New York state recently amended Labor Law Section 203-f, codifying a hurdle for employers who seek to claim ownership over an employee's inventions.

The law, which is similar to laws enacted in other states[1], has three significant impacts. First, the law narrows what is permissible in agreements and contracts between employers and employees (e.g. invention assignment or employment agreements), so the unfettered “all the work you do we own” provisions that are very common in such documents are no longer permitted. Second, it places the burden on the employer to demonstrate that an invention is related to the employee’s work for the employer, which will make it harder for employers to enforce (inventions are no longer presumed to be owned by an employer). The new law requires employers to show that the invention was part of their “actual or demonstrably anticipated” research, which may imply that an employer must prove that the invention was anticipated by documentation. Third, if an employer does not update its job descriptions, it will make it more difficult to show that the work product falls within the scope of employment and thus owned by the employee.

Commonplace Provisions in Employment Agreements are Unenforceable

Section 203-f of the New York Labor Law was amended on September 15, 2023, and it became immediately effective. It makes unenforceable common employment terms that ask employees to assign to the employer the rights to any inventions created while employed. Employers will need to ensure their employment agreements and contracts comply with the new narrowed ownership assignment provision of Section 203-f if they want to continue to enforce such documents. Specifically, the law prohibits agreements that require an employee to assign their rights in an invention to their employer, particularly when the employees developed the invention entirely on their own time without using the employer’s equipment, supplies, facilities, or trade secret information.

The law potentially threatens the enforceability of certain employee invention assignment agreements and related clauses, as it states, “[t]o the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision one of this section, such provision is against the public policy of this state and shall be unenforceable.” This creates constitutional issues if it impacts contracts signed prior to its enactment. To the extent it invalidates existing contracts, it is likely to be found unconstitutional.

It is still unclear whether New York courts will modify, or blue pencil, overbroad invention assignment provisions under this new law or simply invalidate them altogether.

The Burden is on the Employer to Prove Their Ownership Rights

The law also places the burden on the employer to prove that it owns an employee’s invention. While the law does not explicitly provide for burden shifting, it effectively places the burden on the employer by limiting the circumstances when it is appropriate for an employer to require assignment of inventions. Under this new law, there are two exceptions where employers will own inventions, namely when they:

• “relate … to the employer’s business, or actual or demonstrably anticipated research or development of the employer;” or
• “result from any work performed by the employee for the employer.”[2]

These restrictions inherently place the onus on the employer to show that the invention falls within these exceptions. The employer will have to show that the invention at the time of conception or reduction to practice (showing that an invention works) relates to the employer’s business, anticipated research, or development, or that it resulted from work performed for the employer. Accordingly, employers should accurately define employees’ job duties, anticipated research and expected work product in writing to make it easier to defend its ownership of the invention. This exception tracks an employer’s rights under federal law, which acknowledges that employers should own inventions for which employees were specifically hired to create. But the difference under the New York law is that the employer is now expected to show that the invention was anticipated or contemplated as work performed for the employer.

With more employees working remotely (at least part of the time), many employers will find it more difficult to show that work from which the invention at issue was derived was performed or expected to be performed for the employer. Employees working from home and using the same electronic devices for both work and home complicates this even further. This development makes it even more important for employers to track what information and trade secrets employees are accessing.[3] 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, thereby questioning whether the aforementioned statutory exceptions apply.

Employers Must Consider Additional Precautions to Protect Ownership Rights

Employers should examine their employment agreements, offer letters, restrictive covenants, employee handbooks and other documents to make sure they do not contain provisions that unlawfully limit an employee’s ownership of separately conceived inventions. If an employer wants to own an employee’s inventions, it needs to be well documented that the work was contemplated in the employee’s role at the company.

The world of work is in flux as more and more employers are permitting remote and hybrid work, which blurs the lines of work and personal life, including what is considered company property versus personal property. Besides employment contracts, any policies or contracts providing for the scope of research and development should be continuously updated and appropriately broad. They also must be understandable if employers want to ensure that inventions for which employees are hired to create remain their property. Taking these precautions will help clarify the expectations of employers and employees with respect to invention ownership in light of these new legal hurdles imposed by amended Section 203-f of the New York Labor Law.

[1] California (Cal. Lab. Code § 2870), Illinois (765 ILCS 1060/2(1)), Delaware (19 Del. C. § 805), Kansas (K.S.A. § 44-130(a)), Minnesota (Minn. Stat. § 181.78(1)), New Jersey (N.J.S.A. 34:1B-265(a)(1)), North Carolina (N.C.G.S. § 66-57.1), Utah (Utah Code §§ 34-39-3), and Washington (R.C.W. § 49.44.149) have enacted similar limitations on employers asking employees to assign work product created by employees to the employer. Nevada law creates the opposite presumption; in the absence of a contract provision to the contrary, employee inventions automatically vest with the employer under Nevada law (Nev. Rev. Stat. § 600.500).

[2] These exceptions track the definition of “work for hire” under federal copyright law. 17 U.S.C. § 101. The law provides that a “work made for hire,” is owned by a third party (not the inventor) when the work was “prepared by an employee within the scope of his or her employment;” or “a work specially ordered or commissioned as a contribution to a collective work.”

[3] However, note that effective May 7, 2022, New York requires that employers provide notice of electronic monitoring and access control of employees’ electronics. See New York Civil Rights Law § 52-C (2022).

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