Category: Intellectual Property

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More Patent Fun, New York Times and another DC event

My paper with Gerard Magliocca made the New York Times in a piece called “Beyond 3-D Printers’ Magic, Possible Legal Wrangling,” and the fun continues. With patent reform on the table (pdf to the bill), the New America Foundation is holding a conference called Just How Broken Is the Patent System?. I will be on the kick-off panel with my friend Adam Mossoff. After some jousting over patents, property, and more with the help of Annie Lowery, the day will turn to industry folks, policy wonks, and more professors, to get into health and patents, green innovation, patent assertion, fixes to the patent system, and a keynote by Maureen K. Ohlhausen, Commissioner, Federal Trade Commission.

It promises to be a fun day. Hope to see folks there.

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Plant Patents

Here’s something sort or random that I wonder about from time to time.  Why do we have a separate category of plant patents?  In other words, is there any good explanation for why a separate statute governing plant patents was enacted, and is there any valid reason for treating plants differently from other utility patents?  It is a curiosity in that we use the same patent requirements for all other functional inventions.  (Design patents are distinct and have their own issues, but leave that aside).  Plant patents are probably an inadequately theorized subject, for anyone who is looking for a topic.

 

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The Dualities of Freedom and Innovation

What a rollercoaster week of incredibly thoughtful reviews of Talent Wants to Be Free! I am deeply grateful to all the participants of the symposium.  In The Age of Mass Mobility: Freedom and Insecurity, Anupam Chander, continuing Frank Pasquale’s and Matt Bodie’s questions about worker freedom and market power, asks whether Talent Wants to Be Free overly celebrates individualism, perhaps at the expense of a shared commitment to collective production, innovation, and equality. Deven Desai in What Sort of Innovation? asks about the kinds of investments and knowledge that are likely to be encouraged through private markets versus. And in Free Labor, Free Organizations,Competition and a Sports Analogy Shubha Ghosh reminds us that to create true freedom in markets we need to look closely at competition policy and antitrust law. These question about freedom/controls; individualism/collectivity; private/public are coming from left and right. And rightly so. These are fundamental tensions in the greater project of human progress and Talent Wants to Be Free strives to shows how certain dualities are pervasive and unresolvable. As Brett suggested, that’s where we need to be in the real world. From an innovation perspective, I describe in the book how “each of us holds competing ideas about the essence of innovation and conflicting views about the drive behind artistic and inventive work. The classic (no doubt romantic) image of invention is that of exogenous shocks, radical breakthroughs, and sweeping discoveries that revolutionize all that was before. The lone inventor is understood to be driven by a thirst for knowledge and a unique capacity to find what no one has seen before. But the solitude in the romantic image of the lone inventor or artist also leads to an image of the insignificance of place, environment, and ties…”.  Chapter 6 ends with the following visual:

 

Dualities of Innovation:

Individual / Collaborative

Radical/Incremental

Accidental /Deliberate

Global /Local

Passion / Profit

Art/Science

Exclusive/Shared

Inscribed/Tacit

 

And yet, the book takes on the contrarian title Talent Wants to Be Free! We are at a moment in history in which the pendulum has shifted too far. We have too much, not too little, controls over information, mobility and knowledge. We uncover this imbalance through the combination of a broad range of methodologies: historical, empirical, experimental, comparitive, theoretical, and normative. These are exciting times for innovation research and as I hope to convince the readers of Talent, insights from all disciplines are contributing to these debates.

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Individuals & Teams, Carrots & Sticks

I promised Victor Fleisher to return to his reflections on team production. Vic raised the issue of team production and the challenge of monitoring individual performance. In Talent Wants to Be Free I discuss some of these challenges in the connection to my argument that much of what firms try to achieve through restrictive covenants could be achieved through positive incentives:

“Stock options, bonuses, and profit-sharing programs induce loyalty and identification with the company without the negative effects of over-surveillance or over-restriction. Performance-based rewards increase employees’ stake in the company and increase their commitment to the success of the firm. These rewards (and the employee’s personal investment in the firm that is generated by them) can also motivate workers to monitor their co-workers. We now have evidence that companies that use such bonus structures and pay employees stock options outperform comparable companies .”

