The Bridge - Issue 2, 2020 - 12

Feature

INTELLECTUAL PROPERTY: What's Mine is Mine and What's Yours is Mine

universally required to sign agreements drafted in the
privacy of an attorney's office without the benefit of
any negotiation with those who will be offered the
agreement. Corporate lawyers interpret their jobs as
that of protecting the corporation. By training and
inclination, they will do this even in areas where they
lack insight or expertise. Absent the restraining hand
of enlightened C-suite executives, they are natural
intellectual property maximalists, blind to adverse
effects upon recruiting, employee morale, employee
retention, and rate of innovation. Here is an example
of what you get:
"The employee agrees: That all inventions and
improvements made, developed, perfected, devised,
or conceived by the Employee--either solely, or in
collaboration with others during the Employee's
employment by [corporate name], whether or not
during regular working hours, relating to the business,
developments, products, or activities of [corporate
name], or its subsidiaries, shall be and are the sole
and absolute property of [corporate name]; and to
disclose promptly in writing to [division name]'s Legal
Department, or to such other person as [corporate
name] may designate, such inventions
and improvements."
This sweeping, open-ended language not only
attempts to capture home projects but even claims
anything related to work at far-flung subsidiaries of
which an employee might be unaware, let alone
what work they perform. As we probe into the
bowels of the machinery the question is, what are the
practical effects of such IP terms in an employment
agreement? As the following examples hopefully
make clear, they are not without consequence.

Case History: An IBM Software Story
In 1981, IBM entered the personal computer
business with the original IBM PC, followed by the
XT and later the AT models. The product line was
wildly successful for a number of years, and spawned
a vibrant aftermarket in third-party hardware and
software. IBM's own employees in the Personal
Computer Division were in a unique position to
understand these products in detail and had the
necessary skills to create aftermarket software.

THE BRIDGE

INTELLECTUAL PROPERTY: What's Mine is Mine and What's Yours is Mine

Rather than turning a blind eye to entrepreneurial
aspirations or stipulating a right of first refusal, the
employment agreement simply forbade employees
from independently marketing such creations.

their ideas had already been implemented. A new,
superior version could displace an older one, but this
was rare. Remaining opportunities required addition of
new categories, an increasingly difficult task.

In the face of rising discontent, IBM inaugurated a
software submissions program. The essence was
that employees could use their own resources to
independently create whatever software they wanted
and submit it to the company for review. If the
submission passed muster, the company itself would
market the software in a catalog periodically mailed
to registered PC owners, with a share of the proceeds
handed back to the employee. Unsurprisingly,
submissions varied from masterpieces to botched
or trivial efforts that were refused. Royalty rates were
reasonable but sales were low. Some felt that
IBM marketing had inadequate experience with
direct sales.

On the whole, except for select individuals, employee
dissatisfaction was not reduced. One cynical view was
that the program was little more than an executive
"shush mechanism" to quell discontent rather than
a real business. It became apparent that not only
was it ineffective in draining employee resentment,
but probably fostered it. The final nail in the coffin
was rapidly declining financial results in the face of
superior products created by full-time, funded projects
at outside companies. Perhaps some of these took
their inspiration from the IBM direct sales catalog.

My new supervisor walked
me through the employment
agreement, showing me certain
places where he had modified his
own agreement. He helped me
strike through various things and
rewrite mine until it made sense for
me. This was certainly not the usual
take-it-or-leave-it approach (and
the interview process is a story of
its own), but it illustrates why this
particular company was able to
attract the best, and why employee
loyalty was extraordinarily high.
ORIN E. LANEY

A larger problem was category saturation.
After two or three of the most suitable checkbook
balancing programs, directory tree viewers, and disk
defragmenters were accepted, it was hard to justify
the inclusion of more. There was evidence that
employees became discouraged when they saw that

Case History:
The Offer That Almost Was
Running a small, high-tech business is like being in
a rowboat in the middle of the ocean. One moment
you're up at the top of a huge wave and can see
the horizon. The next moment the waves loom over
you and you feel like you're about to be swallowed.
All you can do is keep pulling at the oars.
In 1983, I had to concede that my electronics
consultancy was experiencing a temporary cash
trough. It was, after all, a time of recession. I decided
to seek full-time employment. The plan was to let my
business partner (my wife) deal with the quotidian
tasks of the business, while I would use evenings and
weekends to handle the creative demands.
After some searching, I found a research position at
a nearby aerospace company. The work seemed not
only financially viable but potentially quite interesting.
I submitted an employment application and was
invited to an interview which went rather well. Upon
their expression of interest in hiring me I asked for
copies of whatever documents I would be required
to sign upon start of work.
A few days later I received the paperwork. Upon
inspection, I discovered that the employment
agreement claimed essentially all intellectual property
generated during the term of employment. This was
problematic, given that I had responsibilities to existing
clients who could not ethically be cut off cold turkey.

Feature

I explained this in a thoughtfully prepared, professional
letter, pointing out that the needs of my clients did not
overlap the business of the aerospace company, and
that in any instance, I was obligated to protect their
proprietary interests to the same extent as for work
performed as an employee. To accommodate this,
I requested a reasonable interval, say six months, in
which to transition my clients to other arrangements.
The letter ended by mentioning that the state
legislature had passed certain limitations on the
scope of employer claims, which placed the offered
intellectual property assignment terms in conflict with
California law. I hand delivered this letter to the
HR department.
Several weeks passed without a response. When I
eventually telephoned to inquire about the status, my
HR contact told me that the offer was dead. When I
asked for an explanation, he dropped his voice to a
whisper and asked me to stop by in person. When
I arrived he ushered me into a private room, then
after extracting a promise that our conversation would
never be attributed to him, he told me the story.
My letter had been duly forwarded to the attorney
for the division. In the course of working through his
in-basket, he pulled out my folder and read the letter.
Then things became interesting. The attorney was so
incensed that any engineer would attempt to stand on
his hind legs and speak that he jumped up, grabbed
the folder, ran down the hallway and out the door,
then hustled across the parking lot and into the next
building, where he burst into the office of the head
of HR, slammed my folder on his desk, and declared,
"This is the sort of person who wouldn't be happy
working here!"
When I heard this, I agreed with the attorney. It wasn't
hard to deduce the general atmosphere inside the
company. I walked to my car and drove away deep
in thought. On that breezy spring afternoon, I parked
at the top of a large hill overlooking the campus, got
out, and gazed back at the buildings in wonder. I felt
empathy for the wage slaves who worked there. Then
the thought struck me: "I just became a case history!"
Rather than continue my search for employment, I
soldiered on with my own business and went on to
have a record year.

HKN.ORG

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The Bridge - Issue 2, 2020

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