In particular, Whitewater sought, inter alia, to enforce the post-employment invention assignment provision thatAlleshouse had signed in connection with his prior employment.In analyzing the claims, the Federal Circuit relied on two separate statutes: California Business and Professions Code § 16600, which has regularly been used to invalidate non-competition agreements and other restrictive covenants in California, and California Labor Code § 2870(a), which applies specifically to invention assignment provisions. The Court’s analysis was further guided by two critical facts: (1) the inventions at issue were not developed until afterAlleshouse left his employment with Wave Loch, and (2) Alleshouse did not use any trade secret or confidential information in developing the new inventions.

rovisions 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

loyer, or if the invention results from any work performed by the employee for the employer. Section 203-f further provides that a requirement in an employment agreement that an employee assign, or offer to assign, any of his or her rights in an invention developed on his or her own time to an employer is against New York State public policy and shall be unenforceable. Notably, Section 203-f does not state that such a provision renders an entire employment agreement unenforceable if it contains such a provision and does not create a private right of action.The new bill was originally sponsored by New York State Senator Jessica Ramos from the 13th Senate District. State lawmakers approved the legislation in June 2023 after other States, including California, Illinois, New Jersey, and Nevada approved similar protections.In fact, the bill provides protections similar to California’s Labor Code Section 2870. However, the New York legislation differs from its California counterpart in that California Labor Code Section 2870 includes language that explicitly allows employers to require employees to disclose all inventions employees develop during the term of their employment. California also places a burden on employees to prove that their inventions are not covered by their employee invention assignment agreement.As a result, employers should review their employment agreements in New York to ensure they comply with the new law and draft any new agreements accordingly.

Employers must also be aware that some states limit the enforceability of employment agreements, typically rendering such agreements ineffective to assign inventions made on employee’s own time without use of employer resources unless they relate to the employer’s business. See Cal. Labor Code § 2870; 19 Del. Code Annotated § 805; Ill. Rev. Stat. Ch. 140, §§ 301-303; Kan. Stat. Annotated §§ 44-130; Minn. Stat. Annotated § 181.78; N.C. Gen. Stat. §§ 66-57.1, 66-57.2; Utah Code Annotated §§ 34-39-2, 34-39-3; Was. Rev. Code Annotated §§ 49.44.140, 49.44.150.Employers should also strongly consider consulting both intellectual property and employment attorneys in drafting an employment agreement.

Seven of those states – California, Delaware, Illinois, Kansas, Minnesota, North Carolina, and Washington – have nearly identical requirements. For example, California Labor Code § 2870 provides: Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer 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 except for those inventions that either: (1) 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 (2) Result from any work performed by the employee for the employer. The California statute and others also typically require the employer to notify the employee that the invention assignment agreement does not apply to an invention that does not qualify as the employer’s invention under the statute.

Seven of those states – California, Delaware, Illinois, Kansas, Minnesota, North Carolina, and Washington – have nearly identical requirements. For example, California Labor Code § 2870 provides:Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer 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 except for those inventions that either:(1) 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(2) Result from any work performed by the employee for the employer.The California statute and others also typically require the employer to notify the employee that the invention assignment agreement does not apply to an invention that does not qualify as the employer’s invention under the statute.

It is this last category of employer that is targeted bythe bill passed by the New Jersey legislature. If the bill becomes law,New Jersey will join the small, but growing list of states that have statutesthataffectemployer’s claims to employee’s inventions: California (California Labor Code § 2870) Delaware (Delaware Code Annotated, Title 19, § 805) Kansas (Kansas Statutes Annotated §§ 44-130) Minnesota (Minnesota Statutes Annotated § 181.78) North Carolina (North Carolina General Statutes §§ 66-57.1, 66-57.2) Utah (Utah Code Annotated §§ 34-39-2, 34-39-3), and Washington (Washington Revised Code Annotated §§ 49.

Notes:[1] A number of cases in California have considered whether an invention was owned by an inventor or a company where there was no agreement between them. California Labor Code § 2870 specifies the broadest scope of inventions that an employer may require an employee to assign to the employer.[3]See Patent Cooperation Treaty Articles 10 and 11 and Implementing Regulations Rules 18, 19 (2011).