Can an employment NDA claim ownership of side projects created on personal time?

Can an employment NDA claim ownership of side projects created on personal time?

No, an employment agreement cannot legally claim ownership of side projects created entirely on personal time, using personal equipment, and unrelated to the employer's business. While employers often include broad 'Invention Assignment' clauses, these are limited by state statutes that protect employee rights to innovate outside of work hours.

Key takeaway: An NDA is primarily for protecting confidential information, not for seizing your personal intellectual property. Always distinguish between an NDA and an Invention Assignment Agreement.

The Legal Framework: Invention Assignment vs. NDA

It is a common misconception that an NDA (Non-Disclosure Agreement) grants an employer ownership of your work. An NDA is designed to prevent the disclosure of trade secrets. Ownership of your side projects is governed by an Invention Assignment Agreement. If your contract contains an overly broad assignment clause, it may be unenforceable under specific state laws.

State-Specific Protections

Several states have enacted laws that explicitly protect an employee's right to develop inventions on their own time. For example, California Labor Code Section 2870 prohibits employers from requiring employees to assign rights to inventions developed entirely on their own time without using company resources.

• California (Section 2870): Protects inventions created without company equipment, supplies, or trade secrets.
• Washington (RCW 49.44.140): Similar protections for inventions developed on personal time.
• Illinois (Employee Patent Act): Limits the scope of assignment agreements to work related to the employer's business.

Action Item: Check if your state has a specific 'Employee Invention Act.' If you live in a state without these protections, your contract terms become the primary governing document.

Criteria for Determining Ownership

To determine if your side project is safe, evaluate it against these four criteria. If you answer 'Yes' to any of these, your employer may have a legal claim to your work.

The 'Scope of Business' Test

Courts often look at whether the side project competes with the employer. If you are a software engineer for a fintech company and you build a personal finance app on the weekend, the employer has a much stronger claim than if you built a gardening app. The 'nexus' between your job duties and your project is the deciding factor.

Action Item: Review your job description. If your side project falls within the 'anticipated research or development' of your employer, you are at high risk.

Best Practices to Protect Your IP

If you are building a side project while employed, you must maintain a strict 'firewall' between your professional and personal work.

1. Use Personal Hardware: Never use a company-issued laptop, tablet, or phone for your side project.
2. Avoid Company Networks: Do not use company VPNs, servers, or cloud storage (e.g., company-provided GitHub or AWS accounts).
3. Document Everything: Keep a log of hours worked on your project to prove it was done outside of your 9-to-5 schedule.
4. Disclose Early: If your project is borderline, consider a written disclosure to your HR or legal department to get a formal waiver.

Key takeaway: Never use company-licensed software (like Adobe Creative Cloud or enterprise IDEs) to build your personal projects. This creates a direct link to company resources.

When to Seek Legal Counsel

If your side project has significant commercial potential or if your employment contract contains a 'Pre-Invention Disclosure' requirement, you should consult an attorney. Many contracts require you to list all existing inventions before you start your employment. Failing to disclose a project that you later monetize can be grounds for termination or a breach of contract lawsuit.

Action Item: If you are planning to launch a startup, perform a 'contract audit' to ensure you are not violating any non-compete or non-solicitation clauses that might exist alongside your NDA.

How TermScore Simplifies 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 instantly scan your employment agreements, highlighting aggressive invention assignment clauses, restrictive covenants, and potential ownership traps. By uploading your contract to TermScore, you can identify exactly which clauses threaten your side projects in seconds, allowing you to negotiate with confidence or proceed with peace of mind.