New York Limits Employer Rights to Employee Inventions – Employee Rights/Labor Relations

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A standard clause in many employment agreements is that any inventions created by an employee while employed by the employer are owned by or assigned to the employer. Employers in New York must now narrow this clause as a result of a new law that mandates 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 get rights to employee inventions under the new law?

Employers can no longer enforce a blanket requirement that all inventions created by an employee during employment must be assigned to the employer. Under the new law, this provision will no longer apply to an invention that an employee develops entirely on their own time without using the employer’s equipment, supplies, equipment or trade secret information.

However, there are two exceptions to the law. An employer may acquire rights to an invention if the invention:

  1. relates, at the time of conception or restriction of operation of the invention, to the employer’s business or to the employer’s actual or demonstrably anticipated research or development; gold

  2. the results of any work done by the employee for the employer.

The first exception protects employers from employees who create inventions on their own time that may be derived from work done by or for the employer. This potentially wide selection can determine how effective the law actually is, as courts consider the precise contours of what “pertains” to an employer’s business.

There is no penalty for an employer who issues an inadmissible clause, but the assignment of rights to the employer is not enforceable by the courts. Further, because the Act does not establish a private right to sue or refer to any other remedies that an aggrieved employee may invoke, it is likely to be relevant only where the employer insists on enforcing an allegedly unenforceable provision that has meaningful financial significance to the employee. Ultimately, the law does not appear to provide wholeemployment contract unenforceable, but rather likely only applies to offensive language (and any remaining uncertainty may be resolved by a standard severability clause).

What steps should employers take to comply with New York law?

The law took effect immediately, so it is imperative that employers review their employment contracts, including non-competition and non-disclosure agreements. Employers should consult legal counsel to comply with the new law if their previous employment contracts contained broad language regarding the assignment of invention rights.

The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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