 But I also warn:

 “[W]hile stock options and bonuses reward hard work, these pay structures also present challenges. Measuring employee performance in innovative settings is a difficult task. One of the risks is that compensation schemes may inadvertently emphasize observable over unobservable outputs. Another risk is that when collaborative efforts are crucial, differential pay based on individual contribution will be counterproductive and impede teamwork, as workers will want to shine individually. Individual compensation incentives might lead employees to hoard information, divert their efforts from the team, and reduce team output. In other words, performance-based pay in some settings risks creating perverse incentives, driving individuals to spend too much time on solo inventions and not enough time collaborating. Even more worrisome is the fear that employees competing for bonus awards will have incentives to actively sabotage one another’s efforts.

A related potential pitfall of providing bonuses for performance and innovative activities is the creation of jealousy and a perception of unfairness among employees. Employees, as all of us do in most aspects of our lives, tend to overestimate their own abilities and efforts. When a select few employees are rewarded unevenly in a large workplace setting, employers risk demoralizing others. Such unintended consequences will vary in corporate and industry cultures across time and place, but they may explain why many companies decide to operate under wage compression structures with relatively narrow variance between their employees’ paychecks. For all of these concerns, the highly innovative software company Atlassian recently replaced individual performance bonuses with higher salaries, an organizational bonus, and stock options, believing that too much of a focus on immediate individual rewards depleted team effort.

Still, despite these risks, for many businesses the carrots of performance-based pay and profit sharing schemes have effectively replaced the sticks of controls. But there is a catch! Cleverly, sticks can be disguised as carrots. The infamous “golden handcuffs”- stock options and deferred compensation with punitive early exit trigger – can operate as de facto restrictive contracts….”

 All this is in line with what Vic is saying about the advantages of organizational forms that encourage longer term attachment. But the fundamental point is that stickiness (or what Vic refers to as soft control) is already quite strong through the firm form itself, along with status quo biases, risk aversion, and search lags. The stickiness has benefits but it also has heavy costs when it is compounded and infused with legal threats.

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The TPP and Copyright

This is my second post about the leaked draft of the Trans-Pacific Partnership Agreement.  Here, I address some of the copyright provisions. This is not an exhaustive analysis, and I’ve tried to make it complimentary to what’s already out there. For analysis of additional provisions, see KEI, Public Citizen, Ars Technica, Kimberlee Weatherall for an Australian perspective, and EFF. [Note: I have updated this post .]

First, there are major splits between countries. The United States consistently takes the position of pushing for stronger IP, while others—especially Canada and New Zealand— advocate a more balanced approach.  The divisions are particularly prominent when it comes to preliminary statements about the public domain and public health, none of which the U.S. supports.  These analyses are on one subset of proposed language, not finalized language, and a lot of the agreement could change. I focus my analysis primarily on the U.S. proposed language.

Second, the U.S. proposals look very similar to our past Free Trade Agreements, including the earlier texts of ACTA.  Whatever message was sent when the EU refused to ratify ACTA, the U.S. Trade Representative did not receive it.  Many of the provisions that appeared in ACTA are also areas of proposed reform in the United States—the U.S. proposed text for the TPP would internationally bind this country and prevent many proposed reforms to our copyright law.

Third, and this is an important point: U.S. proposals are less balanced than U.S. domestic law. As I noted in my previous post, this is because a subset of IP industries provide the USTR advice, leaving out important balancing viewpoints and sometimes misrepresenting U.S. law.

Similarities to ACTA:

Intermediary liability (Article QQ.I.1): As in ACTA, the central copyright argument in TPP is over what kind of intermediary liability regime will be internationally required.  Currently, online intermediary liability is not governed at an international level.  Michael Geist has done a great job of outlining the basic differences in the TPP proposals for intermediary liability. The United States is pushing for notice-and-takedown, with a coalition of countries, including Canada and New Zealand, pushing instead for a notice-only provision.  These regimes offer different levels of due process for Internet users.

Statutory damages (ARTICLE QQ.H.4.Y(15)): As in ACTA, countries are fighting over statutory (or “pre-established”) damages: damages awarded to copyright owners without a showing of actual harm.  Australia opposes this provision because it does not have statutory damages. Statutory damages are an often-criticized part of the U.S. regime, enabling disproportionately large awards in copyright cases.

