A client recently reached out about a new law labor in NY that addresses intellectual property developed by employees (BTW if you have burning business or IP questions, feel free to send an email).
To put it simply, New York Governor Kathy Hochul has just signed a law that says employees do not have to give their employer any rights to an invention they create on their own time, using their own material, unless it's related to what the company does and was created while they were working for the company[1]. This new law validates the usual terms found in most employment contracts.
Are you currently working for someone while building your business on nights and weekends? Do you know what that means for your inventions or anything else you are creating while employed? This blog is all about ownership.
Inventions? Is it mine or yours?
First things first, let's clarify what we're talking about. When we mention "inventions," we mean those brilliant, world-changing ideas and creations that may spring to life during your personal time if you are an employee.
This could be anything from a new app, a game-changing invention/product for children, or even the next best-selling novel. Now, when it comes to "employee rights," we're addressing the question of who owns these inventions.
The General Rule
In general, if you develop an invention in your own time, using your resources, and without using any of your company's equipment, trade secrets, or confidential information, the invention is likely to belong to you.
Why Should You Care?
You might wonder why this matters, especially if you are currently employed and thinking “how will they know what I’m creating in my personal time?”
Well, understanding these rules is crucial for both employees and employers. For employees, it means they can explore their creative side without worrying that their nights and weekend project could be claimed by their employer. It encourages innovation, creativity, and entrepreneurship.
For employers, it means setting clear expectations and providing transparent policies. If you're worried about potential conflicts of interest or if you think your employee's invention could be related to your business or industry, it's crucial to establish ground rules from the start.
Not So Fast
Of course, there are exceptions to this rule. Similar to the new NY law, some employment contracts may have clauses that grant the employer rights to inventions or other intellectual property created outside work hours, especially if those inventions or IP are related to the company's business. That's why it's crucial for both parties to review and negotiate employment agreements carefully.
A great practice for employers and employees alike is to discuss these matters when the employer makes the offer of employment, and the employee negotiates the terms of the employment agreement presented. Open communication can help avoid misunderstandings and conflicts down the road. And for employers, it's also a chance to showcase your support for your employees' creative endeavors.
However, if you're an employer who wants to assert some ownership over inventions created outside of work hours, there are ways to go about it:
Make sure your employment contracts specify the company's rights (especially if you are in a state that has not made this law) to inventions and any exceptions for creations developed outside work hours.
If you're dealing with particularly valuable inventions, you might want to consider a separate agreement to define the ownership, revenue sharing, or royalties.
Open Dialogue: Encourage employees to come forward with their inventions. If an idea has the potential to benefit the company, discuss it openly, and find a mutually beneficial solution.
Over the last decade it has become more common for individuals to work for someone full-time and have a side venture to make more money or work full-time and build their business on the side until they have the funds to make the leap into full-time entrepreneurship.
It’s also not uncommon for individuals to go from employment to entrepreneurship and back to employment. With all the ways in which we now earn a living, it’s important that on whatever side you sit, you understand employee rights as they relate to intellectual property.
Remember, if you are an employee, the key here is to understand the parameters of what you can create and fully own within the context of your role as an employee. This is especially important if you are considering leveraging your current position to create a new business.
If you’re an employer, remember to respect your employees' creative freedom while also protecting your company's interests. Open communication and transparent agreements can go a long way in creating a win-win situation for everyone.
Stay creative, stay innovative, and stay informed!
[1] Bill Search and Legislative Information | New York State Assembly (nyassembly.gov)