One out of every four employees of commercial organizations have withheld inventions from their employer

A new study sheds light for the first time on an important issue in the business world: employees withholding their inventions from the companies they work for.

Although the law and/or employment contracts typically grant organizations the rights to their employees’ inventions, the phenomenon of invention withholding is quite common and carries serious implications for businesses, especially in knowledge-intensive industries.

The study reveals alarming data: one out of every four employees in commercial organizations has withheld an invention from their employer at least once. In many cases, this withholding is done deliberately, with the intent to use the invention after leaving the organization. The study was published in the prominent journal Academy of Management Perspectives.

What the researchers say: “Commercial organizations, particularly those in knowledge-intensive industries, encourage innovation among their employees, and their success largely depends on those employees coming up with groundbreaking inventions,” the lead author told us. “In order to protect companies’ rights to these inventions, legal systems and standard employment contracts typically grant the employer ownership of inventions made by their employees, while requiring employees to disclose any invention they have come up with at work."

“This allows the employer to obtain patents and protect the invention. To increase employees’ motivation to disclose their inventions, many companies implement incentive systems, offering financial grants and/or recognition, such as badges of honor, to inventors.”

“But at the end of the day, when an employee comes up with a new invention, they are faced with a behavioral dilemma: should they fulfill their legal obligation and disclose the invention to their employer, knowing they will lose ownership, or violate their obligation and hold on to the possibility of capitalizing on their invention outside the company? Indeed, it is a common scenario to see people leave one organization and either join another in the same field or even start their own company — often to develop an invention conceived in their previous workplace.”

“These types of cases often end up in court, where an employer sues a former employee — or their new employer — alleging that they are using an invention that the employee conceived while working for them, and that the patent rightfully belongs to the original employer.” The researchers explained. “With this study, we aimed to shed light on this important phenomenon and begin to address it from a business perspective.”

For the purpose of the study, the researchers distributed an anonymous online questionnaire, asking inventors to report whether they had ever withheld one or more inventions from their employers. Participants were also requested to describe the event, including its reasons and circumstances.

A total of 199 valid responses were collected. Fifty-four participants, or 27 percent of the respondents, reported withholding at least one invention from the organization in which they worked. Of these, 28 percent explicitly stated that they did so with the intention of developing the invention themselves after leaving the organization or bringing it as a sort of ‘dowry’ to their next employer. The others cited a variety of reasons, some psychological and some financial. These included an emotional attachment and sense of ownership over the invention as a personal creation; fear that someone else would take credit; conflict with their employer; lack of trust in management; dissatisfaction with pay; and the belief that they would not be adequately compensated for an invention that would profit the organization.

In the next phase, the researchers developed a unique and validated measurement scale, the first of its kind, to assess employees’ tendencies to either disclose or withhold inventions from their employers.

The findings revealed that withholding or disclosing inventions are not simply opposite sides of the same behavior, but rather two fundamentally different behaviors: an employee might refrain from disclosing a certain invention for a variety of reasons (such as a heavy workload or the belief that the invention still requires development and is not ready to be disclosed). However, a deliberate and active decision to withhold an invention in order to prevent the transfer of ownership to the organization is a distinct behavior that may be influenced by completely different factors (for example, the employee’s feeling that they are poorly treated by the company regardless of the invention itself).

“This distinction is extremely important for organizations seeking to address the problem.” The lead author explained. “Actions taken by companies today, such as offering financial incentives or recognition to inventors, may encourage more disclosures to the organization. However, such measures may be less effective for employees who deliberately withhold a promising invention with the intention of using it further down the road, outside the organization."

“In this study, we conducted an in-depth exploration of a widespread phenomenon that has long concerned legal professionals around the world, but so far has hardly been examined from a managerial perspective: employees in the business sector who withhold their inventions from the company that employs them,” he concluded.

So, what? This is a fascinating bit of research which needs more follow-up studies to find out if the results hold in different cultures and economic contexts. I suspect that it does and that the extent of invention withholding depends on the social and ethical environment within the company rather than in the society.