Amend Your Contract To Allow For Side Projects

December 14, 2016

The other day Joel Spolsky blogged a wonderful overview of the copyright issues with software companies in terms of its employees. The bottom line is: most companies have an explicit clause in their contracts which states that all intellectual property created by a developer is owned by the employer. This is needed, because the default (in many countries, including mine) is that the creator owns the copyright, regardless of whether they were hired to do it or not.

That in turn means that any side project, or in fact any intellectual property that you create while being employed as a developer, is automatically owned by your employer. This isn’t necessarily too bad, as most employers wouldn’t enforce their right, but this has bugged me ever since I started working for software companies. Even though I didn’t know the legal framework of copyright, the ownership clause in my contracts was always something that I felt was wrong. Even though Joel’s explanation makes perfect sense – companies need to protect their products from a random developer suddenly deciding they own the rights to parts of it – I’ve always thought there’s a middle ground.

(Note: there is a difference between copyright, patents and trademarks, and the umbrella term “intellectual property” is kind of ambiguous. I may end up using it sloppily, so for a clarification, read here.)

California apparently tried to fix this by passing the following law:

Anything you do on your own time, with your own equipment, that is not related to your employer’s line of work is yours, even if the contract you signed says otherwise.

But this doesn’t work, as basically everything computer-related is “in your employer’s line of work”, or at least can be, depending on the judge.

So let’s start with the premise that each developer should have the right to create side projects and profit from them, potentially even pursue them as their business. Let’s also have in mind that a developer is not a person, whose only ideas and intellectual products are “source code” or “software design(s)”. On the other hand the employer must be 100% sure that no developer can claim any rights on parts of the employer’s product. There should be a way to phrase a contract in a way that it reflects these realities.

And I have always done that – whenever offered a contract, I’ve stated that:

  1. I have side-projects, some of which are commercial, and it will make no sense for the employer to own them
  2. I usually create non-computer intellectual property – I write poetry, short stories, and linguistics problems

And I’ve demanded that the contract be reworded. It’s a bargain, after all, not one side imposing it’s “standard contract” on the other. So far no company objected too much (there was some back-and-forth with the lawyers, but that’s it – companies decided it was better for them to hire a person they’ve assessed positively, than to stick to an absolute contract clause).

That way we’ve ended up with the following wording, which I think is better than the California law, protects the employer, and also accounts for side-proejcts and poetry/stories/etc.

Products resulting from the Employee’s duties according to the terms of employment – individual or joint, including ideas, software development, inventions, improvements, formulas, designs, modifications, trademarks and any other type of intellectual property are the exclusive property of Employer, no matter if patentable.

Not sure if it is properly translated, but the first part is key – if the idea/code/invention/whatever is a result of an assignment that I got, or a product I am working on for the employer, then it is within the terms of employment. And it is way less ambiguous than “the employer’s line of work”. Anything outside of that, is of course, mine.

I don’t vouch for the legal rigidity of the above, as I’m not a legal professional, but I strongly suggest negotiating such a clause in your contracts. It could be reworded in other ways, e.g. “work within the terms of employment”, but the overall idea is obvious. And If you end up in court (which would probably almost never happen, but contracts are there to arrange edge cases), then even if the clause is not perfect, the judge/jury will be able to see the intent of the clause clearly.

And here I won’t agree with Joel – if you want to do something independent, you don’t have to be working for yourself. Side projects, of which I’ve always been a proponent, (and other intellectual products) are not about the risk-taking entrepreneurship – they are about intellectual development. They are a way to improve and expand your abilities. And it is a matter of principle that you own them. In rare cases they may be the basis of your actual entrepreneurial attempt.

Amending a standard contract is best done before you sign it. If you’ve already signed it, it’s still possible to add an annex, but less likely. So my suggestion is, before you start a job, use your “bargaining power” to secure your intellectual property rights.

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One Response to “Amend Your Contract To Allow For Side Projects”

  1. It shouldn’t matter if you create something pertaining to the line of business your employer is in. If you do something on your time and your employer wants it, but doesn’t want to buy it from you, then they are a bum and need to be disappointed more often!

    The really sad thing is, most employers kill products and services because they are only invested in them as a business; only interested in how much they can get out of them (although some fantastic ones are releasing open-source software).

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