Can my employer claim ownership of personal side projects built on my own time under an employment NDA?

Can my employer claim ownership of personal side projects built on my own time?

In most jurisdictions, your employer cannot claim ownership of personal side projects if they are developed entirely on your own time, without using company equipment, supplies, facilities, or trade secret information, and do not relate directly to the employer’s business or anticipated research and development.

Key takeaway: If your contract contains an overly broad 'Invention Assignment' clause, it may legally supersede common law protections, potentially granting your employer rights to your side work regardless of when or where you built it.

Understanding Proprietary Information and Inventions Agreements (PIIA)

Most employment contracts include a PIIA. These clauses are designed to ensure that any intellectual property (IP) created during your employment belongs to the company. However, the scope of these clauses varies significantly.

The Three Pillars of Protection

To retain ownership of your side projects, you must typically satisfy three specific criteria:

• No Company Resources: You did not use company laptops, software licenses, servers, or proprietary data.
• No Business Relation: The project does not compete with your employer’s current business or their planned R&D.
• Off-Hours Development: The work was performed entirely outside of your compensated working hours.

Action Item: Audit your current workspace. If you are using a company-issued laptop for personal coding, you are likely violating the 'No Company Resources' pillar, giving your employer a legal claim to your code.

Jurisdictional Protections: The California Model

Certain states have codified protections for employees. California Labor Code Section 2870 is the gold standard. It explicitly states that an employer cannot require an employee to assign rights to an invention developed entirely on their own time without using the employer’s property.

Action Item: Check if your employment contract includes a 'Choice of Law' provision. If you live in a protective state but your contract dictates the law of a state without these protections, your rights may be significantly diminished.

Red Flags in Your Employment Contract

When reviewing your contract, look for language that is intentionally broad. These clauses are designed to capture everything you touch during your tenure.

• 'Any and all inventions': If the clause lacks a qualifier regarding the company's business, it is a red flag.
• 'Related to the business': This is often defined so broadly that it could encompass almost any software or creative work.
• 'Developed during the term of employment': This phrasing ignores whether you were on the clock or using company resources.

How to Mitigate Risk

1. Disclose Early: If you have a project that could be perceived as related to your work, disclose it in writing to your HR or legal department before you begin.
2. Maintain Separation: Use a separate computer, separate email address, and separate cloud storage for all personal projects.
3. Document Everything: Keep a log of hours worked on your personal projects to prove they were done outside of company time.

Action Item: Create a 'Prior Inventions' list. Most PIIAs have an exhibit where you can list projects you started before joining the company. Ensure this list is accurate and updated.

The Role of AI in Contract Analysis

Manually parsing dense legal jargon is prone to error, and missing a single 'assignment of rights' clause can cost you the ownership of your startup or creative work. TermScore uses advanced AI to scan your employment agreements, highlighting aggressive IP assignment language and comparing your contract against industry-standard protections. By using TermScore, you can identify potential ownership traps before you sign, allowing you to negotiate clearer terms that protect your personal intellectual property.