CSG Law Alert: Works for Hire….But not “Work” Just Because One is Hired

On September 15, 2023, Governor Hochul signed SB 5640 into law, which creates a new Section 203-f under New York’s Labor Law, and has the result of adding New York to the growing list of states such as California, Delaware, Illinois, Kansas, Minnesota, Nevada, New Jersey, North Carolina, Utah, and Washington, that protect employees by placing certain restrictions on the enforcement of employee assignment of invention1 agreements, otherwise known as “work for hire” agreements. Similar to these other states’ laws, the New York law states that any provision in an employment agreement which requires an employee to assign, or offer to assign, to an employer any rights to an invention, shall not apply to an invention that the employee developed entirely on the employee’s own time without using the employer’s equipment, supplies, facilities, or trade secret information.

However, unlike some of these other states’ laws, the New York law exempts from this carveout those inventions developed entirely on the employee’s own time/equipment that either:

(a) relate 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

(b) result from any work performed by the employee for the employer.

Also, unlike some of the other states’ laws, such as California and Washington, the New York law does not require employers to include express language in an assignment of inventions agreement as to the types of inventions that the employee is not assigning. Nevertheless, employers may want to include such language mirroring this law in order to help reduce the risk of a court invalidating an assignment of inventions provision in its entirety.

Another best practice for employers to minimize risk of an ownership dispute over a particular concept is to have an exhibit to their assignment of invention agreement where the employee can list any preexisting inventions to which the employee claims ownership. This is not to say that there may not be challenges in the future as to whether an invention was developed on the employee’s own time and own resources, but this disclosure can minimize claims by employees as to preexisting inventions under this recent New York law.

Given this new law, all employers with employees performing services in New York should review their assignment of inventions agreements (whether contained in a standalone agreement or part of a larger employment agreement) to ensure that these provisions are not overbroad and comply with this new law. Employees, on the other hand, who come up with the next “big idea” should be mindful of how and where they develop that idea if indeed it is their original concept which they want to protect and develop independent of their employer.

1 While the test of SB 5640 refers only to the assignment of “inventions” and does not expressly define that term, for the purposes of these agreements, “inventions” generally refers to the broader concept of “intellectual property.”