Can an employment NDA legally prohibit me from coding personal projects on my own time?

Can an employment NDA legally prohibit me from coding personal projects on my own time?

An NDA alone cannot stop you from coding personal projects, as its purpose is to protect trade secrets, not to claim ownership of your labor. However, most employment contracts include an 'Invention Assignment' clause that can legally grant your employer ownership of any code you write, regardless of when or where it was created.

Key takeaway: An NDA is a confidentiality agreement; an Invention Assignment Agreement is an ownership transfer. Always check your contract for the latter, as it is the primary legal mechanism used to claim your side projects.

Understanding the Difference: NDA vs. Invention Assignment

Many employees conflate NDAs with IP assignment. It is critical to distinguish between the two to understand your legal exposure.

• NDA (Non-Disclosure Agreement): Prohibits you from sharing your employer's proprietary data, algorithms, or client lists. It does not inherently claim ownership of your personal work.
• Invention Assignment Agreement: A clause stating that any intellectual property (code, designs, inventions) created during your employment belongs to the company.

Action Item: Search your employment contract for keywords like 'Inventions,' 'Work Product,' 'Intellectual Property,' or 'Developments.' If these terms appear, you are subject to assignment rules.

The 'Three-Prong' Test for IP Ownership

In many jurisdictions, specifically those with employee-friendly labor laws, courts evaluate whether your employer can claim your side project based on three specific criteria. If your project meets all these, it is likely yours; if it fails one, the company may own it.

Action Item: Document your development process. Keep a log of hours worked and ensure you are using a personal laptop and personal software licenses to maintain a clear separation from company assets.

Jurisdiction-Specific Protections

Your location significantly impacts your rights. Several states have enacted laws that limit the scope of invention assignment agreements.

• California (Labor Code 2870): Employers cannot require you to assign rights to an invention developed entirely on your own time without using company resources, provided it does not relate to the employer's business.
• Washington (RCW 49.44.140): Similar to California, this statute protects employees from being forced to assign rights to inventions that do not relate to the employer's business.
• Illinois (Employee Patent Act): Provides protections for inventions developed on the employee's own time without company equipment.

Action Item: If you live in a state with these protections, ensure your contract does not contain a 'catch-all' clause that attempts to override state law. If it does, that specific clause may be unenforceable.

Red Flags in Your Employment Contract

When reviewing your contract, watch for these aggressive clauses that could jeopardize your personal projects:

• 'Related to Business' Clauses: Language that defines 'business' so broadly that it covers almost any software development.
• 'During Employment' Clauses: Language that claims ownership of everything you create simply because you are employed by the company, regardless of the project's nature.
• 'Prior Inventions' Omissions: If you fail to list your existing side projects in an 'Excluded Inventions' exhibit, the company may claim them by default.

Key takeaway: Always maintain an 'Excluded Inventions' list. If you have a side project you intend to keep, disclose it in writing to your employer before signing your employment agreement.

How to Protect Your Personal Code

1. Use Separate Hardware: Never code personal projects on a company-issued laptop.
2. Use Personal Accounts: Use personal GitHub/GitLab accounts. Never push personal code to company-managed repositories.
3. Avoid Company IP: Ensure your project does not utilize any proprietary libraries, APIs, or data sets owned by your employer.
4. Disclose Early: If you have a significant side project, ask your employer for a written waiver or a 'carve-out' agreement.

Action Item: Audit your current development environment. If you are using company-provided IDE licenses or cloud credits for personal work, migrate those projects to personal accounts immediately.

Streamlining Contract Analysis

Navigating the dense legal language of employment contracts is difficult, but you don't have to do it alone. TermScore uses advanced AI to scan your employment agreements, identifying restrictive invention assignment clauses and potential conflicts with your personal projects. By uploading your contract to TermScore, you can instantly see if your employer's language is standard or overly aggressive, allowing you to make informed decisions about your side projects before you sign.