Can an employer enforce an NDA to claim ownership of side projects built on my own time?

Whether an employer can claim your side project depends on the specific language in your employment agreement and your state's labor laws. While many states protect work created entirely on your own time without company resources, overly broad 'Invention Assignment' clauses can legally override these protections.

The Anatomy of an Invention Assignment Clause

Most employment contracts contain an 'Invention Assignment' or 'Proprietary Information and Inventions Agreement' (PIIA). This clause is distinct from a standard NDA, which protects trade secrets. An assignment clause dictates who owns the intellectual property (IP) you create.

Common Red Flags in Assignment Clauses

• 'All-Encompassing' Language: Clauses that claim ownership of 'any and all inventions, ideas, or discoveries' made during your employment, without qualification.
• 'Related to Business' Clauses: Language that claims ownership of anything 'related to the actual or anticipated business or research' of the employer. This is often interpreted very broadly by courts.
• 'Company Time/Resources' Clauses: Provisions that trigger ownership if you use even minor company resources, such as a company-issued laptop or Slack account.

Key takeaway: If your contract says it owns everything you create during your employment term, you are at high risk. Do not assume your 'off-hours' work is safe.

Action Item: Search your contract for the word 'Invention' or 'Assignment' and highlight every instance where the scope of ownership is defined.

State-Specific Protections

Several states have enacted legislation to prevent employers from overreaching. These laws typically state that an employer cannot require you to assign rights to an invention developed entirely on your own time, provided that:

1. No company equipment, supplies, facilities, or trade secret information was used.
2. The invention does not relate directly to the employer's business or actual/demonstrably anticipated research.
3. The invention does not result from any work performed for the employer.

Action Item: Check if your state has an 'Invention Assignment' statute. If you live in a state without one, your contract terms will likely be the final word in a dispute.

Best Practices to Protect Your IP

Even with legal protections, preventing a dispute is better than litigating one. Follow these strict operational guidelines:

• Hardware Separation: Never use a company-issued laptop, phone, or tablet for your side project. Use a dedicated personal machine.
• Network Isolation: Do not use company Wi-Fi or VPNs to push code or access project files.
• Time Management: Never work on your side project during your contracted hours. Even a 15-minute commit during a lunch break can be used as evidence of 'company time' usage.
• IP Carve-Outs: If you have a pre-existing project, list it as an 'Excluded Invention' in an exhibit to your employment contract before you sign it.

Key takeaway: Documentation is your best defense. Keep a log of your development hours and maintain a clear separation of assets to prove your project is truly independent.

Action Item: If you have a side project you are worried about, draft a simple email to your HR or legal department disclosing the project and asking for a written acknowledgment that it falls outside the scope of your employment.

When to Seek Legal Counsel

If your side project has significant commercial potential or if your employer is a direct competitor, the risk of a lawsuit is high. You should consult an attorney if:

• Your employer explicitly asks you to sign an updated PIIA.
• You are developing software that competes with your employer's core product.
• You have already used company resources and need to 'clean' your IP history.

TermScore can automatically analyze your employment contract to identify aggressive IP assignment clauses and potential ownership risks, providing you with the clarity needed to protect your work before you sign. Upload your contract today to see if your side projects are at risk.