Earlier this morning, I received an email containing some fairly disturbing pictures, one of which is reproduced below. While I have no idea whether these pictures were taken recently, or whether they are an accurate representation of a Chinese manufacturing facility, we don’t really need photographs to tell us that the Chinese (and other foreign countries) offer manufacturing capabilities at price largely unachievable here in the US. Forbes recently published a piece claiming that our domestic manufacturing capability is so low that Amazon would not be able to produce the Kindle in the US even if it wanted to.
Foreign competition naturally reduces the market for American labor, and the labor union’s primary negotiating tool (the strike) is relatively worthless if companies can produce components and products overseas. Further, with double-digit employment, the prospect of not working is likely not all that appealing. Combine these facts with the occasional union leaders whose interests are more aligned with management than labor, the guys doing the actual work are really limited when it comes to bargaining power. Regardless of your personal politics, it’s hard to deny that the side without bargaining power has a tough time getting the better end of a deal.
Personally, I have no stake in the labor vs management debate. I don’t “work” for a living, I don’t work for a company that manufactures anything, and most of my clients aren’t involved in businesses that rely on manufacturing. However, I am endlessly interested in exploring deployment of patent assets to achieve strategic objectives, even when they’re not strictly monetary. After all, if patents are valued by a diverse group of stakeholders, inventors will benefit, and the cycle will continue. To that end, I wonder how long it will be before labor unions figure out how acquiring patents on the secondary market can help them achieve better collective bargaining outcomes.
Labor unions took note of patent policy a few years ago, as part of a political gambit where the AFL-CIO came out staunchly opposed to patent reform. This shocked the world, not so much because of their opposition, but because they had an opinion at all. As it turns out, their interests were only short-term as they quickly horse-traded patent reform support for concessions on other bills. Unions should, however, take a more active interest. After all, unions, on a large scale, are interested in protecting a domestic industry. Likewise, patents are territorial in nature, representing the potential to affect commerce within the country.
The right patents in the hands of a smart, well run labor organization could be strategically enforced against its bargaining opponents, or to affect their opponent’s supply chain. Licensing demands could include provisions mandating specific working conditions under which patented products are manufactured, or specifying a discounted royalty for products produced at union shops.
In addition, the right patents also give labor organizations a foothold to negotiate in areas where they are currently inadequately equipped. For example, companies that set up manufacturing facilities in the so-called “right-to-work” states typically end up just outside the reach of conventional collective bargaining methods. However, armed with a patent portfolio, the labor union could gain valuable negotiating leverage to either unionize those facilities, or generate revenue to benefit its union members. When it comes to foreign shops, the prospect of patent enforcement is blatantly obvious: the International Trade Commission. Using the ITC as a venue, successful patent owners can block imports of infringing products made overseas. Imagine the leverage a labor organization would have when dealing with a management team planning to off-shore jobs if armed with a credible threat of keeping the off-shore factory’s output out of the US market.
What’s more, while there’s a fairly liquid secondary market for inventions relating to handheld devices, e-commerce transactions and other business methods, the secondary market in the automotive and other manufacturing technologies is almost non-existent. Early adopters that have made moves already are likely to be the biggest beneficiaries as others look to adapt. Don’t expect OEMs to be quick to sell core technology to the labor organizations that represent the OEM’s own workers, but there are plenty of outsiders with large portfolios bound to include patent rights highly relevant across different industries.