Are employment NDAs that claim ownership of all side projects enforceable?

Are employment NDAs that claim ownership of all side projects enforceable?

In most jurisdictions, employment agreements that claim ownership of all side projects—regardless of their relevance to the employer—are legally overbroad and often unenforceable. Courts typically invalidate clauses that attempt to seize intellectual property created entirely on an employee's own time, using personal resources, and unrelated to the employer's core business.

Key takeaway: An employer cannot simply draft a contract that claims everything you create; they must demonstrate a legitimate business interest and a nexus between your work and the invention.

The Legal Landscape of IP Ownership

The enforceability of an IP assignment clause hinges on the specific language of the contract and the governing state law. While employers have a right to protect their trade secrets and core business interests, they do not have a blanket right to your personal creative output.

The California Standard (Labor Code 2870)

California is the gold standard for employee protection. Under California Labor Code 2870, any provision in an employment agreement that requires an employee to assign rights to an invention developed on their own time is unenforceable if the following criteria are met:

• The invention was developed entirely on the employee's own time.
• No equipment, supplies, facilities, or trade secret information of the employer was used.
• The invention does not relate to the employer's business or actual/demonstrably anticipated research.
• The invention does not result from any work performed by the employee for the employer.

Jurisdictional Variations

While California offers robust protections, other states have varying degrees of scrutiny. States like Illinois, Washington, and Delaware have enacted similar statutes, though they may differ in their definitions of "business interest." In states without specific statutes, courts apply the "shop right" doctrine or common law principles, which generally favor the employer only if the employee used company resources or if the invention is directly related to the employee's assigned duties.

Action Item: Check your state's labor department website to see if there is a specific statute governing "Invention Assignment Agreements."

Red Flags in Your Employment Contract

When reviewing your employment agreement, look for these specific red flags that indicate an overreaching IP clause:

• "All Inventions" Language: Clauses that claim ownership of "all inventions, ideas, or concepts conceived during the term of employment" without qualification.
• Lack of Exclusions: The absence of a "Prior Inventions" schedule where you can list projects you already own.
• Broad Definitions of Business: Definitions of the company's business that are so vague they could encompass any software or creative project.
• Post-Termination Reach: Clauses that attempt to claim ownership of ideas conceived shortly after leaving the company.

How to Negotiate IP Clauses

If you are presented with an overbroad contract, you have the right to request modifications. Use the following steps:

1. Identify the Conflict: Point out that the clause is overly broad and potentially unenforceable under state law.
2. Request an Exclusion List: Ask to attach an "Exhibit A" that lists your existing side projects and intellectual property.
3. Narrow the Scope: Propose language that limits the assignment to inventions "directly related to the employer's business" rather than "any and all inventions."
4. Clarify Resource Usage: Explicitly state that the company has no claim to work performed on personal devices outside of business hours.

Key takeaway: Never sign an agreement containing an IP assignment clause without first disclosing your existing side projects in writing.

Best Practices for Protecting Your Work

Even if your contract is favorable, you must maintain a strict separation between your professional and personal work to avoid legal disputes.

• Use Personal Hardware: Never develop side projects on a company-issued laptop or phone.
• Avoid Company Software: Do not use company-licensed software (e.g., Adobe Creative Cloud, JetBrains, or proprietary internal tools) for personal projects.
• Time Tracking: Maintain a log of when you work on your side projects to prove they occur outside of your 9-to-5 hours.
• Separate Repositories: Keep your personal code in private repositories on a personal GitHub or GitLab account, never on company servers.

Action Item: Audit your current digital workspace today. If you have personal files on a work machine, migrate them to a personal cloud drive immediately.

Conclusion

While employers have a legitimate interest in protecting their intellectual property, they cannot use employment contracts as a mechanism to seize your personal creative output. By understanding your state's laws and ensuring clear boundaries between your professional and personal work, you can protect your side projects from legal overreach.

If you are unsure whether your current employment contract contains overbroad IP assignment clauses, TermScore can automatically analyze your agreement, highlight risky language, and provide actionable insights to help you negotiate better terms.