New York Seeks to Limit the Scope of Permissible Invention Assignment Agreements

Update: This bill was signed into law on September 15, 2023.

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The New York State Legislature passed Senate Bill 5640 / Assembly Bill 6829 on June 6, 2023, which, if the governor signs, would amend the Labor Law and add a new section 203-f, regulating the use and enforceability of invention assignment agreements. In a standard invention assignment agreement, the employee agrees to assign to the employer works (i.e., “inventions”) the employee creates during employment. Typically, these provisions encompass any type of work created during employment, from computer code to artwork and beyond. Invention assignment provisions are usually included within larger agreements entered into at the time an employee is hired (such as an employment agreement or confidentiality agreement) that govern an employee’s obligations to the employer, related to employer confidential information, among other subjects, and such an agreement would normally include a worksheet for disclosing any inventions belonging to the employee at the time of hire.

The bill would provide that invention assignment provisions “shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information,” unless the inventions: (a) relate to the employer’s business or “reasonably anticipated” research or development; or (b) result from work performed by the employee for the employer.

The bill would also render unenforceable any provision requiring that an employee assign to the employer an invention outside the scope of assignments permitted by the bill. The bill does not, however, provide for an express right of action, create monetary penalties for offending invention assignment provisions, nor provide for administrative oversight or enforcement by the State Department of Labor.

While the bill would essentially codify the language used in conventional invention assignment provisions, it has the potential to invalidate more expansively written invention assignment agreements. The bill’s language may be interpreted to disallow a judicial reformation of overly expansive provisions (i.e., blue-penciling), given its statement that any offending provision “shall be unenforceable.”

There are a number of other states with very similar invention assignment laws, some of which have specific employee notice obligations, which multi-state employers should make sure are taken into consideration when implementing an agreement on a national basis.  Unlike some of the laws adopted by other states, the present New York bill would not explicitly require that employers provide written or affirmative notice to employees of the limitation or that an assignment agreement is void, nor is there a requirement to post a notice or distribute any information in this regard.  Due to these varying requirements among states, we recommend that employers that have multi-state operations and/or employees working in more than one state, consult with counsel if they are considering adopting an inventions assignment agreement to ensure compliance with all applicable requirements. 

While this bill has yet to be signed by Governor Hochul, we encourage employers to take this opportunity to review their invention assignment provisions and assess whether their existing provisions would fall within the bill’s permitted scope and are not otherwise overbroad. This bill is expected to be delivered to Governor Hochul at some point before the end of the year. She will then have 10 business days to sign or veto this bill. Littler will continue to monitor the status of this bill, which would take effect immediately upon the governor’s signature. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.