Do employment NDAs automatically claim ownership of side projects built on my own time without company equipment?

Do employment NDAs automatically claim ownership of side projects?

No, employment NDAs and invention assignment agreements do not automatically grant your employer ownership of side projects created on your own time. Ownership is governed by a combination of state-specific labor laws and the specific, often overbroad, language contained in your employment contract. If you developed the project entirely on your own time, without using company equipment, proprietary information, or trade secrets, and the project does not relate to your employer's current or anticipated business, you likely retain ownership.

Key takeaway: An NDA is primarily about confidentiality; the actual ownership of your work is usually dictated by an 'Invention Assignment Agreement' or a specific section within your employment contract. Always check for these clauses separately.

The Legal Framework: Why 'Automatic' Is a Myth

Employers often include broad language in employment contracts to capture any intellectual property (IP) an employee creates. However, courts frequently strike down or limit these clauses if they are deemed unconscionable or overly restrictive. The legal battleground usually centers on three specific criteria:

• Time: Was the work performed during your contracted working hours?
• Resources: Did you use company laptops, servers, software licenses, or proprietary data?
• Relevance: Does the project compete with your employer's business or utilize their trade secrets?

Action Item: Audit your current contract for the phrase 'all inventions created during the term of employment.' If you find this, you are at higher risk and should seek a carve-out agreement.

State-Specific Protections

Several states have enacted legislation that explicitly protects an employee's right to their own inventions. These laws generally invalidate contract provisions that attempt to assign ownership of inventions developed entirely on an employee's own time.

In these jurisdictions, even if your contract says the company owns everything, the law may override that language. However, these protections usually do not apply if the invention relates directly to the employer's business or results from work performed for the employer.

Action Item: Research your specific state's 'Invention Assignment' statutes. If you live in a state without these protections, your contract language is the final authority.

Red Flags in Your Employment Contract

When reviewing your agreement, look for these common red flags that signal an attempt to claim your side projects:

• 'Work Made for Hire' language: This legal term is often used to claim ownership of creative works, but its application to side projects is frequently contested.
• Broad 'Scope of Employment' definitions: If the contract defines your scope as 'any software development,' it may attempt to claim every line of code you write, regardless of the project.
• Lack of Carve-outs: A well-drafted contract should include an 'Excluded Inventions' section where you can list pre-existing projects.

Key takeaway: If your contract lacks an 'Excluded Inventions' list, you are leaving your personal IP vulnerable. Request an addendum to your contract that explicitly lists your side projects as your sole property.

How to Protect Your IP

If you are building a side project, follow these steps to maintain ownership:

1. Use Personal Hardware: Never use a company-issued laptop, phone, or tablet. Even a single commit to a GitHub repository from a company machine can create a legal nexus.
2. Separate Networks: Do not use company VPNs or office Wi-Fi to push code or conduct research for your project.
3. Document Everything: Maintain a timestamped log of your development hours. If challenged, you must prove the work was done outside of your 9-to-5.
4. Avoid Proprietary Knowledge: Ensure your project does not utilize any trade secrets, customer lists, or internal methodologies you learned at your job.

Action Item: Create a 'Project Disclosure' document. If you have a significant side project, disclose it to your employer in writing and get a signed acknowledgment that they have no claim to it.

The Role of TermScore

Navigating the legalese of employment contracts is complex and high-stakes. TermScore uses advanced AI to instantly scan your employment agreements, identifying aggressive invention assignment clauses and potential ownership risks that could jeopardize your side projects. By highlighting these specific terms, TermScore empowers you to negotiate better protections or understand your legal standing before you start building. Visit TermScore today to ensure your hard work remains yours.