Key Points in This Guide
- 1How IP assignment works legally
- 2What "conceived or reduced to practice during employment" means
- 3The role of the prior inventions list
- 4State law exceptions (CA, DE, WA, MN, NC, IL)
- 5How to carve out personal projects
- 6What "company equipment or time" triggers mean
- 7Work-for-hire vs assignment: the key difference
- 8How employers use IP clauses in practice
Intellectual property assignment clauses are among the most consequential — and least understood — provisions in any employment contract. In a world where knowledge workers create valuable IP every day, understanding exactly what you are transferring to your employer is essential. This guide breaks down how IP assignment works, what most clauses actually say, and how to protect your side projects.
What an IP Assignment Clause Actually Does
An intellectual property assignment clause transfers ownership of intellectual property you create during your employment to your employer. This is not unusual — employers have a legitimate interest in owning work you produce as part of your job. The problem is that most IP assignment clauses are drafted far more broadly than this legitimate interest requires.
A standard clause might read: "Employee assigns to Company all inventions, discoveries, developments, improvements, and works of authorship conceived, created, or reduced to practice by Employee during the term of employment, whether or not conceived during working hours, whether or not using Company resources, that relate to the Company's business, anticipated business, research, or development." Read that carefully: "anticipated business" and "whether or not conceived during working hours" are the phrases that turn a legitimate IP clause into a career threat.
The Personal Time Trap
The phrase "whether or not conceived during working hours" is the core of the personal time trap. Under a broad IP assignment clause, work you do at midnight on a Sunday on your personal laptop can belong to your employer if a creative reading of "related to company business" applies. For software engineers, designers, product managers, and anyone in a creative or technical role, this is a real risk.
The employer's argument in a dispute would be: "Your employment contract gave us ownership of anything you created that relates to our business. Your app does X — we do Y — X and Y are in the same market, therefore your app belongs to us." You might win that argument eventually. But the legal fees to defend your ownership can exceed the value of what you built.
This has happened. Engineers have been sued by former employers for mobile apps, SaaS tools, and open-source projects they built independently. The typical settlement involves assigning partial rights or paying a license fee. Preventing it requires getting the carve-out language in the contract before you sign.
Protecting Your Side Projects: The Carve-Out
The standard protection is a schedule attached to your employment agreement listing your pre-existing inventions and projects by name. This schedule — sometimes called Exhibit A or Schedule 1 — creates a contemporaneous record that those projects existed before your employment and are therefore excluded from the IP assignment.
The language you want: "The IP assignment in Section X does not apply to inventions that Employee can demonstrate were (a) conceived entirely on personal time, (b) developed without the use of any Company equipment, supplies, facilities, or confidential information, and (c) do not relate to the Company's current or anticipated business." California Labor Code Section 2870 codifies this protection into state law; employees in California have this protection automatically. Employees in other states must negotiate for it.
When you present your list of prior inventions, be comprehensive but reasonable. Include anything that could conceivably be relevant. Do not include vague descriptions — be specific about what each project is, what it does, and roughly when you began working on it. An employer who refuses to allow any prior inventions list should be treated with serious caution.
Work Made for Hire: A Different but Related Risk
"Work made for hire" is a copyright concept distinct from IP assignment. Under US copyright law, work created by an employee within the scope of their employment is automatically a work made for hire — meaning the employer, not the employee, is the legal author. This applies to anything you create as part of your job function, period, without the need for a separate IP assignment clause.
IP assignment clauses capture what work-for-hire law does not: inventions (which are patent-related), work created outside the scope of employment, and work created by contractors (who are not covered by work-for-hire by default). Together, a work-for-hire rule and an IP assignment clause can give an employer broad ownership over nearly everything you produce professionally.
For freelancers and independent contractors, this is especially important: by default, you own the copyright in work you create as a contractor. A client can only own the work if there is a written IP assignment or a written work-for-hire agreement signed by both parties for certain categories of works. This is why every client contract should be reviewed for IP provisions before you start work.
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