Does an employment NDA allow my boss to claim ownership of side projects I built on my own time?

Does an employment NDA allow my boss to claim ownership of side projects I built on my own time?

An employment NDA (Non-Disclosure Agreement) typically does not grant your employer ownership of your side projects. Ownership is usually governed by a separate 'Invention Assignment' or 'Proprietary Information and Inventions Agreement' (PIIA). Even with such an agreement, state laws often protect your right to own work created on your own time, provided you did not use company resources or trade secrets.

Understanding the Difference: NDA vs. Invention Assignment

It is a common misconception that an NDA covers intellectual property (IP) ownership. An NDA is designed to protect confidential information from being leaked. An Invention Assignment agreement, however, is the legal instrument that transfers the rights of your creations from you to your employer.

The Scope of Invention Assignment Clauses

Most employment contracts contain a clause stating that any invention, software, or creative work developed during your employment belongs to the company. However, these clauses are not absolute. Courts generally look at three factors to determine if the employer owns your side project:

• Timing: Was the work created during working hours?
• Resources: Did you use company laptops, servers, software licenses, or proprietary data?
• Relevance: Does the project directly compete with or relate to the employer's actual or anticipated business?

Key takeaway: Always distinguish between an NDA and an Invention Assignment agreement. If your contract lacks an assignment clause, your employer has a much harder time claiming your side work, regardless of what the NDA says.

Action Item: Review your employment contract specifically for the section titled 'Inventions,' 'Intellectual Property,' or 'Proprietary Information.' If you cannot find one, your employer likely has no contractual claim to your side projects.

State-Specific Protections for Side Projects

Several states have enacted legislation to prevent employers from overreaching into the private lives of their employees. If you live in one of these states, your side projects are significantly safer.

Action Item: Search for 'Invention Assignment statute' followed by your state name. If your state has a law similar to California’s Labor Code 2870, your employer cannot force you to sign away rights to inventions that do not relate to their business.

Red Flags in Your Employment Contract

When reviewing your contract, look for language that is overly broad. If a clause claims ownership of 'all inventions conceived, developed, or reduced to practice during the term of employment,' it is likely an attempt to overreach.

Common Overreach Tactics

• The 'Any Business' Clause: Language that claims ownership of anything related to the company's 'anticipated' business, which could be interpreted to cover almost any industry.
• The 'Company Time' Trap: Clauses that define 'company time' as any time you are employed, even if you are off the clock.
• Equipment Ambiguity: Clauses that claim ownership if you used 'any company equipment,' even if it was just a standard office pen or a basic software subscription.

Key takeaway: If a clause is too broad, it may be unenforceable. However, you should not rely on a court to strike it down. Negotiate an 'Excluded Inventions' list to be attached to your contract before signing.

Action Item: If you have a side project, disclose it in writing to your employer before signing the contract and ask for it to be explicitly excluded from the assignment agreement.

How to Protect Your Side Projects

1. Document Everything: Keep a log of hours spent on your side project to prove it was done outside of business hours.
2. Use Personal Equipment: Never use your work laptop, company-provided cloud storage, or work email for your side project.
3. Separate Finances: Ensure your side project has its own bank account and does not use company funds.
4. Avoid Trade Secrets: Do not use any code, data, or processes that you learned or accessed through your employer.

Action Item: Create a 'Personal IP Folder' where you store evidence of your project's development, including timestamps and proof of personal hardware usage.

Navigating the complexities of employment contracts can be daunting, but you don't have to do it alone. TermScore uses advanced AI to analyze your employment agreements, instantly flagging overbroad IP assignment clauses and potential risks to your side projects so you can negotiate with confidence.