1 of every 4 employees of commercial organizations has withheld inventions from their employer

A new study from the Coller School of Management at Tel Aviv University 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: 1 out of every 4 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 research was led by Dr. Sarit Erez, in collaboration with Prof. Yaniv Shani and Prof. Abraham Carmeli, all from the Coller School of Management at Tel Aviv University. The study was published in the journal Academy of Management Perspectives.

Dr. Erez explains, “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.

“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.”

Dr. Erez continues, “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.

“Having practiced law in the private sector for about 20 years, I often represented employees, employers, or employee organizations in disputes of this type. It became evident to me that the legal tools currently used to address this issue are not the most effective approach.

“I believed that management tools designed to increase employees’ willingness to disclose their inventions and reduce their tendency to withhold them could be far more effective. But when I looked for academic research on this subject, I found only a handful, and even those focused mainly on the withholding of inventions in academia rather than in commercial organizations.

“It became clear to me that the issue of withholding inventions, which is so vital to the growth of knowledge-driven companies, had not yet been thoroughly explored in management strategy. 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.

Dr. Erez details the findings, “54 participants, or 27% of the respondents, reported withholding at least one invention from the organization in which they worked. Of these, 28% 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).

Dr. Erez explains, “This distinction is extremely important for organizations seeking to address the problem. 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.”

According to the researchers, this newly developed scale can serve as a foundation for further studies on the subject. Additionally, it can help employers build an effective innovation management strategy that minimizes the withholding of inventions within the organization.

Dr. Erez concludes, “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.

“We urge researchers in academia to continue investigating this important topic, and call on employers to take notice: these behaviors exist, and it is crucial to address them.

“For our follow-up studies, we are developing management tools to help employers tackle the issue in all its complexity. We believe that with the right management strategies, it is possible to encourage disclosure and significantly reduce the withholding of inventions—preventing the need for legal battles down the line.”