What states offer the strongest protection for employee side projects?

California, Washington, Illinois, and several other states have specific statutes (like California Labor Code Section 2870) that prohibit employers from claiming ownership of inventions developed entirely on an employee's own time without using company equipment or trade secrets.

How can I tell if my contract is too restrictive?

Look for 'Invention Assignment' clauses that claim ownership of 'all ideas, concepts, or developments' created during the term of employment, regardless of whether they relate to the company's business. These are often considered overbroad and potentially unenforceable.

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Can an employer use an NDA to claim ownership of side projects built on personal time?

Q: Can an employer claim ownership of side projects built on personal time?

Generally, no, provided the project does not relate to the employer's business, does not use company resources, and was not developed during work hours. However, overly broad IP assignment clauses in employment contracts can legally override these protections depending on your jurisdiction.

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

An employer cannot automatically claim ownership of side projects developed on personal time, provided they do not use company resources, occur during work hours, or relate directly to the employer's business. However, broad 'Invention Assignment' clauses in your employment contract can legally override these protections, making your side project company property.

The Legal Framework of IP Ownership

In the United States, the default rule is that an employee owns the fruits of their labor unless a contract states otherwise. However, most employment agreements include an Invention Assignment Agreement. These clauses are designed to ensure that the company owns any intellectual property (IP) created by the employee that is relevant to the company's operations.

The Three-Prong Test for Ownership

To determine if you own your side project, courts typically look at whether the project meets these three criteria:

Time: The work was performed entirely outside of your contracted working hours.
Resources: No company equipment, software, proprietary data, or trade secrets were used.
Relevance: The project does not relate to the employer's current business, anticipated research, or development.

Key takeaway: If your side project uses your company-issued laptop, you have likely breached the 'Resources' prong, giving your employer a strong legal claim to your work.

Action Item: Audit your current workspace. If you are using a work-issued laptop or cloud storage account for personal projects, migrate that data to a personal, non-company device immediately.

State-Specific Protections

Several states have enacted legislation to protect employees from overreaching employers. These laws often invalidate employment contract provisions that attempt to claim ownership of inventions developed on an employee's own time.

State	Key Statute	Protection Level
California	Labor Code 2870	High (Strictly limits employer claims)
Washington	RCW 49.44.140	High (Protects non-work related inventions)
Illinois	765 ILCS 1060/2	Moderate (Requires specific notice)
New York	N/A	Low (Relies on common law/contract)

Action Item: Check your state's labor code. If you reside in a state with strong IP protections, ensure your contract includes a disclosure of any pre-existing inventions to avoid future disputes.

Red Flags in Your Employment Contract

Not all IP assignment clauses are created equal. You must identify language that is intentionally broad to capture your personal output.

'All-Encompassing' Language: Clauses that claim ownership of 'any and all ideas conceived during the term of employment' without a relevance qualifier.
'Scope of Employment' Ambiguity: Definitions of 'business' that are so broad they cover every industry, effectively claiming everything you create.
Lack of Exclusions: The absence of a 'Schedule A' or 'Prior Inventions' list where you can carve out your existing side projects.

Key takeaway: If your contract does not explicitly exclude your side projects, you are at risk. Always request an addendum to your contract that lists your side projects as 'Excluded Inventions.'

Action Item: Review your contract for an 'Exclusions' section. If it is missing, draft a letter to your HR department or legal counsel listing your current side projects and requesting written acknowledgment that they fall outside the scope of your employment.

How to Protect Your Side Projects

Document Everything: Keep a clear log of the hours spent on your project to prove it was done outside of work hours.
Use Personal Infrastructure: Never use company email, Slack, GitHub, or cloud storage for your side project.
Maintain Separation: Do not use company-provided software licenses (e.g., Adobe Creative Cloud, JetBrains) for your personal work.
Disclose Early: If you are building something that could be perceived as competitive, disclose it to your employer in writing to avoid a 'breach of duty of loyalty' claim.

Action Item: Create a 'Project Separation Log' where you record the dates and times you work on your side project, ensuring it remains strictly separated from your professional obligations.

Analyze Your Risk with TermScore

Navigating the nuances of IP assignment clauses is complex, and a single misread sentence can cost you the rights to your intellectual property. TermScore uses advanced AI to instantly scan your employment contracts, flagging overbroad IP assignment clauses and identifying potential risks to your side projects. Upload your document to TermScore today to gain clarity on your ownership rights and protect your creative output.