Does an employment NDA cover personal side projects created without using any company resources?

Does an employment NDA cover personal side projects created without using any company resources?

An employment NDA or Invention Assignment Agreement typically does not cover side projects created entirely on your own time, using your own equipment, and unrelated to your employer’s business. However, if your contract contains an overly broad IP assignment clause, your employer may legally claim ownership regardless of your efforts to keep the projects separate.

Key takeaway: An NDA protects confidential information, but an Invention Assignment Agreement (IAA) determines ownership. You must distinguish between the two to understand your legal risk.

The Legal Distinction: NDA vs. Invention Assignment

Employees often confuse NDAs with Invention Assignment Agreements (IAAs). An NDA restricts you from sharing trade secrets, while an IAA dictates who owns the intellectual property you create during your employment. If your contract includes an IAA, the language is often drafted to be as broad as possible to capture any work product created during your tenure.

The 'Scope of Employment' Trap

Many contracts define 'Company IP' as anything created that relates to the company's 'actual or demonstrably anticipated business.' If your side project is even tangentially related to your employer's industry, the company may argue it falls within the scope of your employment, regardless of whether you used their laptop or office space.

• Directly Related: Projects that compete with or improve the employer's core product.
• Indirectly Related: Projects that use similar technology stacks or methodologies.
• Unrelated: Projects that fall outside the company's current or planned market sector.

Action Item: Review your employment contract for a section titled 'Proprietary Information and Inventions Agreement' and highlight any definitions of 'Inventions' or 'Work Product.'

State-Specific Protections

Several U.S. states have enacted legislation to protect employees from overreaching IP assignment clauses. These laws generally prevent employers from claiming ownership of inventions created on an employee's own time, provided no company resources were used and the work does not relate to the employer's business.

Action Item: If you live in a state with these protections, ensure your contract includes a notice stating that the agreement does not apply to inventions qualifying under the state's specific labor code.

How to Protect Your Side Project

To minimize the risk of your employer claiming your side project, you must maintain a strict 'firewall' between your professional and personal work.

1. Use Personal Hardware: Never use a company-issued laptop, tablet, or phone for side project development.
2. Use Personal Accounts: Do not use your work email, GitHub enterprise account, or company-paid cloud storage (AWS/Azure) for your project.
3. Document Everything: Maintain a log of hours worked on your project to prove it was done outside of business hours.
4. Disclose Prior Inventions: If you had the idea before joining the company, list it in the 'Prior Inventions' schedule attached to your employment agreement.
5. Seek a Carve-Out: If you are starting a significant project, ask your employer for a written waiver or a 'carve-out' agreement that explicitly excludes your project from the scope of your employment contract.

Key takeaway: Documentation is your best defense. If a dispute arises, you will need to prove the project was created independently of company time and resources.

When to Consult Legal Counsel

If your side project has the potential to generate significant revenue or if it is in the same industry as your employer, the risk of litigation is high. Standard contract language is rarely sufficient to protect you in these scenarios. You should consult with an employment attorney to draft a formal disclosure or a side-letter agreement that protects your ownership rights.

TermScore can automatically analyze your employment contracts to identify aggressive IP assignment clauses and potential conflicts of interest. By uploading your agreement, you can instantly see if your current terms are standard or if they contain restrictive language that could jeopardize your side projects, allowing you to negotiate better terms before you sign.