TAKEAWAY: New legislation recognizes the evolving nature of employer-employee relationships, especially in remote work settings.
On September 15, 2023, New York Governor Kathy Hochul signed into law Senate Bill (S) 5640, amending the New York State Labor Law to impose limitations on the assignment of employee inventions. This new legislation restricts employers from enforcing provisions in employment agreements that require employees to assign rights to inventions created on their own time and without the use of the employer’s resources. With the passing of this law, New York has joined a growing number of states, including California, Delaware, and others, that have implemented restrictions on employers’ ability to automatically claim rights to employee inventions.
The new law explicitly renders unenforceable any provision in employment agreements that compels employees to assign inventions developed entirely on their own time without using the employer’s resources, such as their equipment, supplies, facilities, or trade secret information. Notably, the legislation does not extend to inventions related to the employer’s business or research and development efforts, or those resulting from work performed for the employer.
The legislation poses challenges for employers who traditionally relied on confidentiality clauses and other restrictions in employment agreements to safeguard their intellectual property rights. With the distinction between work and personal life becoming increasingly blurred, especially in remote work scenarios, employers may find it challenging to determine when employees are “on the clock.” This uncertainty may impact the enforceability of contracts that previously asserted broad claims to all inventions.
As the legal landscape surrounding invention assignment evolves, employers must carefully review and update their employment agreements to ensure compliance with these changing regulations. This development reflects a changing understanding of work dynamics, acknowledging the evolving nature of the employer-employee relationship, especially in a remote work environment.
Text of Senate Bill S5640 may be found here.