Do employment NDAs automatically claim intellectual property rights over personal side projects built without company resources?

Do employment NDAs automatically claim intellectual property rights over personal side projects built without company resources?

No, an NDA (Non-Disclosure Agreement) is strictly for protecting confidential information and does not inherently grant the employer ownership of your work. However, most employment contracts contain a separate Invention Assignment Agreement that can legally claim ownership of your side projects, even if built on your own time and equipment, if they relate to the company's business.

Understanding the Difference: NDAs vs. Invention Assignment Clauses

It is a common misconception that an NDA covers everything you do while employed. In reality, your employment agreement is usually a bundle of different clauses. An NDA restricts you from sharing trade secrets, while an Invention Assignment clause dictates who owns the intellectual property (IP) you create.

The Scope of Invention Assignment

Most standard employment contracts define "Inventions" broadly. They often include any work, discovery, or software created during your employment that:

• Relates to the employer’s actual or anticipated business.
• Results from work performed for the employer.
• Is developed, in whole or in part, using the employer’s equipment, supplies, facilities, or trade secret information.

Key takeaway: If your side project is even tangentially related to your employer's industry, the "related to the company's business" clause can be used to claim ownership, regardless of whether you used company resources.

Action Item: Review your employment contract specifically for a section titled "Proprietary Rights," "Inventions," or "Assignment of Inventions." Do not confuse this with the "Confidentiality" section.

State-Specific Protections

Several U.S. states have enacted laws that limit the reach of overly broad invention assignment agreements. These statutes provide a "safe harbor" for employees, provided specific criteria are met.

Action Item: If you reside in one of these states, ensure your side project documentation explicitly notes that it was developed entirely on your own time and without company resources to trigger these statutory protections.

Red Flags in Your Contract

When reviewing your agreement, watch for language that effectively strips you of your IP rights. If you see the following, you are at risk:

• "All-encompassing language": Clauses that claim ownership of "any and all ideas, concepts, or inventions conceived during the term of employment."
• "Broad business definition": Definitions of "Company Business" that include any field the company *might* enter in the future.
• "Duty of Disclosure": Requirements to disclose all personal projects to the employer, giving them the opportunity to claim them.

Action Item: If you find these clauses, consult with an attorney to draft a "Prior Inventions" disclosure or an IP carve-out agreement before you begin your side project.

How to Protect Your Side Projects

To minimize the risk of your employer claiming your work, follow these four steps:

1. Use Personal Equipment: Never use a company laptop, software license, or cloud storage account for your side project.
2. Maintain Strict Separation: Work only during non-business hours. Do not use company time, even during lunch breaks.
3. Document Everything: Keep a log of your development hours and the hardware/software used. This serves as evidence if a dispute arises.
4. Disclose Early: If your project is in a similar industry, provide a written disclosure to your employer and seek a written waiver or acknowledgment that the project is yours.

Key takeaway: The best defense is a clear, written "carve-out" signed by your employer that explicitly excludes your specific side project from the scope of your employment agreement.

Action Item: Create a "Side Project Log" today. Documenting that you used personal hardware and personal time is your primary defense against an employer's claim of "implied ownership."

Conclusion

Employment contracts are designed to protect the employer, not the employee's personal ventures. Understanding the specific language in your Invention Assignment clause is the only way to ensure your side project remains your property. TermScore can automatically analyze your employment contract to identify aggressive IP assignment clauses and highlight potential risks to your side projects, giving you the clarity you need to negotiate or proceed with confidence.