a special program. There was no evidence that the defendants had sought to recover them. Some of the documents were on a memory stick that one of the defendants had used at a conference while employed by Invista. The memory stick was found in a barn at the defendant’s property; the defendant had forgotten that she had it. In some cases the documents were password-protected, and the evidence was that the password had been forgotten.

Retention of documents

Part of the case is about whether the defendants had wrongfully retained property belonging to Invista, after leaving its employment. Birss J found that a small number of documents had been wrongfully retained out of the thousands that were recovered from computers through forensic techniques.

The impression given by his judgment is that these were technical breaches rather than deliberate wrongdoing. Essentially, the judge found the defendants to be honest, despite the apparent “smoking gun” of Invista documents being found on various devices.

Misuse of confidential information

Birss J considered the obligations of confidentiality that were provided for in the contract of employment, as well as the general duties of confidentiality of an ex-employee towards their former employer.

He thought the wording of the written confidentiality obligations was far too wide to be enforceable against an ex-employee, as it was not limited to trade secrets. For example, he focused on clause 1.1.2 of the contract, which formed part of the definition of the employer’s confidential information and was drafted very broadly:

Business methods and processes, technical information and know how relating to the Employer’s business and which is not available to the public generally, including inventions, design, programs, techniques, data base systems, formulae and ideas.

Together with other clauses (e.g. clause 1.2 which required the employee not to use the employer’s confidential information after termination of the contract) this was too wide to be enforceable.

He also found that none of the information highlighted by the claimants was genuine trade secret-type information. Their best shot was some Powerpoint slides.

His conclusion:

Therefore I dismiss the case based on misuse of confidence either in contract or in equity altogether.

Non-compete clauses

The contract included various obligations not to work for a Competing Business or solicit staff, customers, etc, for a period of 3 months after termination of the employment. Some key definitions in this part of the contract included:

“Competing Business” means any entity or persons engaged in or about to become engaged in research, development, production, marketing or selling of a competing product(s).

“Competing Products” means product(s) process(es) or service(s) with which the employee has worked within five years preceding termination of such employment, or about which the employee has acquired the employer’s trade secret, technical or non-technical information.

Birss J considered that these definitions were very broad. In relation to the obligation not to work for a competitor, he considered:

All this clause achieves when applied to employees like the individual defendants is to prevent them from exercising the very same skills they were hired for in the first place for three months post-employment. That does not benefit Invista at all. I find that the clause, in its operation as it operates after the employment has ceased is an unreasonable restraint of trade. The period in the clause is just a relatively short period to try and make an unreasonable clause seem more reasonable. That is not a justification.

In relation to the non-solicitation part of the clause, he found that the first defendant had breached it by seeking to recruit the second and third defendants to her new business during the 3 month period.

So, he found a few technical breaches. But he decided not to order an enquiry as to damages:

Overall, I will not order an inquiry as to damages in relation to the proven breaches of contract. It would be entirely disproportionate. There is no justification for it. There is no evidence any of these activities cause any substantive or quantifiable loss to Invista. I am prepared to hear submissions about what sum by way of damages (if any) ought to be awarded for the proven breaches, including the failure to return documents in the Chen Library, at the hearing to deal with the consequences of this judgment but that is as far as it will go.

Comments

This case is interesting to IP Draughts because it sheds a light on the enforceability of non-compete clauses in the case of scientists working for a technology-based company. Much of the case law in this field concerns very different types of industry and employee role.

IP Draughts has tended to advise companies to limit their non-compete obligations to 6 months after termination. In this case, it seems the company’s lawyers took an even more cautious approach, going for 3 months, but the judge decided that even this was too long when the obligations were too broad in scope.
There are various other techniques for improving the enforceability of these clauses, including explicitly limiting their post-termination application to trade secrets. Not all of those techniques seem to have been used in the contract under discussion in this case.

IP Draughts doesn’t recall a case of this kind where the judge’s sympathies lay with the defendants. At one point, when discussing whether he believed the witnesses, he commented on the defendants of “being sued personally by a major multinational corporation which has deployed all the resources at its disposal to do so. The strain that that would place on anyone would be significant.”

In IP Draughts’ view this is a significant judgment on non-compete clauses for scientific staff. It will be interesting to see if it is appealed.

tailor

Tailor-made is best

IP Draughts understands that the UK Supreme Court heard a separate case about non-compete clauses earlier this week, and he looks forward to reading the judgments in due course, to see whether they give further guidance on this subject.

In light of these cases, including any appeal in the Invista case, high-tech (including life science) companies may wish to review the non-compete clauses in their contracts of employment, and obtain specialist advice on whether any revisions are appropriate.

UK companies that have US parents (as in this case) may wish to “push back” against using template wording provided by the parent company for use by all employees in the group, and instead draft tailor-made clauses in light of UK case law.

 

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