Court of Appeal Rules on David Parsons v Convatec Patent Dispute

What is the Parsons v Convatec case about?

In David Parsons v Convatec Limited [2026] EWCA Civ 1357, handed down on 26 October 2026, the Court of Appeal considered two appeals arising from a claim brought by Dr David Parsons, an analytical chemist who worked for Convatec from 1991 to 2023.

Dr Parsons alleges that inventions he devised during his employment were patented by Convatec and generated substantial commercial benefits for the company. His claim concerns seven patent families, with estimated global sales of products embodying the inventions reaching approximately $3.2 billion by 2021. The claim has been valued at up to £366 million, although Convatec disputes it in its entirety.

The appeals concerned the interpretation of sections 40 and 106 of the Patents Act 1977. Section 40 addresses compensation for employees whose patented inventions provide outstanding benefit to their employers. Section 106 concerns costs and expenses in proceedings under section 40.

What did the court decide on patent benefits?

The first appeal concerned whether a court can consider the combined benefit of multiple inventions or patents when deciding whether an employer has obtained an outstanding benefit under section 40(1) of the Patents Act 1977.

Convatec argued that a claimant could not rely on the collective benefit of patents or inventions if none provided outstanding benefit individually. Dr Parsons challenged that interpretation, arguing that the legislation allowed the court to assess the benefits together.

The Court of Appeal accepted Dr Parsons’ interpretation. Lord Justice Arnold, giving the leading judgment, concluded that the statutory wording did not require the court to assess each invention or patent in isolation. The court allowed the appeal and ordered that the relevant parts of Convatec’s defence be struck out.

The ruling resolves an important legal issue before the substantive compensation claim proceeds to trial. It does not, however, determine whether Dr Parsons is entitled to compensation or the amount of any award.

Why were costs budgets disputed?

The second appeal concerned whether section 106(1) applies when a court approves costs budgets, rather than only when it makes an order awarding costs.

Section 106(1) requires the court, when deciding whether to award costs and what costs to award, to consider all relevant circumstances, including the financial position of the parties.

Dr Parsons argued that the provision should apply during costs budgeting because the potential exposure to a large adverse costs order could deter an employee from pursuing a compensation claim. He had obtained after-the-event insurance, with an initial cover limit of £800,000, and was also proceeding under a conditional fee agreement.

At the costs management stage, Dr Parsons had incurred just under £2.7 million in costs and sought approval for a further £5.3 million. Convatec had incurred approximately £4.2 million and sought approval for £10.2 million in future costs. The High Court approved future costs of approximately £4.7 million for Dr Parsons and £6.5 million for Convatec, but held that section 106 did not apply to costs budgeting.

The Court of Appeal disagreed with that interpretation. It held that approving costs budgets is an important step in determining what costs may ultimately be awarded and therefore falls within section 106(1).

Why was Convatec’s costs budget capped?

Having concluded that section 106 applies to costs budgeting, the Court of Appeal also considered whether the High Court judge had properly exercised his discretion.

The court found that the judge’s assessment had been affected by his earlier conclusion that section 106 did not apply. It also found that insufficient consideration had been given to the effect of Convatec’s approved costs budget on Dr Parsons’ ability to pursue the claim and obtain a meaningful benefit if successful.

The Court of Appeal rejected the original proposals advanced by Dr Parsons, including limiting Convatec’s costs to the amount remaining under his insurance cover or to one-third of his own budget. It nevertheless concluded that a fair order was required, taking account of the circumstances of both parties.

The court accepted a proposal to limit Convatec’s budgeted future costs to £4 million. It considered this figure more reasonable for Convatec while providing greater predictability for Dr Parsons. The court therefore allowed the second appeal and ordered that Convatec’s budgeted costs be limited to £4 million.

What does the judgment mean for employees and employers?

The decision provides important clarification for employee-inventor compensation claims. It confirms that the court is not necessarily restricted to assessing the commercial benefit of each invention or patent separately when applying section 40 of the Patents Act 1977.

It also confirms that section 106 can be relevant at the costs-budgeting stage. In appropriate cases, the court must consider the financial position of the parties when exercising its discretion over costs in employee-inventor proceedings.

The judgment does not guarantee that employees will receive compensation or that an employer’s costs will always be capped. The court must still consider the relevant circumstances of each case, including the nature and scale of the claim and the work reasonably required to defend it.

The Court of Appeal also expressed concern about the length and complexity of the proceedings. The claim had been commenced in September 2022 and was listed for a 37-day trial in February 2028. The court observed that uncertainty in the statutory framework may contribute to prolonged litigation and suggested that the employee-inventor compensation regime requires reconsideration.