Does an employment NDA cover personal side projects developed during off-hours without company assets?

Does an employment NDA cover personal side projects developed during off-hours without company assets?

Generally, no. If a project is developed entirely on your own time, using your own equipment, and is unrelated to your employer's business, it is typically not covered by an NDA or an Invention Assignment Agreement. However, broad contract language can create legal ambiguity that employers may exploit to claim ownership of your intellectual property.

Key takeaway: An NDA is a confidentiality agreement, but the real threat to your side project is the 'Invention Assignment Agreement' (IAA) often bundled within your employment contract. Always distinguish between confidentiality obligations and ownership rights.

The Distinction Between NDAs and Invention Assignment Agreements

Employees often conflate NDAs with Invention Assignment Agreements (IAAs). While an NDA restricts what you can disclose, an IAA dictates who owns the work you create. If your contract contains a broad 'Work Made for Hire' clause, your employer may claim ownership of anything you create during your employment term, regardless of when or where it was built.

Criteria for Employer Ownership

Employers typically claim ownership if your project meets any of the following criteria:

• Use of Company Resources: You used company-issued laptops, software licenses, or proprietary servers.
• Business Relevance: The project competes with, or relates directly to, the employer's current or anticipated research and development.
• Time Allocation: The work was performed during your contracted working hours.
• Trade Secret Usage: The project utilizes proprietary data, customer lists, or internal methodologies you accessed through your employment.

Action Item: Audit your employment contract for the phrase 'all inventions created during the term of employment.' If this exists without a carve-out for personal projects, you are at high risk.

Jurisdictional Protections: The California Exception

State laws significantly impact the enforceability of broad assignment clauses. California, for example, has robust protections under Labor Code Section 2870.

Action Item: Research your state's specific labor codes regarding 'Invention Assignment' to see if your contract's language is legally voidable.

How to Protect Your Side Projects

To ensure your side projects remain yours, you must maintain a strict 'firewall' between your professional and personal work.

1. Use Personal Hardware: Never install company software or access company repositories on your personal machine.
2. Document Everything: Keep a time-stamped log of your development hours to prove the work occurred outside of company time.
3. Disclose Prior Inventions: Most contracts include an 'Excluded Inventions' schedule. List your existing side projects here before signing.
4. Avoid Competitive Overlap: Do not build products that directly compete with your employer’s core business model.

Key takeaway: If you are working on a project that could be perceived as competitive, obtain a written waiver from your employer’s legal or HR department before proceeding.

Red Flags in Your Employment Contract

When reviewing your contract, look for these specific red flags that signal an overreaching employer:

• 'All-Encompassing' Language: Clauses that claim ownership of 'any and all ideas, concepts, or inventions' without limitation.
• Lack of 'Carve-Outs': The absence of a section specifically excluding personal projects developed on your own time.
• Broad Definition of 'Confidential Information': Definitions that include general industry knowledge, which could be used to claim your personal project is based on 'stolen' trade secrets.

Action Item: If you identify these red flags, consult with an employment attorney to draft a 'Side Project Disclosure' letter to establish a paper trail of your independent development.

Automated Contract Analysis

Navigating the nuances of IP ownership and confidentiality clauses is complex, but you don't have to do it alone. TermScore uses advanced AI to automatically scan your employment agreements, highlighting restrictive invention assignment clauses and potential conflicts of interest. By identifying these risks early, TermScore helps you understand your rights and negotiate better terms before you sign.