Criminal liability (Article QQ.H.7(2)): As in ACTA, countries have split over the definition of criminal copyright infringement.  The U.S. proposal, like U.S. law, pushes to criminalize very low level infringement, to go after even low level filesharing.  Other countries want to keep it at the international requirement, which requires a motive of financial gain or commercial advantage.  The United States lost a recent WTO case on criminal copyright, and has since been trying to ratchet up international criminal copyright law through free trade agreements.

Criminal Intermediary liability (Article QQ.H.7(6)): As in ACTA, the TPP criminalizes aiding and abetting infringement. This allows authorities to go after websites under criminal law, rerouting around protections from civil liability. Coupled with a low underlying threshold for criminal infringement, this could sweep in a lot of activity. Thanks to Kimberlee Weatherall for catching this.

Asset Forfeiture (Article QQ.H.7(c) p. 79): As in ACTA, the TPP allows the seizure of “any related materials and implements used in the commission of the alleged offense”. In the United States, asset forfeiture has been used to seize websites before trial.

DRM/Technological Protection Measures (Article QQ.G.10): As in ACTA, the United States is trying to export the DRM provisions of the DMCA, as its version of implementation of the WIPO Copyright Treaty. As I note below, however, what’s proposed is a worse version of what we have at home. The recent conflict over cell-phone unlocking shows that this is likely to be the focus of domestic policy reform. Some suggest that the DRM provisions here criminalize unlocking even when the underlying purpose is fair use.

De minimis border measures (the “Ipod search”)( Article QQ.H.6(8)): As in ACTA, the United States is pushing to shrink the “personal use” border exception that currently exists in international law, in TRIPS Article 60.  For now, however, it looks as though the de minimis provision is functionally the same as TRIPS, due to a strategic footnote (235).  This is something to watch.

Account termination (Article QQ.I.1(p. 88)): In U.S. copyright law, there’s a provision requiring online intermediaries to have a termination policy in place for repeat copyright infringers. Similar language has been proposed in the draft TPP. As Annemarie Bridy has pointed out, this language may have different implications in different countries.  It probably does not require graduated response.  However, its inclusion can also be read as endorsing recently developed private-ordering graduated response in the United States: agreements between private companies to kick infringing users offline. And transplanting this language into other countries might lead them to push for similar or more draconian policies.

Things that differ from US law:

Fair Use/Exceptions and Limitations language (Article QQ.G.Y): There‘s no fair use. The broadened copyright exceptions language that the USTR bragged about earlier this year is not very broad. And it’s not fair use.  This may harm our exporting businesses.  Google just won the Google Books case, where Google books was found to be fair use; TPP shows no evidence of extending that kind of exception abroad.

International First Sale Doctrine (Article QQ.G.3,  Article QQ.G.17):  Despite the fact that the Supreme Court held in Kirtsaeng in March that first sale doctrine applies abroad—and trumps the importation right—the USTR is exporting the opposite. The USTR also opposes saying that countries are encouraged to establish international exhaustion of rights. All other countries (except Canada, which is neutral) want international first sale doctrine. It’s not clear to me why the USTR thinks it can bind the US to law contrary to Kirtsaeng—and this draft is from months after the Kirtsaeng opinion came down. I’m happy to be convinced otherwise, but I can’t see how the two are reconcilable.

Temporary reproductions (Article QQ.G.1): Despite the fact that there is a circuit split over whether temporary reproductions are considered “fixed” enough to be copyrightable, the USTR proposes exporting a requirement that temporary reproductions are covered by copyright.

Standard technical measures (Article QQ.I.1(p. 88)):  In the DMCA, there is a requirement that intermediaries accommodate “standard technical measures.”  However, those measures must be arrived at through a multi-industry process that is open and fair. In practice, this means that there are no standard technical measures in the United States. The words “multi-industry” and “fair” get left out of the TPP, which means that standard technical measures may get developed  abroad, and online intermediaries will have to accommodate them there, where they don’t have to at home.

Criminal liability ((Article QQ.H.7(2)):  U.S. criminal copyright law contains a numerical threshold for criminal copyright infringement that is done without commercial motivation- $1000 of infringement in 180 days. The TPP proposal substitutes the word “significant” for an actual number. This difference could go either way.

