Are side projects built on my own time without company resources covered by my employment NDA?

Are side projects built on my own time covered by my employment NDA?

In most cases, an NDA (Non-Disclosure Agreement) is distinct from an Invention Assignment Agreement. While an NDA restricts you from sharing company secrets, an Invention Assignment clause dictates who owns the work you create. If your project relates to your employer’s business or uses their resources, they may claim ownership, even if built on your own time.

Key takeaway: Never assume 'own time' equals 'own property.' Your employment contract is the final authority, and many contain 'catch-all' clauses that assign all intellectual property created during your tenure to the employer.

Understanding the Distinction: NDA vs. Invention Assignment

Employees often confuse confidentiality obligations with ownership rights. It is critical to distinguish between these two common contract components:

• NDA (Non-Disclosure Agreement): Prevents you from leaking proprietary information, client lists, or trade secrets. It does not inherently claim ownership of your personal creative work.
• Invention Assignment Agreement: This is the clause that transfers ownership of your work to the company. These clauses often include broad language covering anything 'related to the company's business' or 'demonstrably anticipated research.'

Action Item: Review your contract for the term 'Invention Assignment' or 'Proprietary Rights.' If you find these, your side project is at risk if it overlaps with your employer's industry.

Jurisdictional Protections: The 'Own Time' Exception

Several U.S. states have enacted legislation to protect employees from overly broad assignment agreements. If you reside in these jurisdictions, your employer cannot claim ownership of inventions developed entirely on your own time, provided you meet specific criteria.

Action Item: Check your state's labor laws. If you are in a state without these protections, your contract language is the only law that matters.

The Three-Pronged Test for Ownership

To ensure your side project remains yours, you must pass a strict test. If you fail any of these, your employer has a strong legal argument for ownership:

1. Resource Usage: Did you use company laptops, software licenses, servers, or office space? Even using a company-provided Slack account to discuss your project can be a red flag.
2. Temporal Proximity: Did you work on the project during your standard 9-to-5 hours? Even if you are salaried, working during business hours suggests the project is part of your employment duties.
3. Business Relevance: Does your project compete with your employer or utilize their proprietary technology? If your employer can prove the project is 'demonstrably anticipated' by their current research, they will likely claim it.

Key takeaway: Maintain a 'clean room' environment. Use your own hardware, your own software licenses, and your own internet connection. Never store project files on company cloud drives.

How to Mitigate Risk

If you are planning to launch a side project, follow these steps to insulate yourself from potential litigation:

• Audit your contract: Identify the scope of your Invention Assignment clause.
• Document everything: Keep a log of when and where you worked on your project.
• Avoid overlap: Ensure your project does not utilize any trade secrets or proprietary methodologies you learned at your current job.
• Get a waiver: If your project is significant, request a written waiver from your employer’s legal department.

Action Item: Before you commit significant time or capital to a side project, perform a formal review of your employment agreement to identify high-risk clauses.

Automated Contract Analysis

Navigating the nuances of employment law is complex, but you don't have to do it alone. TermScore uses advanced AI to instantly analyze your employment contracts, flagging restrictive Invention Assignment clauses and potential IP ownership risks. By uploading your agreement, you can gain clarity on your rights and protect your side projects before they become a legal liability.