Enforceability TBD: From Status to Contract in Intellectual Property Law

Posted by Social Science Research Network

Enforceability TBD: From Status to Contract in Intellectual Property Law

Orly Lobel (Harvard)

Abstract:      Much of the recent history of intellectual property has been a move from status to contract, resulting in an unchecked expansion of controls over knowledge beyond the boundaries once drawn in IP law. When employers introduce these contractual arrangements as standard HR provisions, they are imposed without negotiation and largely without notice. Oftentimes new employees are asked to sign these contracts as a “take it or leave it” condition to their continued employment. These provisions may appear in unilateral, generic individual employment contracts or as part of corporate handbooks and manuals. The problem is compounded with the breadth of the contractual clauses, which employ language and terms far more expansive than the recognized boundaries of intellectual property, resulting in uncertainty about their enforceability. The courts employ multifactor tests to determine, ex post, the “reasonableness” of such clauses as non-compete, non-disclosure, innovation assignment, and holdover clauses. These complicated provisions exact a high cost to innovation and job mobility, resulting in the chilling of talent flow and entrepreneurship. They also induce the vertical integration of firms to the detriment of knowledge exchanges and competition.