Employees Now Own Their Off-the-Clock Inventions in New York

A new New York law muddies the relationship between an employer and the inventions of its employees, and could lead to sticky questions in the current hybrid workplace environment about what counts as employer time and resources.

On Sept. 15, New York Governor Kathy Hochul signed an amendment to New York Labor Law to add a new Section, 203-f, which concerns inventions made by employees during the period of their employment. Effective immediately, provisions in employment agreements concerning the assignment of an employee’s rights in an invention to an employer are no longer valid—to the extent those inventions have been “developed entirely on his or her own time and without the use of the employer’s equipment, supplies, facilities, or trade secret information.”

This new statutory carve-out doesn’t apply, however, to inventions that relate at the time of conception or reduction to the practice of the invention to the employer’s business, research, or development, or to the result of any work the employee performed for the employer.

The new law also makes unenforceable, as a matter of public policy, provisions of existing employment agreements that mandate an employee assign an invention to their employer that would otherwise be excluded under the new law.

Many existing employment agreements require employees to assign rights in their inventions that are created during the period of employment to their employers, whether the inventions are created at work, or on the employer’s time, or using employer-provided resources or information—although some employees can often carve out pre-existing inventions that pre-date the commencement of employment.

Now, however, such agreements are likely unenforceable to the extent they assign to employers the rights in employee inventions developed on the employee’s own time, without use of any of the employer’s trade secrets or resources, if such inventions are unrelated to the employer’s business, research, or development efforts.

Room for Interpretation

We anticipate that, should employers try to obtain rights to employees’ inventions, courts will be tasked with interpreting what it means for an invention to be created solely on an employee’s own time and without use of employer resources or trade secrets.

In the current hybrid work environment, many employees use the same electronic devices for both work and personal purposes. Many employees also work lengthy or irregular hours for the employer while working remotely, further blurring the lines between what an employee does on their “own time” and what they do on the employer’s time.

Further, because many employees are exposed to confidential information while working for an employer, it may be difficult to prove whether an employee used an employer’s trade secret information in the process of conceiving of inventions. Even where it can be shown that the employee developed the invention on their “own time” and without the employer’s resources or trade secrets, issues may arise as to whether the invention is somehow “related” to the employer’s business or resulted from some work performed for the employer, in which case the new statutory exception wouldn’t apply.

Beyond New York

Similar laws have also been passed in California, Illinois, Delaware, Kansas, Minnesota, New Jersey, North Carolina, and Washington. In justifying the passage of the new law, a New York assembly member commented that employees may have decided to work in states like California due to such protections, thus previously hampering the development of New York’s tech sector.

Nevada and Utah also have laws concerning employee inventions, but both concern the circumstances under which employers may require assignment of rights to inventions, as opposed to being solely focused on the rights of employees.

Under Nevada law, the employer is the automatic and sole owner of inventions developed by employees during the course and scope of employment when the invention relates to the employee’s work.

Utah’s law includes factors that make an invention an “employment invention,” in which case the employer may require assignment. But as in the states listed above, Utah employers may not require assignment of an invention that is not an “employment invention” and created by the employee entirely on their own time.

Guidance for Employers

Although there is no private right of action or enforcement mechanism mentioned in the new law, employers should ensure that future employment agreements, offer letters, restrictive covenants, employee handbooks, and other agreements with their employees don’t contain language that unlawfully limits employees’ ownership of their separately conceived inventions.

Employers may also want to scrutinize existing agreements to evaluate what inventions, if any, they may have attempted to obtain assignment of that are now against public policy, per the new law, and plan for any potential losses of access to inventions that the new law would prohibit it from owning.

Employers should also carefully assess any efforts to seek injunctive relief or to obtain rights in inventions created by their employees which might now be un-assignable as a matter of public policy. This will avoid expending legal dollars in a court proceeding that will be unfruitful, given the new law’s provisions, or a declaration that perhaps other inventions conceived or reduced to practice by the same individuals also don’t belong to the business.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Keith A. Markel is a partner and co-chair of the Labor & Employment Department at Morrison Cohen.

Alana R. Mildner is an associate in the Labor & Employment Department Morrison Cohen.

Jessica L. Lipson is a partner and co-chair of the Technology, Data & Intellectual Property Department at Morrison Cohen.

Fred H. Perkins, co-chair of the Technology, Data & Intellectual Property Department, also contributed to this article.