Sunday, March 23, 2014

Human Capital Law

Guest Blogger

Orly Lobel

For the conference on Innovation Law Beyond IP at Yale Law School

I am thrilled to be taking part of the Innovation Law Beyond IP conference next week at Yale Law School. Thank you to Lisa, Amy and Kiel for organizing such an exciting event. To me, the conference’s title reflects with precision how we should be thinking about innovation policy. In my recent book, Talent Wants to Be Free: Why Should Learn to Love Leaks, Raids and Free-Riding I argue that human capital law - at the intersection of intellectual property, employment law and antitrust – is one of the most important frontiers for innovation policy. The book challenges conventional wisdom about competition, secrecy, motivation, and creativity and suggests that we rethink the boundaries we’ve drawn between human capital controls and openness. Balkinization featured an exchange Kiel and I did about the book.

In my new article, The New Cognitive Property, I argue that contemporary policy is grounded in the conviction that not only the outputs of innovation – artistic expressions, scientific methods, and technological advances – but also the inputs of innovation – people, their skills, experience, knowledge, professional relationships, creative and entrepreneurial energies, and the potential for innovating – are subject to control and propertization. In 1964, Charles Reich wrote “the institution called property guards the trouble boundary between individual man and the state.” Today, as we guard the boundaries between individual, market, and state, we face a reality of not only the expansion of intellectual property but also cognitive property. 

At the same time, the field of human capital law is largely neglected in innovation policy debates. Regulatory and contractual controls on human capital – post-employment restrictions including non-competition contracts, non-solicitation, non-poaching, and anti-dealing agreements; pre-innovation assignment agreements of patents, copyright, as well as non-patentable and non-copyrightable ideas; and confidentiality and non-disclosure agreements and trade secrets enforcement against former insiders - are fast growing frontiers of market battles. The expansion is textured:

·      subject-wise, the expansion of controls into the intangibility spectrum that propertizes knowledge that would fall outside the scope of patent and copyright, as captured by the rise in contractual clauses assigning all innovation “whether patentable or non-patentable.”

·      time-wise, the expansion of ownership over future innovation, as well as attempts to go back in time and capture prior knowledge that an employee had when joining the company.

·      scope-wise, demonstrates “the non-compete thicket” - the colossal rise in the use of non-competes along with a shift from individualized controls to meta-controls, or cognitive cartels, as evidenced in the current class action against high-tech giants, including Apple, Google, Intuit, and Pixar, which agreed to not hire each other’s employees.

These regimes heavily shape industrial competition, regionally and globally, and through this web of extensively employed mechanisms, skill and knowledge that have traditionally been deemed public in intellectual property law have become proprietary. The expansion of controls over human capital has thus become the blindspot of intellectual property debates.

Human capital is a dynamic self-replenishing shared resource. Unlike other natural resources that become endangered by overuse, pollution, and free riding, human capital is endangered when it is under-used, isolated, and controlled. Unlike other resources, it is human, with built-in motivation and psyche. The traditional and under-developed analysis asserts that human capital controls are necessary to generate investment and growth. At the same time, a growing body of empirical evidence points to the detrimental effects of excessive human capital controls, both motivationally and in the aggregate. I look forward to the Innovation Beyond IP conference this coming week where we will continue to engage with the human capital/innovation nexus.

Orly Lobel is the Don Weckstein Professor of Labor and Employment Law at San Diego Law School. She can be reached at lobel at

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