Does an employment NDA allow my employer to claim intellectual property rights over side projects built without company equipment?

Does an employment NDA allow my employer to claim intellectual property rights over side projects built without company equipment?

No, an NDA alone does not grant your employer ownership of your side projects. However, most employment contracts include a separate 'Invention Assignment' clause. If this clause is drafted broadly, it may attempt to claim ownership of all work created during your employment, even if you used your own equipment and personal time.

Key takeaway: An NDA is for confidentiality; an Invention Assignment agreement is for ownership. Always check your contract for the latter, as it is the primary legal mechanism employers use to claim your side projects.

Understanding the Difference: NDA vs. Invention Assignment

Employees often confuse NDAs with IP assignment agreements. An NDA (Non-Disclosure Agreement) is designed to prevent the unauthorized sharing of trade secrets. It does not inherently transfer ownership of your creative output to your employer. The actual transfer of rights occurs in an Invention Assignment clause, often found within your offer letter or a standalone Proprietary Information and Inventions Agreement (PIIA).

Red Flags in Assignment Clauses

• 'All-Encompassing' Language: Clauses that claim ownership of anything created 'during the term of employment' without qualification.
• Lack of 'Personal Time' carve-outs: Failure to explicitly exclude projects developed entirely on your own time.
• Broad Definition of 'Company Business': Defining the company's business so broadly that it covers any software, writing, or design work you might perform.

Action Item: Search your contract for the word 'Invention' or 'Assignment.' If you find a clause that claims everything you create, you need to negotiate a carve-out.

State-Specific Protections for Side Projects

Several jurisdictions have enacted laws to protect employees from overreaching IP claims. These statutes typically render assignment agreements unenforceable if the invention meets specific criteria.

Action Item: If you live in a state with these protections, ensure your contract includes a statement acknowledging these rights. If it does not, the contract may be misleading or unenforceable.

The 'Three-Prong' Test for Ownership

Even in states without specific statutes, courts often apply a common-law 'Three-Prong Test' to determine if an employer can claim your side project. To keep your work, you must generally prove:

1. No Company Resources: You did not use company equipment, supplies, facilities, or trade secret information.
2. No Relation to Business: The project does not relate directly to the employer's business or their anticipated research and development.
3. No Connection to Employment: The project does not result from any work performed for the employer.

Key takeaway: If your side project fails any of these three prongs, your employer has a strong legal argument for ownership, regardless of your NDA status.

How to Protect Your IP Before Starting a Project

Proactive management of your IP is essential to avoid future litigation. Follow these steps to insulate your side projects:

1. Review Your PIIA: Identify the specific scope of your assignment obligations.
2. Request a Carve-out: If you have a pre-existing project, ask your employer to sign an 'Excluded Inventions' list, which is a standard attachment to many employment contracts.
3. Document Everything: Maintain a clear log of when you worked on your project and prove that no company assets were used.
4. Use Separate Hardware: Never install company software or access company servers on the machine used for your side project.

Action Item: If you are starting a new job, ask for an 'Excluded Inventions' schedule during the onboarding process to list your current side projects and exempt them from the assignment clause.

The Role of AI in Contract Analysis

Manually parsing dense legal jargon to find hidden IP traps is inefficient and prone to error. TermScore uses advanced AI to instantly scan your employment agreements, flagging overly broad Invention Assignment clauses and highlighting potential risks to your personal intellectual property. By identifying these issues before you sign, TermScore empowers you to negotiate better terms and protect your creative work from the start.