Is it legal for an employment NDA to claim ownership of my personal side projects built without company resources?

Is it legal for an employment NDA to claim ownership of my personal side projects?

In many jurisdictions, it is not legal for an employer to claim ownership of personal side projects developed entirely on your own time, using your own equipment, and without utilizing company trade secrets or proprietary information. While some states provide robust statutory protections, overly broad "Invention Assignment" clauses can still create significant legal risk if not explicitly limited in your contract.

Understanding Invention Assignment Clauses

Most employment agreements include an "Invention Assignment" or "Proprietary Information and Inventions Agreement" (PIIA). These clauses are designed to ensure that anything you create that relates to your employer's business belongs to the company. However, the scope of these clauses varies wildly.

The Scope of "Related to Business"

Employers often define "related to business" so broadly that it could encompass almost any software or creative work. If your contract states that the company owns anything "conceived or reduced to practice" during your employment, you are in a high-risk category. Legally, this is often considered an overreach, but it requires a court to strike it down.

• Broad Clauses: Claim ownership of any invention created during the term of employment.
• Narrow Clauses: Limit ownership to inventions created using company resources or directly related to the company's current or anticipated research.

Key takeaway: If your contract does not explicitly exclude projects created on your own time, you are legally vulnerable. Always check for an "Excluded Inventions" schedule in your contract.

State-Specific Protections

Your rights depend heavily on where you work. Several states have enacted labor codes that specifically protect an employee's right to their own inventions.

Action Item: Research your state's labor code. If you live in a state without these specific protections, your contract's language is the final word, making negotiation critical.

How to Protect Your Side Projects

To ensure your side projects remain yours, you must establish a clear "firewall" between your professional duties and your personal work.

1. Never use company hardware: Do not use your work laptop, company-issued phone, or even company-provided software licenses (like Adobe Creative Cloud or GitHub Enterprise) for personal projects.
2. Maintain strict time separation: Work on your projects only during non-working hours.
3. Document your work: Keep a log of when and where you worked on your project to prove it was done outside of company time.
4. Negotiate an exclusion: Before signing, provide a list of existing side projects to your employer and ask for them to be listed as "Excluded Inventions" in an addendum.

Red Flags in Your Employment Agreement

When reviewing your contract, look for these specific red flags that indicate an employer is attempting to claim ownership of your personal life:

• "Any and all inventions": This language is dangerously broad and lacks the necessary carve-outs for personal work.
• "During the term of employment": This implies that even if you work on a project on a Sunday, the company owns it because you are currently employed by them.
• Lack of "Excluded Inventions" section: A professional contract should always provide a space for you to disclose and exclude your pre-existing intellectual property.

Key takeaway: If a contract contains no carve-outs for personal work, assume the employer will claim ownership of anything you build. Do not sign until you have negotiated an exclusion.

The Role of Trade Secrets

Even if you follow all the rules above, you can still lose ownership if your project is deemed to be based on your employer's "trade secrets." If your side project uses proprietary algorithms, internal data, or confidential business strategies you learned at work, the company can claim the project as a derivative work. Ensure your side project is conceptually and technically distinct from your employer's core business.

Action Item: Conduct a "conflict of interest" audit. If your side project competes with your employer, you are at risk of termination for cause, regardless of who owns the IP.

Final Thoughts on Contract Analysis

Navigating the intersection of employment law and intellectual property is complex, and standard contracts are rarely written in the employee's favor. TermScore can automatically analyze your employment agreement to identify overly broad IP assignment clauses and highlight where you may be signing away your rights to your personal projects. Use our platform to gain the clarity you need before you sign.