Can an employee inventor add up the benefit of several inventions to show that the employer gained an outstanding benefit? On 26 October 2026 the Court of Appeal said yes. In Parsons v Convatec it also held that the employee's finances count when the court approves costs budgets.
The case is David Parsons v Convatec Ltd [2026] EWCA Civ 1357. Lord Justice Arnold gave the lead judgment. Lord Justice Baker and Lady Justice Asplin agreed. The court allowed two appeals from the Patents Court, one from Mellor J and one from Richards J.
- Under section 40(1) of the Patents Act 1977, the court can consider the benefit of more than one invention or patent together.
- Whether aggregation is right on the facts is left to the trial judge.
- Section 106(1) applies when the court approves costs budgets, so the parties' financial position counts at that stage.
- The court capped Convatec's budgeted future costs at £4 million.
- Arnold LJ said the legislation "is not fit for purpose" and needs rethinking.
The facts
Dr Parsons is an analytical chemist. He worked for Convatec, a medical products company, from 1991 to 2023. He says he devised inventions protected by seven patent families, with priority dates from November 2000 to May 2013. Some inventorship points are disputed.
He relies on estimated global sales of about $3.2 billion of products using the inventions up to 2021. At its highest, the claim is valued at about £366 million. Convatec disputes it in full. The claim began in September 2022. A 37 day trial is listed for February 2028.
What sections 39 to 41 say
Section 39 gives the employer ownership of inventions made in the course of an employee's normal or specifically assigned duties. Section 40(1) lets the court award compensation where the invention or the patent, or both, is of "outstanding benefit" to the employer. The court must have regard to the size and nature of the employer's undertaking. It must also be just to make an award. Section 41 then sets a "fair share" of the benefit.
Section 43(4) makes references to patents include foreign patents. Section 43(5A) excludes benefit after a patent expires. In section 40 proceedings, section 106(1) requires the court to consider all relevant circumstances, including the parties' financial position, when deciding costs.
The first appeal: adding up the benefit
Convatec pleaded that, as a matter of law, a claimant cannot rely on the collective benefit of patents or inventions that are not of outstanding benefit individually. Dr Parsons applied to strike out that plea. Mellor J declined to decide the point before trial.
The Court of Appeal held that this was a pure question of law. It did not depend on the facts and should be decided early to save cost. The court then decided it in favour of Dr Parsons.
- Singular includes plural. Section 6(c) of the Interpretation Act 1978 applies. "Invention" and "patent" in section 40(1) include the plural.
- No one to one link. Sections 14, 26 and 125 show that one patent can cover more than one invention. Section 43(4) means foreign patents count, so benefit from all patents for one invention can be considered together.
- Territory. A strictly territorial, patent by patent approach would be unworkable where a product is made in one country and sold in another.
- Overlapping patents. A compound patent, a formulation patent and a dosage patent may all protect one product. A breakthrough patent may only succeed commercially with a later improvement. The court saw no reason to force the benefit apart.
- Avoidance. Convatec's reading would let employers split inventions across patents so that none is of outstanding benefit.
Expiry dates still matter. The further apart the inventions are in time, the harder aggregation may be to justify. The trial judge must decide how far aggregation is appropriate. Dr Parsons must specify the combinations he relies on well before trial.
The second appeal: costs budgets
Dr Parsons has after the event insurance with a limit of £800,000 and a conditional fee agreement. Richards J approved future costs of about £4.7 million for Dr Parsons and £6.5 million for Convatec. He held that section 106 did not apply to costs budgeting.
Convatec relied on an unreported 2015 paper order of Floyd LJ in Shanks v Unilever. The Court of Appeal held that this single judge order, made in proceedings incidental to an appeal, was not binding.
On the wording, the court held that "determining … what costs … to award" covers every step on the path to deciding the amount of costs. Approving a costs budget is such a step. The court relied on section 106(2) and on the scale costs used in the Intellectual Property Enterprise Court.
The court set aside the judge's exercise of discretion and made its own order. It limited Convatec's budgeted costs to £4 million. It noted that the highest section 40 award so far is £2 million, in Shanks v Unilever [2019] UKSC 45. It also noted the different tax position of an individual and a company.
What the court did not decide
- It did not decide whether any invention was of outstanding benefit to Convatec.
- It did not decide whether aggregation is appropriate on these facts.
- It did not decide the inventorship disputes.
- It did not decide whether section 106 applies in the Court of Appeal itself.
Why it matters
The court noted that only two section 40 claims have ever succeeded: Kelly v GE Healthcare in 2009 and Shanks v Unilever in 2019. The outstanding benefit test is hard to meet for one patent. Aggregation lowers that hurdle for employees with a long run of related inventions, such as pharmaceutical and medical device scientists.
The costs ruling also matters. Employee claimants depend on insurance and funding. A capped costs budget makes the risk easier to insure.
How India, the US and Europe compare
India. The Patents Act, 1970 has no statutory scheme for employee inventor compensation. Ownership and any reward depend on the employment contract and a written assignment. Where an assignee files, section 7(2) requires proof of the right to apply. Rewards for employee inventors are therefore a matter of contract and company policy.
United States. Federal patent law has no general right to compensation for employee inventors. Ownership usually passes under a written assignment in the employment agreement. Some states limit how far pre invention assignment clauses can reach. California Labor Code section 2870 is a common example.
Germany. The Employee Inventions Act gives employees a statutory right to reasonable remuneration when the employer claims a service invention. Arnold LJ noted that the German scheme rewards far more employees than the UK one.
European Patent Convention. Article 60(1) EPC says the right to a European patent for an employee's invention is decided under the law of the state where the employee is mainly employed. National law therefore governs ownership. Compensation also depends on national law, but Article 60 does not decide it. France, for example, provides additional remuneration for inventions made under an employee's assigned mission.
Practical steps
- UK employers should keep records linking products, patents and inventors. Section 40 claims now look at the combined effect of related patents.
- Do not rely on splitting. Filing an invention across several patents will not by itself defeat a claim.
- Check contracts. Section 42 makes contract terms that diminish an employee's rights unenforceable in the UK. Under section 40(3), the compensation right does not apply where a relevant collective agreement provides compensation.
- Global groups with research staff in the UK, Germany, France and India should map which law applies to each inventor under Article 60 EPC and national law.
- Indian companies should use clear invention assignment clauses and a written reward policy. That supports proof of right under section 7(2).
Our patent services include ownership and assignment reviews for Indian and foreign filings. Foreign groups filing in India can see our guide to India patent filing for foreign applicants. Our note on invention records and metadata covers related evidence issues.
Frequently asked questions
What is employee inventor compensation in the UK?
Under section 40 of the Patents Act 1977, an employee can claim a fair share of the benefit where an invention or patent owned by the employer is of outstanding benefit to it. The court must also find an award just.
Can several patents be combined to show outstanding benefit?
Yes. In Parsons v Convatec the Court of Appeal held that the court can consider the benefit of more than one invention or patent together. Whether to do so is decided on the facts at trial.
Do employee inventors in India have a right to compensation?
The Patents Act, 1970 has no statutory compensation scheme. Rights depend on the employment contract, the assignment and any company reward policy.