Emmett Dulaney: The trouble with intellectual property

Tue, 2012-10-02 08:36 -- univcomm
October 2, 2012

The distinction that exists between employer versus employee property becomes very fuzzy when the item in question is intellectual property (IP). As soon as an employee terminates their relationship with an employer, they can turn over any tangible items they have, but how can an employer collect the knowledge and thoughts for which they’ve paid but that are in the possession of the individual? Cagey job changers can withhold information and use it after they’ve changed employers to better themselves in their new position. Or, put another way, an employee can take advantage of an employer to learn something that they then take with them after they’ve ceased to work there.

Businesses have had to struggle with this issue more recently than in the past due to so many of the jobs now requiring knowledge work as opposed to labor. Every time an employee leaves, they potentially take with them trade secrets or expertise that have monetary value to the current employer. Legally, this is a gray area that is difficult to police and costly to even address. Let’s look at an overly simplistic ­— and fictitious — example of how this might be an issue:

Odontophore, LLC is experiencing rapid growth and decides to add two satellite offices hundreds of miles from their sole campus where headquarters are located. Peter is an IT administrator for the company and pegged to oversee the technical setup of the two new offices and implementation of a virtual private network to tie everything together. Eager to learn, but lacking the skills needed to do the project justice, Peter is sent off for specialized (which translates to “costly”) training to get the certifications that will help make the expansion possible. No sooner than he gets the certifications, Peter turns in his notice — now that he is worth more money, he is leaving to pursue a job with another company.

Lots of companies require employees who are pursuing more training or education to sign agreements that they will pay back the money spent on them if they quit within a short period of time to try and prevent scenarios of this sort. Agreements like this are noble, but they don’t help the company (Odontophore doesn’t need the money back; they still need someone to oversee the growth). The real problem lies in the intangible nature of knowledge and the inability to prevent it from walking out the door.

Easy solutions to this problem don’t exist and we would never want to overcorrect the problem by creating employment contracts which don’t give employees the freedom to leave and move to better positions when opportunities come their way. Realizing the problem, though, and the costs associated with it, are critical to keep a company from being blindsided.

Anderson University is a private Christian university of 2,600 undergraduate and graduate students in central Indiana. Anderson University continues to be recognized as one of America's top colleges by U.S. News and World Report, The Princeton Review, and Forbes. Established in 1917 by the Church of God, Anderson University offers more than 65 undergraduate majors and graduate programs in business, music, nursing, and theology. The Falls School of Business is one of Anderson University’s largest academic departments offering eight undergraduate majors as well as MBA and DBA programs. The school is accredited by the Accreditation Council for Business Schools and Programs (ACBSP) and is a member of the Christian Business Faculty Association (CBFA).

Columns from Anderson University’s Falls School of Business are published Tuesdays in The Herald Bulletin. Tuesday’s columnist is Emmett Dulaney, who teaches marketing and entrepreneurship.