When your ideas are your company's property

A man walks past the neon sign in front of the "We Work" co-operative co-working space on March 13, 2013 in Washington, DC. -- FILE PHOTO: AFP
A man walks past the neon sign in front of the "We Work" co-operative co-working space on March 13, 2013 in Washington, DC. -- FILE PHOTO: AFP

The big story in Silicon Valley these days is a class-action lawsuit alleging that several major technology companies, including Google and Apple, agreed not to try to hire away one another's employees - thereby hindering workers from seeking out better-paying jobs.

But do-not-hire agreements are not the only way corporations are taking control of their employees' intellectual capital. From Thomas Edison to Steve Jobs, the individual inventor is a hero in our popular imagination. But increasingly it is corporations, not people, who own inventions.

This ownership runs deeper than inventions and artistic works, extending to skills, ideas and professional ties - tacit knowledge and social relations that cannot be subject to patent or copyright under the traditional scope of intellectual property, but which corporations lay claim to at increasing rates through employment agreements.

In these agreements, companies demand that employees - from those in low-level manufacturing positions to design engineers and creative workers - sign away all their innovations, and the knowledge they will acquire during the course of employment, and refrain from competing with their employer post-employment, whether that means taking a new job with a competitor or starting their own company.

While some states place some limit on such agreements in their labour codes, for the most part, employers can demand ownership over almost all aspects of our cognitive ability - from their products to their uses - long after we have moved on to different endeavours.

Moreover, unlike other high-patenting countries like Germany, Finland, Japan and China, which require businesses to pay the inventor who assigns an invention to them, American intellectual property law lacks any requirements that employers compensate employees for the fruits of their creative labours above their regular salary.

Companies have been making more expansive claims to their employees' mental work for more than a decade. In 2004, a court in Texas ordered a former Alcatel employee to give his former employer a software algorithm - which existed entirely in his mind.

The idea, which he was still working on and was still too abstract and incomplete to be a patentable invention, was nevertheless deemed the property of Alcatel, forcing the former employee to turn over the algorithm in the months after he was fired.

With more corporations demanding that employees pre-assign their intellectual property, there has been a steady decrease in inventor-owned patents. A couple of decades ago, individuals owned about 25 per cent of all patents. Now, individuals own barely 10 per cent; the rest are corporate-owned.

And this disparity is about to become even more pronounced. Last year, the America Invents Act went into effect, shifting our patent system from a first-to-invent to a first-to-file rule. That will aid corporations and harm individual inventors, who will usually lack the funding to speed up filing.

A world where what is fair and what is law diverge so markedly raises a number of important moral, legal and economic questions, the most basic and important of which is: How does a reality in which we own so little of what we create affect our drive to make something new and original?

To answer this question, marketing professor On Amir and I researched how ownership over our skills and creative ventures affects our motivation to perform. In a study published this year in the Harvard Business Review, we reported on a series of behavioural experiments in which we asked more than 1,000 participants to perform various tasks and solve problems.

We divided the subjects into two groups. We told one set that they were free to later perform similar work for other "employers" in the virtual workplace of our experiment. We asked the others to sign over ownership of their skills to, and sign non-compete agreements with, their current "employers." All of the participants were assured that they would be paid for the tasks they performed in the experiment.

But the effects of giving up future control over one's own skills and products of the mind were significant. When we asked participants to relinquish ownership of their skills, they became less focused on the problem, spent less time on the task and made twice as many errors as the unconstrained group.

These effects were mitigated when our subjects found the tasks particularly interesting in and of themselves, but even then, the constraints we imposed on their human capital suppressed their motivation to perform well.

Certainly, we are not driven solely by ownership. To be human is to create, and we thrive when we use our talents in productive ways. But our research shows that no one can sustain creative energies on passion alone.

This loss of creative fire is not only costly for individuals. In a world in which economic growth depends on innovation, we simply cannot afford such limitations on creativity.


The writer, a professor at the University of San Diego School of Law and a founding faculty member of the Centre for Intellectual Property and Markets, is the author of Talent Wants To Be Free: Why We Should Learn To Love Leaks, Raids, And Free Riding.