Working Knowledge: Employee Innovation and the Rise of Corporate Intellectual Property, 1800-1930

6. Corporate Management of Science and Scientific Management of Corporations

6 Corporate Management of Science & Scientific Management of Corporations Many large corporations established research and development facilities in the first decade of the twentieth century to systematize invention. Innovations became more likely to be made in a research lab or in some other collective setting by someone working as an employee of a corporation. At the same time, large businesses adopted the methods of scientific management. They restructured jobs so that complex tasks were divided up and performed piecemeal by less-skilled workers, they rationalized production so that supervisors rather than skilled labor and foremen controlled the manufacturing process, and they improved record keeping so that the productivity (and therefore the wages) of each worker could be measured and calibrated. The pace and order of work and many aspects of working conditions were no longer left to the discretion of individual workers and foremen. The development of personnel management within a framework of managerial capitalism transformed working life. In the first few decades of the twentieth century, science was applied to management and management was applied to science. The scientific management of corporate science changed the ownership of ideas in the workplace. The spread of bureaucratic employment practices and the growth of firms eventually narrowed differences in legal status (“master” and “servant”) that previously had separated creative employees from machine operators and office clerks. After 1900, just as the social class line was becoming increasingly clear between the middle class and the working class and between office and manual workers, the legal class line between working- and middle-class employees was becoming increasingly faint. All were employees of large firms, corporate intellectual property  [178] not servants, but not masters. White male office workers still expected to rise in the business world and saw themselves as superior to factory workers, but in law the distinction between the legal rights of a middle-class employee and a working-class employee had largely disappeared.1 The newly defined employment contract assigned ownership and control of intellectual property rights, including patents and trade secrets, to the corporate employer. Lawyers and courts embraced the notion of collective invention in the newfangled corporate research facility as a basis for reallocating ownership rights to employee innovation. Some of the research employees no doubt relished the job security and the opportunity to work collaboratively on increasingly complex and sophisticated technology under the aegis of a well-respected corporation in the growing R & D facilities at large companies. They happily traded the rights to whatever intellectual property they generated for a secure career with a reputable firm. It may be that most R & D employees benefited more from the corporate management of science than they would have in the entrepreneurial world of the independent inventor of the nineteenth century. But many R & D employees thought they would have been better off with greater opportunities for individual entrepreneurship and resented the corporate control that modern law and modern management allowed. They did not think they benefited from the implicit trade of entrepreneurial opportunity for stability of corporate employment and had difficulty accommodating themselves to the new role of the corporate scientist as being dependent on corporate employment and subservient to corporate managers. The New Employment Contract and the Emergence of Industrial Research A phenomenon unknown before 1840—the large, multi-unit, professionally managed business corporation—was the dominant form of business by 1930. The American economy was controlled as much by managers as by markets, and people worked for others rather than for themselves.2 Courts realized that combinations were rapidly replacing individuals in business relations and they began to transform their vision of the employment contract to fit the new reality. As Justice Oliver Wendell Holmes famously observed in Vegelahn v. Guntner, an 1896 case in which concerted action by a labor union challenged the liberal individualist conception of work relations, “It is plain from the slightest consideration of practical affairs, or the most superficial reading of industrial history, that free competition means combination , and that the organization of the world, now going on so fast, means an ever-increasing might and scope of combination.”3 The management of the [179] Corporate Management of Science thousands of workers employed in the behemoth firms became ever more systematic and bureaucratic. Inventive employees were less likely than ever before to be entrepreneurs founding their own small firms, tending instead to be mid-level employees of a research division of a large corporation...