New Jersey employers who rely on employment contracts to dictate ownership rights to employee inventions may want to revisit their agreements in light of new legislation.

New Jersey recently adopted legislation that provides new protections for employee inventions created outside the scope of his/her employment. Although the bill, Bill A-492, was originally introduced to the Assembly Labor Committee in January 2016, it was signed into law recently on January 16, 2018.

The law aims to protect employees' patent rights and prohibits employment contracts that require the assignment of any employee invention developed entirely on the employee's own time and without using the employer's resources. Advocates for the law expressed there was a need for such regulation as there were few measures in place that would prevent employers from assigning themselves rights to all employee inventions – even if the invention was entirely unrelated to the employer's business. 

An employer does not automatically have exclusive ownership of any and all intellectual property created by an employee during the course of employment. For this reason, written agreements which specifically assign to the company all intellectual property created by the employee during the course of his or her employment are common. These clauses are essential to certain employment contracts because absent such an agreement, the employee may have ownership rights in the intellectual property created while working for the company, even if the invention is related to the employer's business. 

While the new law does provide more protective measures for employees, it also specifically states this protection does not apply to inventions that: (a) relate to the employer's business or actual or demonstrably anticipated research or development; or (b) result from any work performed by the employee on behalf of the employer.

According to the new law, if an employee, outside the context of an employment contract, voluntarily offers the rights to the invention to the employer, the employer must accept or reject the opportunity within nine months from the initial date of the employee's offer.  After this period, the employer will be barred from any further opportunity to acquire the rights.

The law goes into effect April 1, 2018 and will apply to employment contracts entered into on or after the effective date.  Thus, to the extent any provision in an employment contract applies, the provision will be deemed against public policy and unenforceable.  As such, employers should be sure to revise any provisions in their employment contracts that conflict with the new law.  Additionally, employers should carefully analyze the circumstances in which an employee develops his/her invention if they want to pursue a claim of ownership. If employers are concerned about distinguishing between inventions developed independently versus during the course of employment, they could occasionally have employees identify, in writing, any intellectual property in which they believe they own and verify whether such intellectual property was created independent of the company's resources and the employees' duties.

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