Where does the employee end and the employer begin? In The New Cognitive Property, Orly Lobel confronts us with employers’ ever-expanding reach into the craniums of their employees, both past and present. The article continues Lobel’s groundbreaking work into the intersections between employment law, intellectual property, and what she terms “human capital law.” Employers are bringing new legal tools to bear against employees to keep their ideas within the firm and prevent them from using their talents outside their current workplace. And as her research makes clear, the costs may be borne not only by these workers, but by our society and its capacity to innovate.
Lobel’s 2013 book Talent Wants to Be Free explained, for a more general and business-oriented audience, how restrictions on employees such as covenants not to compete, trade secrets, and the work-for-hire doctrine limit employees’ capacity to develop and use their human capital. As a result, workers are less able to develop this capital and less likely to want to do so. These themes are updated and further developed in The New Cognitive Property, which spends a great deal of time on the legal mechanisms themselves. Her discussion of human capital restrictions circa 2015 is an eye-opening read even for those well-versed in the traditional employer tools in this area. You may know about the shop-right doctrine, but did you know that employers are laying claim to employees’ ideas that are too abstract to be patented? You have likely heard about trade secret law, or even “inevitable disclosure,” but how about the criminalization of trade secret law, where one employee was sent to jail for emailing himself code that was largely open-source? And while covenants not to compete have a long and familiar lineage, Lobel brings us up to date with a dizzying array of post-employment restrictions: non-solicitation, non-dealing, non-poaching, and non-hiring clauses. Using a series of vivid examples, The New Cognitive Property artfully explores the manifold ways in which employers are claiming more and more of their employees’ human capital for themselves.
What dangers lurk in these tentacles that reach out to ensnare employee talent? Lobel explores the societal harms, focusing not on the direct economic losses to employees but rather on the larger ramifications. She cites to the loss in productivity when workers are not able to share their knowledge directly and in person. Much of human capital cannot be codified, patented, or written down—it is best shared person-to-person in the lab, at the office, or over coffee. The labyrinth of legal restrictions on human capital reduces the opportunities for the very sharing that creates the capital in the first place. In addition, Lobel fears that employees will under-invest in that capital if they see the labyrinth coming down the road. Her own research with On Amir provides evidence that employees will spend less energy and effort when asked to sign restrictions on future employment.1 It is not surprising to find that employees will respond rationally to the incentives in their economic environment.
In the article’s discussion of the “third enclosure movement,” Lobel describes what is most dangerous about these developments from a legal perspective. Drawing a comparison to the development of intellectual property law in the last century, she shows how employee human capital is being turned into property—cognitive property that belongs to the employer. Just as IP law has moved from its original justifications as temporary monopoly rights into the realm of property, ownership, and exclusion, Lobel sees human capital being staked out and claimed by employers as their own set of property interests. Highlighting this move from owning the outputs of innovation—such as artistic expressions and medical treatments—to owning the inputs of innovation—such as skills, experience, and know-how—is perhaps the article’s key theoretical contribution. And it should be deeply troubling to those who care about how we innovate and how the fruits of that innovation are distributed.
It is also important to recognize, however, that joint production requires choices about what belongs to whom. When we come together as individuals to collaborate as a group, we must decide what responsibilities are required of the individual members, and how we will divvy up the rewards of the collaboration. The economic literature on the theory of the firm explores the mechanics behind these collaborative groups. And to some extent, this scholarship is the other side of the coin from The New Cognitive Property. A primary concern within the theory of the firm research is opportunism—when one member seeks to hold up or exploit the group for undeserved economic gain. Lobel’s examples of employers taking ownership over employee ideas could be cast instead as groups attempting to prevent one of their members from making off with an unfairly large portion of the collective pie. After all, when the company asserts dominion over the lone employee’s human capital, it does so in the name of returning it to the group enterprise. And given the social science research on the collective nature of innovation—which Lobel herself references—it may be that giving more rights to individual employees would unduly encourage opportunism and improperly give one person the credit for something that rightfully belongs to many.
This is not to say that the new practices that Lobel surfaces are justifiable. The recent Silicon Valley “cognitive cartel,” in which employers such as Apple and Google agreed to a no-employee-poaching scheme, seems to be purely an effort to suppress employee wages and mobility. And employer tools may be used against workers who traditionally have not held the type of human knowledge capital that would justify their use—take, for example, the covenant not to compete signed by a Jimmy John’s delivery driver. But seen in their best light, legal doctrines such as trade secrets and the work-for-hire doctrine are efforts to ensure that group enterprises can retain and distribute their assets and revenues in accordance with group production norms. The group may overreach, but so may the individual; group governance requires a balance between these tensions. In the modern economy, we generally organize group production through the corporation, a legal entity governed by and centered on shareholders. The corporation sucks up employee contributions and allows shareholder-oriented management to distribute the rewards. In my view, we need to address this unfair construction of firm governance in order to address the root inequities that employees face. But even if properly constructed and governed with employee participation, firms would still require prohibitions against restraining trade or unduly taking advantage of individual employees, as Lobel’s research makes clear.
In The New Cognitive Property, Orly Lobel depicts a landscape in which employers are ever more aggressive in trying to stake their claims on the intangibles of employee human capital. That such a landscape seems threatening, even Orwellian, should prompt us to reconsider our current approaches to cognitive property and think anew about how we allocate the rights to information, human capital, and work itself.
- On Amir & Orly Lobel, Driving Performance: A Growth Theory of Noncompete Law, 16 Stan. Tech. L. Rev. 833, 852-55 (2013). [↩]