If a business creates something – whether it’s software, toys, food products, designs or processes — the creations are typically made by their employees who were likely hired for their knowledge, experience, talent and education. The business generally has the right to trademark or patent those creations. Their individual employees don’t, because they’ve done the work on behalf of their employer. That should all be spelled out in their employment agreement or other contract.
It typically doesn’t matter if an employee developed something for the company in part on their own time and using their own resources. If they created something within their “scope of employment,” the intellectual property (IP) rights still belong to the employer.
Unfortunately, some employers have claimed to have IP rights for creations by their employees made strictly on their own time, with their own ideas and resources and not specifically for their company. Last fall, New York law was modified to clarify that this this is illegal.
What does the law say?
New York Labor Law now states in part that “employment provisions that require an employee to assign certain inventions that are made on the employee’s own time and which do not use the employer’s equipment, supplies, facilities, or trade secret information shall be unenforceable.” It’s retroactive, which means it applies to employment agreements and contracts already in force.
In a preface to the legislation, the New York Senate stated, “Overly broad contracts can rob employees of their intellectual property….[T]hese clauses prevent employees from trying new ideas that can one day turn into new businesses.” The law is part of a general trend toward giving employees greater rights and freedom, such as laws prohibiting or substantially limiting the provisions that can be included in non-compete agreements.
Even if your company has never been guilty of requiring an employee to hand over IP rights for something they created completely separate and apart from their job, it’s wise to fully read and understand the updated law. If you have questions or concerns about current or future contracts with employees and independent contractors, it’s smart to get experienced guidance.