Many founders choose to maintain a full-time job (i.e., “day job”) during the initial stages of their startup, whether or not the startup is incorporated. This is a common way to self-fund or otherwise hedge prior to a friends & family or seed round.
If in the technology field, however, a day job likely requires their employees to sign an invention assignment in conjunction with or as part of their employment agreement. In a nutshell, the invention assignment defines parameters that an employee assigns intellectual property to its employer. Some invention assignments are broad while others are very narrow in scope. Certain jurisdictions like California place boundaries on how broad employers can make their invention assignment.
The broader the scope of the invention assignment, the greater the potential problem for the founder and his or her startup, as the founder may be unknowingly assigning intellectual property to the day job rather than the startup. If the startup or the technology involved is in any way related to the day job, the risk of such an assignment increases.
Thus, it is very important that startup founders who choose to maintain a day job first locate their employment contract and then look closely at applicable invention assignment. Determine under what parameters intellectual property is being assigned to the day job. Founders should at least be aware of the scope of any applicable invention assignment – even if their startup is a completely different product or service relative to their day job.