Can my employer claim ownership of personal side projects through an employment NDA?

Can my employer claim ownership of personal side projects through an employment NDA?

Yes, your employer can claim ownership of your side projects if your employment agreement contains a broad Intellectual Property (IP) assignment clause. While often bundled with NDAs, these clauses can legally capture work created on your own time if it relates to the employer’s business or utilizes company resources.

Understanding Invention Assignment Clauses

Most employment contracts include an "Invention Assignment" clause, which is distinct from a Non-Disclosure Agreement (NDA). While an NDA prevents you from sharing secrets, an assignment clause transfers the ownership of your creative output to the company. These clauses are designed to protect the employer’s competitive advantage.

Common Triggers for Employer Ownership

• Business Relevance: The project relates directly to the employer’s current or anticipated business, research, or development.
• Resource Utilization: You used company-provided laptops, software licenses, servers, or proprietary data to build your project.
• Time and Effort: The work was performed during your contracted working hours or using company facilities.

Key takeaway: Never assume that "working from home" or "using my own time" automatically protects your IP. If the project overlaps with your employer's market, the contract likely grants them a claim.

Action Item: Review your employment contract specifically for the "Inventions" or "Proprietary Information" section. Look for the phrase "work made for hire."

Jurisdictional Protections: The California Exception

Not all states treat IP assignment clauses the same way. California, for example, has some of the most employee-friendly laws in the United States regarding side projects.

California Labor Code Section 2870

Under California law, an employer cannot require an employee to assign rights to an invention developed entirely on the employee's own time without using the employer's equipment, supplies, facilities, or trade secret information, provided the invention:

1. Does not relate to the employer's business.
2. Does not relate to the employer's actual or demonstrably anticipated research or development.
3. Does not result from any work performed by the employee for the employer.

Action Item: Check if your state has a statute similar to California Labor Code 2870. If you live in a state with no such protection, your contract terms will be the primary governing document.

How to Protect Your Side Projects

To minimize the risk of your employer claiming your side projects, you must maintain a strict separation between your professional duties and your personal endeavors.

Best Practices for IP Protection

• Hardware Separation: Never use a company-issued laptop or phone for personal coding or design work.
• Software Licensing: Do not use company-paid software subscriptions (e.g., Adobe Creative Cloud, JetBrains, or AWS credits) for your side projects.
• Documentation: Keep a log of when you work on your project to prove it occurred outside of your 9-to-5 schedule.
• Disclosure: If you are building something significant, consider disclosing it to your employer in writing and requesting a formal waiver or "carve-out" for that specific project.

Key takeaway: If you are building a startup, ensure your IP is clean. Investors will perform due diligence and will require proof that your employer has no legal claim to your code.

Action Item: Create a "Prior Inventions" list. If your contract allows it, attach a document listing all projects you owned before joining the company to ensure they are excluded from the assignment clause.

The Role of Contract Analysis

Legal language is intentionally dense, often hiding broad IP claims within standard "boilerplate" text. Manually reviewing these documents is prone to human error, and missing a single clause can result in the loss of your intellectual property rights.

TermScore uses advanced AI to instantly scan your employment agreements, highlighting aggressive IP assignment clauses and identifying potential risks to your personal projects. By providing a clear, plain-English breakdown of your obligations, TermScore helps you understand exactly what you own and where your employer's rights begin, allowing you to negotiate with confidence or adjust your development habits accordingly.