Working Knowledge: Employee Innovation and the Rise of Corporate Intellectual Property, 1800-1930

Published by EH.Net (June 2012)

Catherine L. Fisk, Working Knowledge: Employee Innovation and the Rise of Corporate Intellectual Property, 1800-1930.? Chapel Hill: University of North Carolina Press, 2009.? x + 376 pp. $45 (hardcover), ISBN: 978-0-8078-3302-5.

Reviewed for EH.Net by B. Zorina Khan, Department of Economics, Bowdoin College

Economists promote the notion that specialization and the division of labor benefit society, but the marketplace of ideas places greater value on scholarship that transcends narrow disciplinary boundaries.? Catherine Fisk, Chancellor?s Professor of Law at the University of California, Irvine, has produced a richly detailed and comprehensive study of property rights and creativity in the workplace that encompasses legal, historical, technological, business and economic issues.? The analysis incorporates an extensive reading of legal decisions and treatises, as well as archival material from such firms as Rand McNally, Eastman Kodak and E.I. Du Pont de Nemours.? The focus is primarily on patent rights and (to a lesser extent) copyrights, but the discussion touches on the entire range of intellectual property.? The book is organized in chronological order, with three parts that roughly correspond to the antebellum period, the second half of the nineteenth century, and the first three decades of the twentieth century.

Sir Henry Sumner Maine proposed that all ?progressive societies? graduate from relationships ruled by status to objective interactions based on contract.? For Fisk, this is the false perspective of an apologist for unbridled liberalism.? Instead, the change from status to contract signaled a regressive move from entrepreneurial independence to corporate employment that narrowed the rights of innovative workers.? Her central thesis is that law courts were initially responsive to the rights of employee-entrepreneurs, because the judiciary wished to protect skilled workers from downward mobility.? However, by the early twentieth century courts regarded such efforts as unnecessary because corporate employment had become an emblem of respectable middle class standing.? Hence, the legal rights of innovative employees were eroded because ?workers? freedom would be ensured by a legal and economic regime that provided stable and sustaining corporate employment, not by protecting the right of workers to become entrepreneurs? (p. 10).? An economist might question this interpretation, but such misgivings do not detract from the substantive research findings that make this work an invaluable addition to labor history and to the literature on the evolution of intellectual property rights in the United States.

The first section outlines early intellectual property doctrines, which regarded patent property as the just reward for individual genius rather than as unwarranted monopolies that created barriers to entry.? Property rights were held to be sacred or, as Fisk puts it (p. 34), property comprised ?the enabler of republican democracy.??? Early legal decisions were directed to the determination of the first and true inventor of the rights under debate, rather than toward the employment standing of the innovator.? Employers obtained access to the patented ideas of their employees through the assignments of rights or through licensing.? By way of contrast, copyright varied in many regards from patent laws.? One of the most significant differences was that the 1790 statutes allowed ?proprietors? as well as authors to obtain copyrights.? Registrations primarily included works of low creativity that were likely to be collaborative, such as maps, charts, and dictionaries.? Very few opinions are on record, but most of them comprised litigation involving individual authors, and Fisk contends that such decisions reflected the ?elevated social status? of the parties to the dispute.? She concludes that during the antebellum period relatively pro-employee rules prevailed in the realm of copyrights as well as patents.

The Civil War heralded a transformation that ultimately resulted in the Second Industrial Revolution, and an era in which American cultural goods became internationally competitive.? Similarly, the employment relationship morphed from considerations of status toward the free negotiations between the parties to a contract, which Fisk characterizes as ?a contractarian regime that eliminated employer obligation while yet enforcing dependence and subservience on employees under the guise of formal equality? (p. 79).? This ?legal fiction? of freedom to contract was used to transfer rights from workers to firms.? In the realm of intellectual property transactions, the author finds that the default rule altered ?dramatically? in favor of employer ownership (p. 175).? Patentees, who were initially valued and perceived to be of high social status, lost caste and ended up being relegated to mere corporate drudges.? Their diminished status was both a cause and consequence of their lack of control over the fruits of their creativity.? The Copyright Act of 1909 included an explicit work for hire provision that allowed firms the rights to the output of their employees.? Economies of scale, large multidivisional firms, and a mass market ultimately resulted in the rank commodification of ingenuity and the ?desantification of the creation of art, music, and literature? (p. 176).? Attribution, rather than ownership of property rights, increasingly comprised ?the currency that would enable employees to advance their careers? (p. 210).?? The regime that was established during this period largely characterized the intellectual property system of the rest of the twentieth century.

The most intriguing part of the study assesses rights in knowledge and information outside the formal intellectual property system.? Rights to exclude can be replicated through a variety of alternative mechanisms, such as bilateral or multilateral contracts, non-compete agreements, trade restraints, cartelization, and technological barriers.? Firms can also prevent access to their discoveries if they treat them as trade secrets, but initially their ability to control trade secrets or know-how was limited to prohibitions against the enticement of workers from their place of employment during the term of service. Before the 1880s firms generously shared information, and did not attempt to control the knowledge that employees retained even when workers migrated to other enterprises.? However, such craft knowledge quickly became displaced towards the end of the nineteenth century, and trade secrets doctrines at law applied to a larger scope of activities and information.? Courts enhanced such measures as trade secrecy and restrictive covenants through decisions that attempted to prevent the misappropriation of knowledge and intangible assets that were deemed to belong to the firm.? Thus, the ownership of trade secrets shifted from skilled workers to the corporation.?

In short, the compass of intellectual property rights expanded enormously over the course of industrialization, and Fisk argues that this expansion came at the expense of labor and labor relations, heroic inventors and creative individuals, and also the public domain.? Legal rules towards patents and copyrights were in large part responsible for the denouement in which the ?happy marriage between invention and entrepreneurship? (p. 242) of the nineteenth century had given way to a compatible but dull corporate marriage of inconvenience.

Working Knowledge was twelve years in the writing; it has been well worth the wait.

B. Zorina Khan is Professor of Economics at Bowdoin College, and author of The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920 (Cambridge University Press, 2005).? Her current projects examine the role of patents and prizes for innovations, and the contributions of great inventors to technological progress.

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