Does an employment NDA cover personal side projects created on my own time without company equipment?

Does an employment NDA cover personal side projects created on my own time without company equipment?

An NDA alone typically protects confidential information, but most employment contracts include an 'Invention Assignment' clause that claims ownership of your side projects. If your work relates to your employer's business or uses their resources, the company likely owns the intellectual property, regardless of when or where you created it.

Key takeaway: Never assume that working on your own time or equipment grants you ownership. The legal language in your 'Proprietary Information and Inventions Agreement' (PIIA) is the final authority on who owns your work.

The Difference Between NDAs and Invention Assignments

Employees often confuse Non-Disclosure Agreements (NDAs) with Invention Assignment Agreements. While they are frequently bundled into a single document, they serve distinct legal purposes.

• NDAs: Restrict you from sharing the company's trade secrets, client lists, and internal data.
• Invention Assignments: Legally transfer the ownership of any intellectual property (code, designs, inventions) you create during your employment to the company.

Action Item: Locate your employment contract and search specifically for a section titled 'Inventions,' 'Intellectual Property,' or 'Assignment of Inventions.' This is where your ownership rights are defined.

Criteria for Company Ownership

Even if you believe your side project is independent, courts look at specific factors to determine if the employer has a claim. If your contract contains a broad assignment clause, the company may claim ownership if the project meets any of the following criteria:

• Business Relevance: The project relates directly to the company’s current business or anticipated research and development.
• Resource Utilization: You used company hardware, software licenses, or proprietary data to build the project.
• Time Overlap: You performed any work on the project during your standard working hours.
• Trade Secret Usage: You applied knowledge or trade secrets gained during your employment to solve a problem within your side project.

Action Item: Document every tool, software, and hour used for your side project. If you are challenged, this audit trail is your primary defense.

State-Specific Protections

Several states have enacted laws to protect employees from overly broad assignment agreements. These statutes generally prevent employers from claiming ownership of inventions created entirely on your own time without company resources, provided the invention does not relate to the employer's business.

Key Jurisdictions

• California (Labor Code 2870): Prohibits employers from requiring employees to assign rights to inventions developed on their own time without using company resources, unless the invention relates to the employer's business or results from work performed for the employer.
• Washington (RCW 49.44.140): Similar to California, it protects inventions created on personal time, provided they do not relate to the employer's business or actual/anticipated research.
• Illinois (Employee Patent Act): Provides a statutory framework that limits the scope of assignment agreements to protect employee-developed inventions.

Action Item: Check if your employment contract includes a 'Notice' clause regarding these state laws. If you live in a protected state, ensure your contract explicitly acknowledges these statutory rights.

How to Protect Your Side Projects

If you are planning to launch a side project, you must be proactive to avoid future litigation or loss of IP.

1. Review the PIIA: Read your 'Proprietary Information and Inventions Agreement' carefully. Look for the definition of 'Inventions.'
2. Request an Exclusion: If you have a pre-existing project, list it in an 'Excluded Inventions' schedule attached to your contract.
3. Maintain Strict Separation: Never use company email, Slack, GitHub, or hardware for your personal project.
4. Seek Legal Clarification: If the language is ambiguous, ask your employer for a written waiver or clarification regarding your specific project.

Key takeaway: If you are building a startup, do not rely on 'common sense.' Rely on the written contract. If the contract is vague, it is usually interpreted in favor of the employer.

TermScore can automatically analyze your employment contracts to identify aggressive Invention Assignment clauses and flag potential risks to your personal side projects. By uploading your agreement, you can instantly see if your current terms align with your personal goals or if you need to negotiate an exclusion before you start building.