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

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

No, an employer cannot legally claim ownership of personal side projects if they are developed entirely on your own time, without using company equipment or proprietary information, and are unrelated to the employer’s current or anticipated business. Many states have specific statutes that render overly broad assignment clauses unenforceable.

The Legal Framework of IP Ownership

Most employment contracts contain an Invention Assignment Agreement. While these are standard, they are not absolute. The law balances the employer's right to protect their trade secrets against the employee's right to pursue independent innovation.

The Three-Prong Test for Ownership

In jurisdictions like California (Labor Code Section 2870), an employer’s claim to your invention is invalid if you meet these three criteria:

• No Company Resources: You did not use the employer’s equipment, supplies, facilities, or trade secret information.
• Personal Time: The work was performed entirely on your own time, outside of your contracted working hours.
• No Business Relation: The invention does not relate directly to the employer’s business or their actual or demonstrably anticipated research and development.

Key takeaway: If your side project is even tangentially related to your employer's business, you are in a high-risk zone. Always document the separation between your professional duties and your personal projects.

Action Item: Audit your current contract for the definition of "Inventions." If it includes "any work created during the term of employment," it is likely overbroad and potentially unenforceable in states with strong labor protections.

Jurisdictional Variations

Not all states treat IP assignment the same way. Understanding your local laws is critical to determining your leverage.

In states with lower statutory protections, courts rely heavily on the "Shop Right" doctrine, which may grant an employer a non-exclusive license to use your invention if you used company resources to create it, even if they don't own the IP outright.

Red Flags in Your Employment Contract

When reviewing your NDA or Proprietary Information and Inventions Agreement (PIIA), look for these specific red flags that signal an attempt to overreach:

• "Work Made for Hire" language: This is a copyright term that, if applied too broadly, attempts to capture everything you create.
• "Related to the Business" ambiguity: Clauses that define "related to the business" as anything the company *might* do in the future are designed to trap your side projects.
• Lack of Exclusion Schedule: If your contract does not provide a space to list pre-existing inventions, you are at risk of losing ownership of work you started before joining the company.

Action Item: If you find these red flags, draft an "Excluded Inventions" addendum. List your current side projects and have your employer sign off on it before you start your employment.

Best Practices for Protecting Your IP

To ensure your side projects remain yours, follow these operational protocols:

1. Strict Resource Segregation: Never use a company laptop, company-paid software licenses, or company cloud storage for personal projects.
2. Time Tracking: Maintain a log of when you work on your side projects to prove they occur outside of your 9-to-5.
3. Communication: Do not discuss your side projects on company Slack, email, or internal messaging platforms.
4. Disclosure: If you are unsure, disclose the project to your manager in writing and ask for a written acknowledgment that it is outside the scope of your employment.

Key takeaway: The best defense is a clean separation. If you use a company-issued laptop to write code for your side project, you have effectively handed your employer a legal argument for ownership.

How TermScore Can Help

Navigating the nuances of IP assignment clauses is complex, but you don't have to do it alone. TermScore uses advanced AI to scan your employment agreements, identifying overbroad IP assignment clauses and highlighting potential risks to your personal side projects. By providing a clear, plain-English analysis of your contract, TermScore empowers you to negotiate with confidence and protect your intellectual property before you sign.