Can an employer use an NDA to claim intellectual property of projects built without company resources?

Can an employer claim ownership of side projects created without company resources?

No, an employer generally cannot claim ownership of intellectual property (IP) created entirely on your own time, using your own equipment, and without utilizing company trade secrets or proprietary information. While many employment contracts contain broad 'Invention Assignment' clauses, these are frequently limited by state law and public policy.

Key takeaway: An overreaching contract clause does not automatically override state labor laws. If your project is unrelated to your employer's business and developed independently, you likely retain full ownership.

The Legal Framework: Invention Assignment Clauses

Most employment agreements include an 'Invention Assignment' or 'Proprietary Information and Inventions Agreement' (PIIA). These clauses are designed to ensure that anything you create while employed belongs to the company. However, these clauses are not absolute.

The California Standard (Labor Code 2870)

California is the gold standard for employee IP protection. Under California Labor Code Section 2870, any provision in an employment agreement that requires an employee to assign rights to an invention developed entirely on their own time is unenforceable if the following criteria are met:

• The invention was developed entirely on the employee's own time.
• No equipment, supplies, facilities, or trade secret information of the employer was used.
• The invention does not relate directly to the employer's business or actual/demonstrably anticipated research or development.
• The invention does not result from any work performed by the employee for the employer.

Action Item: Check if your employment contract includes a 'Notice of Exemption' or a reference to state-specific labor codes. If it does not, your contract may be drafted to be intentionally misleading.

Comparison: Enforceable vs. Unenforceable IP Claims

Red Flags in Your Employment Contract

When reviewing your contract, look for these specific red flags that suggest an employer is overstepping their legal bounds:

• 'All-Encompassing' Language: Clauses that claim ownership of 'all inventions conceived during the term of employment' without exceptions for personal projects.
• Lack of 'Carve-Outs': The absence of a section that allows you to disclose and exclude prior inventions or independent side projects.
• Broad Definition of 'Business': Definitions of the company's business that are so vague they could encompass any software or creative work.

Action Item: If you find these red flags, do not sign the agreement without requesting an 'IP Exclusion' addendum that lists your current side projects.

How to Protect Your IP

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

1. Document Everything: Keep a log of when you work on your project and what hardware you use.
2. Use Personal Infrastructure: Never use your company email, cloud storage (like company-managed Google Drive), or company-provided VPN to access or store your project files.
3. Disclose Early: If your company has a policy for disclosing outside work, follow it, but be careful not to sign away rights you don't have to.
4. Avoid Competitive Overlap: Do not build a product that competes with your employer's current or planned roadmap, as this can trigger 'breach of fiduciary duty' claims regardless of IP ownership.

The Role of TermScore in Contract Analysis

Navigating the nuances of IP assignment clauses is complex, and standard legal language is often designed to favor the employer. TermScore uses advanced AI to instantly scan your employment agreements, identifying overly broad IP assignment clauses and highlighting potential risks to your personal projects. By providing a clear, plain-English breakdown of your contract, TermScore empowers you to negotiate with confidence and protect your creative work before you sign.