Can an employment NDA legally claim ownership of personal side projects built without company resources?

Can an employment NDA legally claim ownership of personal side projects built without company resources?

No. In most jurisdictions, an employment contract cannot legally claim ownership of inventions developed entirely on your own time without using company equipment, supplies, facilities, or trade secrets, provided the work does not relate to the employer's business or actual or demonstrably anticipated research.

The Legal Framework of IP Ownership

While employers often include broad "Invention Assignment" clauses in NDAs or employment agreements, these clauses are subject to state-specific statutory limitations. Courts generally view overly broad assignments as an unreasonable restraint on trade or an infringement on an employee's right to earn a living.

Statutory Protections by Jurisdiction

• California (Labor Code Section 2870): Explicitly prohibits employers from requiring employees to assign rights to inventions developed entirely on their own time without company resources, unless the invention relates directly to the employer's business or results from work performed for the employer.
• Washington (RCW 49.44.140): Similar to California, it protects inventions created on personal time without company equipment, provided they do not relate to the employer's business.
• Illinois (Employee Patent Act): Provides a clear framework where provisions requiring assignment of inventions developed on personal time are unenforceable.

Key takeaway: Always check your state's specific labor code. Even if a contract says "all inventions," state law often overrides the contract language if the invention meets the "personal time and resources" criteria.

Action Item: Review your employment contract for a "Proprietary Information and Inventions Agreement" (PIIA) and cross-reference it with your state's labor statutes regarding invention assignment.

The Three-Pronged Test for Ownership

To determine if your side project is truly yours, legal experts typically apply a three-pronged test. If your project meets all three, it is almost certainly your property.

What Constitutes "Company Resources"?

Many employees mistakenly believe that using a company-issued laptop for a "quick check" is harmless. Legally, this is a major red flag. Company resources include:

• Company-issued hardware (laptops, phones, tablets).
• Proprietary software licenses paid for by the employer.
• Access to company servers, cloud storage (AWS/Azure/GCP), or internal databases.
• Use of company time (even during lunch breaks if you are on-site).
• Utilization of company trade secrets or confidential data.

Action Item: If you are building a side project, purchase your own hardware and use independent software licenses. Never log into your side project repository from a company network.

How to Protect Your IP Before Signing

If you are in the process of negotiating an employment agreement, you have the leverage to clarify your ownership rights. Do not rely on verbal assurances from HR or hiring managers.

1. Request an IP Carve-out: Ask for an exhibit to be attached to your contract that lists your existing side projects and explicitly excludes them from the assignment clause.
2. Define "Business": Ensure the definition of the employer's "business" is narrow. If the definition is too broad, it could capture unrelated projects.
3. Seek Legal Counsel: Have an employment attorney review the PIIA to ensure it complies with local statutes.

Key takeaway: A written carve-out is the gold standard of protection. If it isn't in the contract, you are relying on the court's interpretation of the law, which is expensive and uncertain.

Action Item: Draft a list of all current side projects and present them to your employer during the onboarding phase to be formally excluded from your assignment obligations.

Common Red Flags in NDAs

Watch out for these specific phrases in your contract that signal an overly aggressive attempt to claim your work:

• "All inventions conceived during the term of employment": This is often too broad and may be unenforceable in states like California.
• "Related to the employer's business": If the employer is a general tech conglomerate, this could be interpreted to include almost any software project.
• "Developed with any company resources": This is a trap. Even a minor use of a company-provided email address to register a domain could be used to claim ownership.

TermScore can automatically analyze your employment contracts to identify these aggressive IP assignment clauses and provide actionable insights on how to negotiate them, ensuring your personal projects remain yours.