Is It Time To Rethink IP Ownership?

The economic woes since 2008 have challenged many of our assumptions about work, employment, savings, investment and retirement. Less has been said about how the Great Recession may be impacting on intellectual property. Where discourse is had, it tends to focus on such issues as the affect on reduced public spending on innovation and patent activity. But there may be other issues of IP merit, more hidden from the view of commentators and the media.

Against this backdrop, this Kat had his feline curiosity whetted in listening to a recent Bloomberg podcast interview with Sarah Horowitz here, founder and executive director of the Freelancers Union and a perceptive commentator on the nature of the changing workplace. One comment by Ms Horowitz particularly grabbed my IP whiskers: she stated that a full one-third (!) of U.S. employees do not hold a full-time employment position. While her focus is on freelancers, who tend to be independent contractors, it is assumed that her data point also includes individuals who are actually employed by a company (or maybe by more than one company), but on less than a full-time basis. Ms Horowitz is of the view that this is a long-term and durable trend. This Kat assumes that there is a similar phenomenon taking place with respect to the composition of the labour market in other countries.

And so the question—should we be rethinking our notions of employer-employee-contractor ownership of IP rights in light of these changes to labor market composition? After all, there is nothing cast in stone about our current arrangements regarding IP ownership, which can be seen as the product of the intersection of law and social policy in response to given historical circumstances. It has always been this Kat's understanding that the legal framework favoring employer ownership of employee works and inventions arose from the industrial model of organization that took hold in the 19th century. Whether those arrangements can be seen as benign or malign depends on your overall socio-economic view.

Indeed, it seems reasonable to conclude that, if production had remained a matter of local cottage industries, the legal treatment of intellectual property ownership might well have been different. Nor is it inevitable that the employer will always have the permanent upper legal hand regarding IP ownership. It appears that the German system, which is particularly favorable to employees, derived from legal provisions enacted in the middle of World War II to encourage employee inventions. The upshot is that the status of employee/ contractor/employer ownership of IP rights is a dynamic process, depending upon both time and place. Given this, what should we make of the decline in full-time employment and the concomitant rise in part-time and freelancing? Two considerations are suggested.

1. Should we make it easier as a matter of law for the commissioning party of a work or invention, rather than the contractor, to be deemed the owner? The goal here is to reach more uniform legal treatment between the employer-employee and commissioned work situations, when both the practical and legal distinctions between the two are more and more blurred. The objective of avoiding unnecessary transaction costs in order to enable more efficient commercial exploitation needs to be balanced against the deeply-ingrained and long-recognized principle that the creator or inventor be the owner. The substantial increase in freelancers in the workplace only places this tension in greater relief.

2. Do we need to create more predictable rules for ownership when the creator or inventor is employed (in the sense of receiving wages) by more than one employer? This phenomenon is frequently encountered in the academic world, where the professor may also be working at a commercial company. But it is not limited to academic situations; in Ms Horowitz's brave new world of less and less full-time employees and the possibility of an employee holding two part-time positions, the frictions and uncertainties that arise with respect to IP ownership can only be expected to increase. The question is whether something less than ad hoc arrangements for resolving this matter should be put into place.

If Ms Horowitz is correct and the workplace is undergoing fundamental and long-term changes, the IP community would be well-advised to take this into account in viewing how IP ownership should best be arranged. The time is ripe for discussion.