Notice-and-takedown misuse & attorneys’ fees (Article QQ.I.1 (p.89)): In the DMCA, people who misuse notice-and-takedown can be sued, and are subject to attorneys’ fees.  Even though the US proposal clearly asks for attorneys’ fees in other places, it does not include attorneys’ fees in the material misrepresentation provision.

Reverse engineering exemption to TPM/DRM (Article QQ.G.10): Thanks to Jonathan Band for pointing this one out to me originally. The reverse engineering exception to DRM exported by the US is not as broad as the one available domestically.

Privacy (Article QQ.I.1): TPP barely mentions privacy.  There are some discussions of a no-duty-to-monitor provision, but no broader assertion of privacy principles that I can find.  We don’t normally think of U.S. law as containing a nod to balancing copyright enforcement with privacy, but it turns out that 512(m)(2), which says providers shall not access content contrary to law, was intended to bolster the “no monitoring necessary” requirement to mean “no monitoring necessary, AND don’t violate wiretap law.” This didn’t make it in.

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The Hard Questions about Talent, Market Regulation, and the World of Work

Each in his own sharp and perceptive way, Brett Frischmann, Frank Pasquale and Matthew Bodie present what are probably the hardest questions that the field of human capital law must contemplate. Brett asks about a fuller alternative vision for line drawing between freedom and control. He further asks how we should strike the balance between regulatory responses and private efforts in encouraging more openness. Finally, he raises the inevitable question about the tradeoffs between nuanced, contextual standards (what, as Brett points out, I discuss as the Goldilocks problem) versus rigid absolute rules (a challenge that runs throughout IP debates and more broadly throughout law). Frank and Matt push me on the hardest problems for any politically charged debate: the distributive, including inadvertent and co-optive, effects of my vision. I am incredibly grateful to receive these hard questions even though I am sure I am yet to uncover fully satisfying responses. Brett writes that he wanted more when the book ended and yes, there will be more. For one, Brett wanted to hear more about the commons and talent pools. I have been invited to present a new paper, The New Cognitive Property in the Spring at a conference called Innovation Beyond IP at Yale and my plan is to write more about the many forms of knowledge that need to be nurtured, nourished, and set free in our markets.

Matt describes his forthcoming paper where he demonstrates that “employment” is reliant on our theory and idea of the firm: we have firms to facilitate joint production but we need to complicate our vision of what that joint production, including from a governance perspective, looks like. “Employers are people too” Matt reminds us, as he asks, “Do some of the restrictions we are talking about look less onerous if we think of employers as groups of people?” And my answer is yes, of course there is a lot of room for policy and contractual arrangements that prevent opportunism and protect investment: my arguments have never been of the anarchic flavor “let’s do away with all IP, duties of loyalty, and contractual restrictions”. Rather, as section 2 (chapters 3-8) of Talent Wants to Be Free is entitled we need to Choose Our Battles. The argument is nicely aligned with the way Peter Lee frames it: we have lots of forms of control, we have many tools, including positive tool, to create the right incentives, let us now understand how we’ve gotten out of balance, how we’ve developed an over-control mentality that uses legitimate concerns over initial investment and risks of opportunism and hold-up to allow almost any form of information and exchange to be restricted. So yes: we need certain forms of IP – we have patents, we have copyright, we have trademark. Each one of these bodies of law too needs to be examined in its scope and there is certainly some excess out there but in general: we know where we stand. But what about human capital beyond IP? And what about ownership over IP between employees and employers?

So yes, we need joint inventorship doctrines for sure when two inventors work together. But what about firm-employee doctrines? Do we need work-for-hire and hired-to-invent doctrines? Here we arrive to core questions about the differences between employment versus joint ventures or partnerships between people. And even here, the argument is that we continue to need during employment certain firm protections over ownership. But the reality is that so many highly inventive and developed countries, diverse as Finland, Sweden, Korea, Japan, Germany, and China, all have drawn more careful lines about what can fall under “service inventions” or inventions produced within a corporation. These countries have some requirement for fair compensation of the employee, some stake in inventions, rather than a carte blanche to everything produced within the contours of the firm. The key is a continuous notion of sharing, fairness and boundaries that we’ve lost sight of. Intense line-drawing as Brett would have it that is based on context and evidence, not on an outdated version of the meaning of free markets.

