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

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

In most jurisdictions, an employment NDA or Invention Assignment Agreement cannot legally claim ownership of side projects developed entirely on your own time, using your own equipment, and unrelated to your employer's business. However, poorly drafted contracts often contain overbroad language that creates significant legal risk for employees.

Key takeaway: An NDA is not a blanket ownership claim. If your contract lacks specific carve-outs for personal work, you are vulnerable to litigation regardless of your intent.

The Legal Framework of Invention Assignment

Most employment contracts include an 'Invention Assignment' clause. This is distinct from a standard Non-Disclosure Agreement (NDA), though they are often bundled together. The assignment clause dictates that any intellectual property (IP) you create during your employment belongs to the company.

The Three-Prong Test for Ownership

Courts typically look at three specific criteria to determine if an employer owns your side project:

• Time: Was the work performed entirely outside of your contracted working hours?
• Resources: Did you use company-owned hardware, software licenses, or proprietary data?
• Relevance: Is the project directly related to the employer’s current or anticipated business, or does it result from work performed for the employer?

Action Item: Audit your current contract to see if it explicitly defines 'Inventions' to include anything created 'during the term of employment' without the three-prong qualifiers listed above.

Jurisdictional Protections: The California Standard

Several states have enacted legislation to protect employee innovation. California Labor Code Section 2870 is the gold standard, rendering any provision in an employment agreement that requires an employee to assign rights in an invention developed on their own time unenforceable, provided the invention does not relate to the employer's business.

Action Item: If you live in a state without specific statutory protection, your contract language is the only law that matters. You must negotiate specific exclusions before signing.

Red Flags in Your Employment Agreement

When reviewing your contract, look for these common traps that could jeopardize your side projects:

• 'Any and All' Language: Clauses that claim ownership of 'any and all ideas, concepts, or inventions conceived during the term of employment' are dangerously broad.
• Lack of 'Excluded Inventions' Schedule: If your contract doesn't have an attachment where you can list pre-existing projects, you are at risk of the company claiming them by default.
• Broad Definition of 'Business': If the contract defines the employer's business as 'any technology or software development,' it effectively claims everything you build.

Key takeaway: Never sign an agreement that lacks an 'Excluded Inventions' section. If the employer refuses to include one, consider it a major red flag regarding their culture of IP ownership.

Steps to Protect Your Intellectual Property

1. Use Personal Hardware: Never code, design, or write on a company-issued laptop. Even using a company VPN to access your personal GitHub can be used as evidence of 'company resource' usage.
2. Document Everything: Keep a timestamped log of your development hours. If a dispute arises, you need proof that the work occurred on weekends or evenings.
3. Disclose Early: If you have a significant side project, disclose it in writing to your employer before signing the contract. Get their written acknowledgment that the project is excluded from the assignment clause.
4. Keep it Separate: Ensure your side project does not compete with your employer. If you work for a CRM company, building a competing CRM on the side is a breach of your duty of loyalty, regardless of the NDA.

Action Item: Create a 'Side Project Disclosure' document today. Even if you aren't currently negotiating, having a record of your personal work helps establish a clear boundary.

How TermScore Simplifies Contract Review

Navigating the nuances of IP assignment clauses is complex, but you don't have to do it alone. TermScore uses advanced AI to instantly scan your employment agreements, flagging overbroad invention assignment clauses and identifying where your personal IP rights are at risk. Upload your contract to TermScore to get a clear, plain-English breakdown of your obligations before you sign.