Due primarily to financial constraints, many founders keep a separate job (a “day job”) during the early stages of a startup. This is common whether or not the startup is incorporated, and it is often how co-founders self-fund or reduce risk prior to a seed round. What many founders overlook is that a document from a day job can materially affect a startup’s viability: before launching, each co-founder should review their current employer invention assignment to confirm the intellectual property they are developing for the startup cannot be claimed by the employer.
An employer’s invention assignment is not part of every job
In the technology sector, many employers require employees to sign an invention assignment agreement, either as a standalone document or as part of a broader employment agreement. In simple terms, an employer invention assignment defines what intellectual property an employee must assign to the employer. (For what it is worth, a startup should also have each co-founder sign a proper invention assignment so the startup owns the IP it needs.) If your day job is not related to technology, or your employer is not building technology, you may not have signed an invention assignment at all.
Check the scope of your employer invention assignment
Some employer invention assignments are broad, while others are narrow. Regardless of what the contract says, certain jurisdictions (like California) limit how broad these agreements can be. In many cases, invention assignments are reasonably scoped and do not try to claim every idea you have ever had, but some employers do take an aggressive approach.
The broader the scope of the invention assignment, the greater the risk for the founder and the startup. A founder can unintentionally assign startup-related intellectual property to the day job instead of to the startup. The risk increases if the startup is related to the day job, if the founder is working on the startup during work hours, or if the founder uses the employer’s equipment, software, or confidential information while building.
Common red flags to look for
Language that assigns inventions created “at any time,” including nights and weekends, with no carveout for work done on your own time.
A definition of “inventions” or “intellectual property” that is extremely broad (for example, any idea, concept, know-how, or work product).
Assignment provisions tied to anything “related to” the employer’s business, products, research, or anticipated roadmap, especially if those terms are vague.
Requirements to disclose all outside projects or to submit inventions for review, even if unrelated.
Restrictions on using any employer equipment, accounts, code, data, or confidential information, combined with a wide assignment clause.
Practical steps before you build
Do not use employer devices, accounts, repos, or SaaS tools for startup work.
Do not build during work hours or on work premises.
Keep a clean record of when you worked on the project and what you created.
If the agreement requires disclosure of outside inventions, follow the process before you launch.
Make sure each co-founder signs a startup-friendly invention assignment to the company early.
When to talk to a lawyer
Consider getting legal advice early if your startup overlaps with your employer’s line of business, if you have already written code or developed designs while employed, or if the invention assignment language is broad or unclear. A short review can help you understand your risk, plan a clean development process, and avoid a future diligence issue that can derail fundraising or an acquisition.
Conclusion
If you are keeping a day job while building a startup, locate your employment paperwork and read the invention assignment carefully. Identify what types of intellectual property are assigned to the employer and what exceptions apply. At a minimum, you should understand the scope of any invention assignment, even if your startup seems unrelated to your day job. If you are unsure how it applies, consider speaking with your employer’s human resources team to confirm what the company’s position is, and consider speaking with a startup lawyer before you invest significant time or money into development.
Ryan RobertsStartup Lawyer
Ryan Roberts is a startup lawyer with more than two decades of experience advising on venture financings and M&A transactions totaling more than $1 billion. He is the author of the Amazon bestselling startup law book Acceleration.