What about non-competes and trade secrets? Again, my argument is that these protections alternate, they should be discussed in relation to one another, and we need to understand their logic, goals, and the cost/benefit of each given that they exist in a spectrum. Non-competes is the harshest restriction: an absolute prohibition post-employment to continue in one’s professional path outside the corporation. This is unnecessary. The empirics are there to support their absolute ban rather than the fine dance that of balancing that is needed with some of the other protections. Sure it makes life momentarily easier for those who want to use non-competes, but over time, not only can we all live without that harsh tool, we will actually benefit from ceding that chemical weapon in the battle over brains and instead employ more conventional arms. And yet, even in California, this insight doesn’t and shouldn’t extend to partnerships. The California policy against non-competes is limited to the employment context. If two people, as in Matt’s hypo, are together forming a business, their joint property rights in that business suggest to us that allowing some form of a covenant not to compete will be justified. There will still be a cost to positive externalities but the difference between the two forms of relationships allow for absolute ban in one and a standard of reasonableness for the other. And yes, as Brett alludes to, the world is not black and white and we will have to tread carefully in our distinctions between employees and partners.

I completely agree with Matt and Frank that there are fundamental injustices created by our entire regime of work law. Talent Wants to Be Free takes those deep structures into account in developing the more immediate and positive vision for better innovation regimes and richer talent pools. Matt writes that a more radical alternative lies within Talent but “deserves more exegesis: namely, whether we should eliminate the concept of employment entirely.” What if people will always be independent contractors?, he asks. The reforms promoted in Talent Wants to Be Free, allowing more employees more control over their human capital, indeed bring these two categories – employees and independent contractors – closer together in some respects. But far more would be needed to shift our work relations to be more “democratic and egalitarian: a post-industrial Jeffersonian economy.” As both Frank and Matt show, in their own scholarship and in their provocative comments here, this will require us to rethink so much of the world we live in.

Frank Pasquale’s review is so rich that I hope he extends and publishes it as a full article. Frank says that “for every normative term that animates [Orly’s] analysis (labor mobility, freedom of contract, innovation, creative or constructive destruction) there is a shadow term (precarity, exploitation, disruption, waste) that goes unexplored.” I would agree that the background rules that define our labor market, at will employment, inequality, class and power relations, are not themselves the target of the book. They do however deeply inform my analysis. To me, the symmetry I draw between job insecurity and the need for job opportunity is not what Frank describes as a “comforting symmetry”. It is a call for the partial correction of an outrageous asymmetry. And yes, as I mentioned at the very beginning of the symposium, I hoped in writing the book to shift some of the debates about human capital from the stagnating repetition of arguments framed as business-labor which I view not only as paralyzing and strategically unwise but also as simply incorrect and distorting. There is so much more room for win-win than both businesses and labor seem to believe. On that level, I think Frank and I actually disagree about what we would define as abuse. I do in fact believe that many of us can passionately decide to give monetary gains in return for a job that provides intangible benefits of doing something we love to do. Is that always buying into the corporate fantasy? Is that always exploitation? Don’t all of us do that when we become scholars? Still, of course I agree with many of the concrete examples that Frank raises as exploitation and precarious work – he points to domestic workers, which is a subject I have written about in a few articles (which I just realized I should probably put on ssrn - Family Geographies: Global Care Chains, Transnational Parenthood, and New Legal Challenges in an Era of Labor Globalization, 5 CURRENT LEGAL ISSUES 383 (2002) and  Class and Care, 24 HARVARD WOMENS LAW JOURNAL 89 (2001)]. Frank describes a range of discontent in such celebrated workplaces as Silicon Valley giants, which I too am concerned with and have thought about how new hyped up forms of employment can become highly coercive. Freeing up more of our human capital is huge, but yes, I agree, it doesn’t solve all the problems of our world and by no means should my arguments about the California advantage in the region’s approach to human capital and knowledge flow be read as picturing everything and anything Californian as part of a romantic ideal.

 

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Capture, sunlight, and the TPP leak

Yesterday, Wikileaks leaked the draft IP chapter of the Trans-Pacific Partnership Agreement (TPP).  This is the first of two posts I’ll make on the significance of the leak.  In this post, I discuss why the leak matters from the process perspective.  In the next, I’ll point out detailed substantive issues in the draft’s copyright provisions.  Unsurprisingly, the process and the substance are closely intertwined.

