Steps to challenge an NDA that claims ownership of side projects built without company resources

To challenge an NDA or IP assignment agreement claiming ownership of side projects, you must prove the work was created entirely on your own time, without company equipment or trade secrets, and falls outside the scope of the company's business. State-specific labor laws often render overbroad clauses legally void.

Understanding the Legal Thresholds for IP Ownership

Most employment contracts include an 'Invention Assignment' clause. While companies have a legitimate interest in protecting their IP, many draft these clauses with excessive breadth to capture everything an employee creates. To successfully challenge these, you must understand the three pillars of protection:

• Time: The work was performed entirely outside of your compensated working hours.
• Resources: No company equipment, software licenses, or proprietary data were utilized.
• Relevance: The project does not relate directly to the company's current or demonstrably anticipated business or research.

Key takeaway: If your contract claims ownership of 'all inventions created during the term of employment,' it is likely overbroad and potentially unenforceable in states like California (Labor Code 2870) or Washington (RCW 49.44.140).

Action Item: Audit your current contract for the phrase 'all inventions' versus 'inventions related to the Company's business.' If it lacks a limiting scope, flag it for negotiation.

Step-by-Step Process to Challenge Overbroad Clauses

If you have identified an overbroad clause, follow this systematic approach to protect your intellectual property.

1. Document Your Environment: Create a 'Proof of Independence' file. Include receipts for personal hardware, logs of development hours, and evidence that you used personal cloud storage (e.g., GitHub Personal vs. Enterprise).
2. Review State Statutes: Check if your state has a 'Labor Code' section governing invention assignments. For example, California Labor Code 2870 explicitly protects employees from assigning inventions created on their own time without company resources.
3. Request a Carve-Out: Before signing, or during a contract review, request an 'Excluded Inventions' schedule. This is an addendum where you list your existing side projects, ensuring they are explicitly exempted from the company's ownership claim.
4. Consult Counsel: If the company insists on the broad language, have an attorney draft a formal letter explaining why the clause violates state public policy.

Action Item: Draft an 'Excluded Inventions' list today. Even if you don't have a project yet, having a template ready demonstrates you are proactive about your IP rights.

Red Flags in Employment Agreements

Not all IP clauses are created equal. Watch for these specific red flags that indicate an employer is overreaching:

• 'Any and all' language: Clauses that do not distinguish between work-related and personal projects.
• 'Anticipated business' ambiguity: Phrases that claim ownership of projects related to what the company *might* do in the future.
• 'Company Equipment' definitions: Clauses that define 'company equipment' to include your personal phone if you use it for 2FA or Slack.

Key takeaway: Never sign an agreement that defines 'Company Resources' to include your personal devices or internet connection. This is a common trap used to claim ownership of code written at home.

Action Item: If you see 'anticipated business' in your contract, ask for a written definition of the company's current business scope to narrow the clause.

Leveraging Technology for Contract Analysis

Manually parsing dense legal jargon is prone to error, and missing a single clause can cost you the rights to your future startup or side project. TermScore uses advanced AI to instantly scan your employment agreements, highlighting overbroad IP assignment clauses and comparing them against state-specific labor protections. By identifying these risks before you sign, you can negotiate from a position of strength and ensure your personal work remains yours.