IP Assignment Clause for Software Engineers — Protecting Your Side Projects
April 27, 2026 / 5 MIN READ / KlausClause TeamKlausClause Editorial Team
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IP Assignment Clause for Software Engineers — Protecting Your Side Projects
Most software engineers have a side project. A weekend app, an open-source library, a startup idea in progress. The IP assignment clause in your employment contract — buried in section 7 or attached as a separate "Proprietary Information and Inventions Assignment Agreement" — may reach into that side work and assign it to your employer.
Before you sign, you need to understand exactly what your employer is claiming, and negotiate a carve-out for your existing and future side projects.
What the Standard IP Assignment Clause Says
The broadest version looks like this:
"Employee assigns to Company all inventions, discoveries, developments, improvements, and works of authorship conceived, developed, or reduced to practice during the term of employment."
The worst versions expand this further:
"...including inventions conceived outside of normal working hours, using personal equipment, or unrelated to the Company's current business activities."
If you're a software engineer and you write code — any code — during your employment period, the broadest version of this clause claims the company owns it. The app you're building on weekends. The open-source library you've been maintaining for years. The side business you started before you took this job.
This isn't hypothetical risk. Companies have asserted these clauses against employees who left to start competing businesses. The clauses are frequently enforceable.
The Statutory Limits in Some States
A handful of states limit the reach of IP assignment clauses:
California, Delaware, Illinois, Minnesota, North Carolina, and Washington all have statutes that limit employer IP claims to work done using company time or company resources, or work that relates to the company's current or anticipated business. In these states, a blanket assignment of all IP created during employment — regardless of when, where, or with what tools — is unenforceable to the extent it covers work outside those categories.
California's version (Labor Code §2870) is the most employer-limiting. It says employers cannot require assignment of inventions developed entirely on the employee's own time, without using company equipment or resources, and that don't relate to the company's business or result from the employee's work for the company.
But even in California, the line between "related to company business" and "unrelated" can be blurry for software engineers whose side projects are also in tech.
If you're not in one of these states, the statutory protections may not apply. The contractual language controls.
What "Conceived During Employment" Means
The assignment clause's trigger is often "conceived, developed, or made during the period of employment" — not "while at work" or "using company resources." This temporal scope is what makes these clauses so broad.
If you have an idea for an app on a Saturday afternoon, write the first 100 lines of code over the weekend, and finish it over the next six months — all outside work hours — the clause may still cover it because it was "conceived" during your employment period.
The practical implication: if you start a side project after you've signed a broad IP assignment clause, the company may have a claim on it.
The Pre-Employment Carve-Out
Most employers will agree to a "prior inventions" carve-out. This is a list — attached as an exhibit to the IP assignment agreement — of existing projects, inventions, or work you've already done that are explicitly excluded from the company's IP claim.
This carve-out only covers what you list before signing. Anything you start after signing is subject to the clause's terms.
What to include in your prior inventions list:
- Any existing side projects, even unfinished ones
- Open-source projects you've started or contributed to significantly
- Domain names and apps you've registered
- Any patents you hold or have applied for
- Any business ideas you've documented or started work on
The list should be specific enough to be identifiable. "Mobile app concept" is too vague. "Social fitness tracking app called [name], iOS prototype started March 2026" is sufficient.
The Future Work Carve-Out
The harder negotiation is protecting future side projects — work you haven't started yet. This requires negotiating changes to the IP assignment clause itself, not just adding an exhibit.
Proposed language that often works:
"The assignment obligations in this section do not apply to inventions developed entirely on Employee's own time, without the use of Company equipment, facilities, or trade secrets, and that do not relate to the Company's current or demonstrably anticipated business or result from work performed for the Company."
This mirrors the California statutory standard. Many employers — even those outside California — will accept this language because it's a reasonable scope limitation.
What won't work: "My personal projects are mine." Too vague. "Anything I do outside work hours." Missing the "company resources" component. Employers need the limitation to be tied to both time and resources, not just time.
The "Relates to Company's Business" Ambiguity
Even with good carve-out language, there's a gray zone: side projects that are in tech, broadly, but not specifically in your employer's product area.
If your employer is a CRM company and your side project is a photo editing app, you're clearly in the clear. If your employer is a developer tools company and your side project is a CLI productivity tool — that's the gray zone.
The safest approach: list it in your prior inventions exhibit even if it's embryonic, so any "during employment" argument is foreclosed.
What Most Employers Will Agree To
Most employers are after a legitimate goal: protecting their actual trade secrets, client relationships, and proprietary technology. They're not trying to own your weekend hobby.
In practice, reasonable employers will:
- Accept a specific prior inventions list
- Accept California-style scope limitations on future IP
- Agree that "company resources" means company time, equipment, or confidential information — not just the fact of employment
Push back on blanket claims to everything created "during the period of employment." Ask for the prior inventions exhibit. Ask for the scope limitation. Most employers will accommodate both.
Have an IP assignment clause in your offer letter? Upload it to KlausClause and see exactly what you're signing over — and what's negotiable.
This article is for informational purposes only and does not constitute legal advice.
Written with AI assistance, reviewed by the KlausClause Editorial Team. This is informational, not legal advice. For anything specific to your situation, talk to a licensed attorney.
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