Up until this leak, only a subset of domestic IP stakeholders has had access to the TPP text.  The U.S. Trade Representative has shown the draft text to its closed advisory committees, but not to anybody else.  Content industries and pharmaceutical industries sit on the IP advisory committee.  Internet industries, smaller innovators, generics companies, and public interest groups do not.

This is no accident.  When Congress established the trade negotiating system, it exempted the Trade Representative from requirements of an open government law that was enacted to prevent agency capture, the Federal Advisory Committee Act (FACA).  FACA requires transparency, a limited term length for industry advisory committees, and balanced membership on those committees.  The trade advisory committee on IP does not have balanced membership.  It is not subject to public oversight.   And it has an extended term limit, at the discretion of the USTR.  Other open government laws also don’t apply—the USTR exempts itself from the Freedom of Information Act (FOIA) by claiming a national security exemption, and the Administrative Procedure Act (APA) doesn’t apply to international lawmaking. As a consequence, the U.S. role in international IP lawmaking is captured through one-sided industry advice.

The USTR is supposed to be exporting US IP law.  But what the USTR exports is not US law.  The USTR paraphrases US law; it doesn’t export our statutes.  This process allows information capture to have substantive consequences.

The paraphrasing USTR sends out is worse than our law. It’s less balanced, and it’s missing things. In places, the USTR misrepresents that one side of a current circuit split is the authoritative word on issues that deeply divide domestic constituents.

These skewings and omissions are not an accident. Some are directly requested by the IP advisory committee—you can see the requests in past advisory committee reports on other free trade agreements.  Others are the result of the USTR’s failing to consult public interest, academics, or opposing industries, who would point out what must be included, what’s wrong, and which omissions matter.

Balanced advice is necessary at the level of the text.  The USTR recently conducted a series of “stakeholder phone calls,” where it takes questions on broad policy issues.  These calls are transparency theater, not transparency.   They lump together stakeholders on an impossibly wide range of issues—from dairy to textiles to IP.  Discussions are high-level, where many of the problems with USTR’s policies are textual problems.  The devil, in law, is very much in the details.

The USTR is captured in other ways, too.  There is a significant revolving door problem. USTR negotiators come from and leave for employment in the same IP industries that sit on its advisory committee.  But the crux of the problem is that nobody outside of the advisory committees sees the text.

This is why the TPP leak is so important: it levels the playing field.  It lets those who aren’t on the advisory committees, like me, find and point to misrepresentations the USTR is making.  If there is one thing I’d say to our negotiating partners, it’s this: find yourself a good U.S. lawyer who can tell you what is actually in U.S. IP law.  And let them read what you’re negotiating.

Our domestic IP law is the result of democratic political process.  Even if that process has been subject to significant collective action problems, it still shows compromise.  Constituents on opposing sides of an IP issue arrive at legal meaning through statutory and regulatory compromise, and litigation.  Courts play an important role in reinserting balance into the system.  The international agreements we negotiate and sign are produced by a closed and captured process.  What little balance we achieve domestically is not what we are sending abroad.

This approach will have consequences.  As many rightfully point out, it will harm developing countries.  But it will also harm domestic constituents.  Google now makes over 50% of their profits overseas, and we export copyright law that will make it more difficult for them to operate abroad.  What’s more, the Internet is global—digital copyright law made abroad affects online content available to people here.  And the law the USTR exports affects our policymaking process at home.  It binds us to detailed IP law created by advising incumbents.  Deviations from that law may result in threats of trade sanctions.

Killing fast track is one way to change the system.  If fast track is stopped, Congress will have much more input into the trade process.  It will be able to amend trade agreements.  But this is a blunt instrument, and it might kill international trade.  A more tailored combination of changing the advisory system, giving the USTR precise and enforceable negotiating objectives, and increasing transparency could produce the changes we need.  This is why I signed the law professors’ letter calling for transparency in trade, issued today. One leak won’t fix things, but it’s certainly a start.

Sunlight is the best disinfectant. Many thanks to Wikileaks for doing what we rightfully expect our government to do.

