Can an employment NDA legally claim ownership of projects built on personal time?

Can an employment NDA legally claim ownership of projects built on personal time?

No, an employment NDA or invention assignment agreement cannot legally claim ownership of projects created entirely on your own time, using your own equipment, provided the work is unrelated to your employer’s business or actual/anticipated research. Overly broad clauses attempting to claim all personal work are often void as a matter of public policy.

The Legal Framework of Invention Assignment

Most employment contracts include an "Invention Assignment" clause. While these are standard, they are not absolute. Courts balance the employer's right to protect their trade secrets against the employee's right to pursue independent innovation.

Statutory Protections by Jurisdiction

Several states have enacted specific statutes that limit the scope of what an employer can claim. If you work in these states, your rights are codified:

• California (Labor Code Section 2870): Prohibits employers from requiring employees to assign rights to inventions developed entirely on their own time without using employer resources, unless the invention relates directly to the employer's business or actual/anticipated research.
• Illinois (Employee Patent Act): Similar to California, it prevents employers from claiming ownership of inventions developed on the employee's own time without company equipment.
• Washington (RCW 49.44.140): Provides a "safe harbor" for employees, ensuring that inventions created on personal time remain the property of the employee unless they result from work performed for the employer.

Key takeaway: Even if you signed a contract that says "all inventions belong to the company," state law often overrides that language if the project is truly independent.

Action Item: Check your state's labor code. If you are in a state with strong IP protections, your contract's "all-encompassing" language may be legally toothless.

The Three-Pronged Test for Ownership

To determine if your side project is safe, courts typically apply a three-pronged test. If your project meets all three criteria, it is almost certainly yours.

Red Flags in Your Contract

Watch for these specific phrases that signal an overreaching agreement:

• "All inventions conceived during the term of employment." (This is often too broad).
• "Any and all intellectual property, regardless of relation to company business."
• "Any work performed using any knowledge gained during employment."

Action Item: Audit your current contract for these phrases. If you find them, document your development process meticulously to prove you did not use company resources.

How to Protect Your Personal IP

If you are building a side project, you must create a "paper trail" of independence. This is your primary defense in the event of a dispute.

1. Use Personal Hardware: Never install development tools or store code on a company-issued laptop.
2. Maintain Separate Accounts: Use a personal GitHub or cloud account. Never use your work email address for registration.
3. Document Time: Keep a log of when you work on your project to prove it occurred outside of your 9-to-5.
4. Disclose Early: If your project is in a grey area, disclose it to your employer in writing and request a written waiver or acknowledgment.

Key takeaway: The burden of proof often shifts to you if the company claims your work. Maintaining a clear separation of assets is your best legal insurance.

Action Item: Create a "Project Independence Folder" where you store receipts for your personal software licenses and hardware to prove they were not company-funded.

The Role of TermScore in Contract Analysis

Navigating the nuances of IP assignment clauses is difficult without legal training. TermScore uses advanced AI to scan your employment agreements, flagging overbroad invention assignment clauses and identifying potential risks to your personal projects. By providing an instant, plain-English breakdown of your rights, TermScore helps you understand exactly what you are signing before you commit to a new role or launch a side venture.