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

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

No, a standard Non-Disclosure Agreement (NDA) does not inherently grant your employer ownership of your side projects. An NDA is designed to protect confidential information and trade secrets. However, most employment contracts include a separate 'Invention Assignment' clause or a Proprietary Information and Inventions Agreement (PIIA) that can legally claim ownership of your work, regardless of whether you used company resources.

The Critical Distinction: NDA vs. Invention Assignment

It is a common misconception that an NDA is the only document governing your output. In reality, your employment contract likely contains multiple layers of restrictive covenants. Understanding the difference is vital to protecting your personal intellectual property.

What an NDA Actually Does

• Restricts the disclosure of proprietary data, client lists, and internal processes.
• Prevents you from using company trade secrets to build a competing product.
• Does not automatically transfer the copyright or patent rights of your independent creations to the employer.

The Role of Invention Assignment Clauses

While the NDA keeps your mouth shut, the Invention Assignment clause takes your work. These clauses often state that any work created 'during the term of employment' or 'related to the company's business' belongs to the employer. If your contract includes this language, the fact that you used your own laptop or worked on weekends may be legally irrelevant.

Key takeaway: Always check your contract for a 'Proprietary Information and Inventions Agreement' (PIIA). If you find one, the NDA is the least of your concerns; the PIIA is the document that dictates ownership.

Jurisdictional Protections: The California Exception

Not all states treat invention assignment clauses equally. If you reside in a state with strong employee protections, you have a significant legal shield.

California Labor Code Section 2870

California law provides a 'safe harbor' for employees. An employer cannot require you to assign rights to an invention if you meet all of the following criteria:

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

If you live in a state like California, Washington, or Illinois, these statutes often override overly broad contract language. However, you must be able to prove that you did not use company resources.

Red Flags in Your Employment Contract

When reviewing your contract, look for these specific phrases that signal potential ownership disputes:

• 'Work Made for Hire': This legal term automatically vests copyright ownership in the employer.
• 'Related to the Company's Business': This is often defined so broadly that it could encompass almost any software or creative project.
• 'During the Term of Employment': This implies that any idea conceived while you are on the payroll belongs to the company, even if you never touched a company computer.

If you see these terms, you should seek a formal 'carve-out' or an 'Excluded Inventions' list attached to your contract. This list explicitly identifies your pre-existing projects that the company agrees not to claim.

How to Protect Your Side Projects

If you are planning to launch a side project, follow this protocol to minimize legal exposure:

1. Audit your contract: Identify if you signed a PIIA or an Invention Assignment Agreement.
2. Document your environment: Keep a log of hours worked and ensure you are using personal hardware and software licenses.
3. Maintain separation: Never use company email, Slack, or cloud storage for your side project files.
4. Request an exclusion: If your project is significant, ask your employer to sign a document acknowledging that the project is your personal property and falls outside the scope of your employment.

Key takeaway: Documentation is your best defense. If a dispute arises, you must be able to prove that your project was developed in a 'clean room' environment, entirely isolated from company resources.

Conclusion

The legal landscape surrounding side projects is complex and highly dependent on the specific language in your employment agreement. Relying on the assumption that 'I didn't use company resources' is a dangerous strategy if your contract contains a broad invention assignment clause. TermScore can automatically analyze your employment contract to highlight these specific IP ownership risks, ensuring you know exactly what you own and what your employer might claim before you start your next project.