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A Time for Action: The Double Gain of Freer Regions and the Double Speak about Talent Droughts

As Catherine Fisk and Danielle Citron point out in their thoughtful reviews here and here, the wisdom of freeing talent must go beyond private firm level decisions; beyond the message to corporations about what the benefits of talent mobility, beyond what Frank Pasquale’s smartly spun as “reversing Machiavelli’s famous prescription, Lobel advises the Princes of modern business that it is better to be loved than feared.” To get to an optimal equilibrium of knowledge exchanges and mobility, smart policy is needed and policymakers must to pay attention to research. Both Fisk and Citron raise questions about the likelihood that we will see reforms anytime soon. As Fisk points out — and as her important historical work has skillfully shown, and more recently, as we witness developments in several states including Michigan, Texas and Georgia as well as (again as Fisk and Citron point out) in certain aspects of the pending Restatement of Employment — the movement of law and policy has actually been toward more human capital controls rather than less. This is perhaps unsurprising to many of us. Like with the copyright extension act which was the product of heavyweight lobbying, these shifts were supported by strong interest groups. What is perhaps different with the talent wars is the robust evidence that suggests that everyone, corporations large and small, new and old, can gain from loosening controls. Citron points to an irony that I too have been quite troubled by: the current buzz is about the intense need for talent, the talent drought, the shortage in STEM graduates. As Citron describes, the art and science of recruitment is all the rage. But while we debate reforms in schooling and reforms in immigration policies, we largely neglect to consider a reality of much deadweight loss of through talent controls.

The good news is that not only in Massachusetts, where the governor has just expressed his support in reforming state law to narrow the use of  non-competes, but also in other state legislatures , courts and agencies, we see a greater willingness to think seriously about positive reforms. At the state level, the jurisdictional variations points to the double gain of regions that void or at least strongly narrow the use of non-competes. California for example gains twice: first by encouraging more human capital flow intra-regionally and second, by its willingness to give refuge to employees who have signed non-competes elsewhere. In other words, the positive effects stem not only from having the right policies of setting talent free but also from its comparative advantage vis-à-vis more controlling states. This brain gain effect has been shown empirically: areas that enforce strong post-employment controls have higher rates of departure of inventors to other regions. States that weakly enforce non-competes are on the receiving side of the cream of the crop. One can only hope that legislature and business leaders will take these findings very seriously.

At the federal level, in a novel approach to antitrust the federal government recently took up the investigation of anti-competitive practices between high-tech giants that had agreed not to poach one another’s employee. This in fact relates to Shubha Gosh’s questions about defining competition and the meaning of free and open labor markets. And it is a good moment to pause about the extent to which we encourage secrecy in both private and public organizations. It is a moment in which the spiraling scandals of economic espionage by governments coupled with leaks and demand for more transparency require us to think hard. In this context, Citron is right to raise the question of government 2.0 – for individuals to be committed and motivated to contribute to innovation, they need some assurances that their contributions will not be entirely appropriated by concentrated interests.

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Input Knowledge, Output Information, and the Irony of Under the Radar Expansion of IP

Peter Lee’s thoughtful review of Talent Wants to Be Free goes straight to the heart of the issues. Peter describes a “central irony about information” – so many aspects of our knowledge cannot lend themselves to traditional monopolization through patents and copyright that their appropriation is done under the radar,  through the more dispersed and covert regimes of talent wars rather than the more visible IP wars. We’ve always understood intellectual property law as a bargain: through patents and copyright, we allow monopolization of information for a limited time as a means to the end of encouraging progress in science and art. We understand the costs however and we strive as a society to draw the scope of these exclusive rights very carefully. and deliberately. We have heated public debates about the optimal delineation of patents, and we are witnessing new legislative reforms and significant numbers of recent SCOTUS cases addressing these tradeoffs. But patents are only a sliver of all the information that is needed to sustain innovative industries and creative ventures. Without much debate, the monopolization of knowledge has expanded far beyond the bargain struck in Article I, Section 8 of the Constitution.  Through contractual and regulatory law, human capital – people themselves – their skills and tacit knowledge, their social connections and professional ties, and their creative capacities and inventive potential are all the subject to market attempts, aided by public enforcement, of monopolization. Peter refers to these as tacit versus codified knowledge; I think about inputs, human inventive powers versus outputs – the more tangible iterations of intangible assets – the traditional core IP, which qualifies patentability to items reduced to practice (rather than abstraction) and copyrightable art to expressions (rather than ideas). Cognitive property versus intellectual property, if you will.

