Most employee confidentiality and similar agreements contain an assignment of invention provision. These typically provide that all employee inventions created during the employee’s employment are assigned to or owned by the company. On September 15, 2023, New York enacted a law, which takes effect immediately, rendering part of these common provisions unenforceable. See New York Labor Code § 203-F (S5640/A5295). Specifically, any provision that requires an employee to assign his or her rights to an invention that the employee created entirely on his or her own time and without the employer’s equipment, supplies, facilities, or trade secret information, will be unenforceable.

However, there are two important exceptions. The law would not apply to those inventions that “(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.” New York Labor Code § 203-F (A) and (B) (S5640/A5295). Therefore, employers may still require assignment of inventions that relate to the business, or research and development, or are based on work performed for the employer. While the second exception seems pretty clear – employees cannot go home and knock off what they created for the employer and claim to own such invention – the exception relating to the employer’s business is vague.

The law does not provide employees with a private right of action; rather, it renders offensive provisions unenforceable and against public policy.

New York is not the first state to pass such legislation, citing the need for increased incentives for innovation and better economic growth. California and New Jersey, for example, have enacted similar protections in favor of employees.

Employers in New York would be well-advised to proactively review their agreements and policies with employees, including confidentiality and non-disclosure agreements, and update them accordingly, including with employees who work outside of New York. The provisions ought to be carefully drafted to address only inventions, not works for hire or other intellectual property. Some states, although not New York, also require that employers provide employees with notice of the limitations on employer’s assignment rights.