Can an employer claim ownership of personal side projects built without company resources via an NDA?

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

In most jurisdictions, an employer cannot claim ownership of a side project if it was developed entirely on your own time, without using company equipment, proprietary information, or trade secrets, and if it does not directly relate to the employer’s current or anticipated business. However, broad IP assignment clauses can complicate these rights, making it essential to verify your specific contract language.

The Anatomy of IP Assignment Clauses

Most employment contracts contain an 'Invention Assignment' clause. These clauses are designed to ensure that anything you create during your employment belongs to the company. While standard, these clauses often overreach.

Common Red Flags in Contracts

• Broad Definitions: Clauses that claim ownership of 'any and all ideas, concepts, or inventions' conceived during the term of employment, regardless of relevance to the company.
• Lack of Carve-outs: The absence of language excluding projects developed on personal time using personal equipment.
• 'Anticipated Business' Clauses: Language that claims ownership of projects related to the company’s 'future' or 'anticipated' business, which is often used to claim ownership of almost any software or tech-related project.

Key takeaway: If your contract does not explicitly exclude inventions created on your own time without company resources, you are at higher risk of a legal dispute. Always look for a 'Section 2870' style carve-out.

Action Item: Audit your current employment agreement for the phrase 'related to the Company’s business.' If this is not defined narrowly, you should seek legal clarification or a written waiver.

State-Specific Protections

Several states have enacted legislation to protect employees from overreaching IP assignment clauses. These statutes generally override contract language that attempts to claim ownership of personal inventions.

Action Item: Check if your state has an 'Invention Assignment' statute. If you live in a state without these protections, your contract language is the final authority.

How to Protect Your Side Projects

To ensure your side projects remain yours, you must create a clear 'paper trail' that separates your professional work from your personal innovation.

1. Use Personal Hardware: Never use a company-issued laptop, phone, or tablet for your side project. Even a single line of code written on a company device can be argued as 'company-assisted.'
2. Use Personal Accounts: Do not use company email, GitHub Enterprise accounts, or cloud storage (AWS/Azure) paid for by your employer.
3. Document Your Time: Keep a log of when you work on your project. If you are a salaried employee, this is critical to prove the work was done outside of your 'scope of employment.'
4. Disclose and Carve Out: If you are building something significant, disclose it to your employer and ask for a written 'IP Waiver' or 'Carve-out' agreement.

Key takeaway: The 'Company Resources' test is the most common metric courts use. If you use a company-licensed software tool or a company-provided cloud environment, you have effectively handed your employer a claim to your IP.

Action Item: Create a 'Personal Development Policy' for yourself. If you are working on a project, keep a dedicated folder on a personal drive and document that no company resources were utilized.

The Role of Trade Secrets

Even if you build a project on your own time, you can still be sued if the project utilizes your employer's trade secrets. If your side project is a competitor to your employer, or if it uses proprietary algorithms or data sets you accessed at work, the 'ownership' of the project becomes secondary to a 'misappropriation of trade secrets' claim.

Risk Mitigation Checklist

• Avoid building products that directly compete with your employer.
• Do not use proprietary data sets or internal documentation.
• Ensure your project does not rely on 'know-how' that is unique to your employer’s specific, non-public processes.

Action Item: Before launching a side project, perform a 'Conflict of Interest' check. If the project is in the same industry, consult with an attorney to ensure you are not violating your duty of loyalty.

Final Thoughts on Contractual Clarity

The ambiguity of IP assignment clauses is a common source of litigation. TermScore can automatically analyze your employment contract to identify overly broad IP assignment clauses, missing state-mandated carve-outs, and potential risks to your personal side projects, allowing you to negotiate better terms with confidence.