Lee is absolutely correct that university tech transfer and its challenges and often discontent is highly revealing in this context of drawing fences around ideas and knowledge. Lee writes “in subtle ways, Orly’s work thus offers a cogent exposition of the limits of patent law and formal technology transfer.” Lee’s recent work on tech transfer Transcending the Tacit Dimension: Patents, Relationships, and Organizational Integration in Technology Transfer, California Law Review 2012 is a must read. Lee shows that “effective technology transfer often involves long-term personal relationships rather than discrete market exchanges. In particular, it explores the significant role of tacit, uncodified knowledge in effectively exploiting patented academic inventions. Markets, patents, and licenses are ill-suited to transferring such tacit knowledge, leading licensees to seek direct relationships with academic inventors themselves.” And Lee’s article also uses the lens of the theory of the firm, the subject of the exchanges here, to illuminate the role of organizational integration in transferring university technologies to the private sector. I think that in both of our works, trade secrets are an elephant in the room. And I hope we continue to think more about how can trade secrets, which have been called the step child of intellectual property, be better analyzed and defined.

Management Wants Precarity: A California Ideology for Employment Law

LaborShareThe reader of Talent Wants to be Free effectively gets two books for the price of one. As one of the top legal scholars on the intersection of employment and intellectual property law, Prof. Lobel skillfully describes key concepts and disputes in both areas. Lobel has distilled years of rigorous, careful legal analysis into a series of narratives, theories, and key concepts. Lobel brings legal ideas to life, dramatizing the workplace tensions between loyalty and commitment, control and creativity, better than any work I’ve encountered over the past decade. Her enthusiasm for the subject matter animates the work throughout, making the book a joy to read. Most of the other participants in this symposium have already commented on how successful this aspect of the book is, so I won’t belabor their points.

Talent Want to Be Free also functions as a second kind of book: a management guide. The ending of the first chapter sets up this project, proposing to advise corporate leaders on how to “meet the challenge” of keeping the best performers from leaving, and how “to react when, inevitably, some of these most talented people become competitors” (26). This is a work not only destined for law schools, but also for business schools: for captains of industry eager for new strategies to deploy in the great game of luring and keeping “talent.” Reversing Machiavelli’s famous prescription, Lobel advises the Princes of modern business that it is better to be loved than feared. They should celebrate mobile workers, and should not seek to bind their top employees with burdensome noncompete clauses. Drawing on the work of social scientists like AnnaLee Saxenian (68), Lobel argues that an ecology of innovation depends on workers’ ability to freely move to where their talents are best appreciated.

For Lobel, many restrictions on the free flow of human capital are becoming just as much of a threat to economic prosperity as excess copyright, patent, and trademark protection. Both sets of laws waste resources combating the free flow of information. A firm that trains its workers may want to require them to stay for several years, to recoup its investment (28-29). But Lobel exposes the costs of such a strategy: human capital controls “restrict careers and connections that are born between people” (32). They can also hurt the development of a local talent pool that could, in all likelihood, redound to the benefit of the would-be controlling firm. Trapped in their firms by rigid Massachusetts’ custom and law, Route 128’s talent tended to stagnate. California refused to enforce noncompete clauses, encouraging its knowledge workers to find the firms best able to use their skills.

I have little doubt that Lobel’s book will be assigned in B-schools from Stanford to Wharton. She tells a consistently positive, upbeat story about management techniques to fraternize the incompatibles of personal fulfillment, profit maximization, and regional advantage. But for every normative term that animates her analysis (labor mobility, freedom of contract, innovation, creative or constructive destruction) there is a shadow term (precarity, exploitation, disruption, waste) that goes unexplored. I want to surface a few of these terms, and explore the degree to which they limit the scope or force of Lobel’s message. My worry is that managers will be receptive to the book not because they want talent to be free in the sense of “free speech,” but rather, in the sense of “free beer:” interchangeable cog(nitive unit)s desperately pitching themselves on MTurk and TaskRabbit.
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