A standard clause in many employment-related agreements is that any inventions created by an employee while employed by the employer are owned by or assigned to the employer. New York employers must now narrow that clause as a result of a new law mandating that employers may not require employees to assign inventions and/or other intellectual property that an employee creates with their own property on their own time.
When Can Employers Obtain Rights to Employee Inventions Under the New Law?
Employers can no longer enforce a blanket requirement that all inventions created by the employee during employment must be assigned to the employer. Under the new law, such a provision will no longer apply to an invention that the employee developed entirely on their own time without using the employer's equipment, supplies, facilities, or trade secret information.
However, there are two exceptions to the law. The employer can get the rights to the invention where the invention:
- relates at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or
- results from any work performed by the employee for the employer.
The first exception protects employers from employees creating inventions on their own time that may be derived from work done by or for the employer. This potentially broad carve out may determine how effective the law is in reality, as courts adjudicate the precise contours of what "relates" to the employer's business.
There is no penalty for an employer that issues an impermissible clause, but courts will not enforce the assignment of rights to the employer. Further, because the law does not provide a private right of action or reference any other remedies that an aggrieved employee may pursue, it will likely only be relevant where an employer insists on enforcing an allegedly unenforceable provision that has meaningful financial significance for an employee. Finally, the law does not appear to render an entire employment contract unenforceable, but rather likely applies only to the offending language (and a standard severability clause may address any remaining uncertainty).
What Steps Should Employers Take to Comply with New York Law?
The law went into effect immediately, so it is essential for employers to review their employment agreements, including non-competition and confidentiality agreements. Employers should consult an employment attorney to comply with the new law if their previous employment agreements contained broad language regarding the assignment of rights to inventions.
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