IP & Confidentiality

California's Invention Assignment Limits (Section 2870-2872) High Risk

Applies to: All employees, especially engineering/technical roles

Employees OWN inventions made on their own time, with their own equipment, unrelated to employer's business. You cannot contract around this protection.

The Core Protection: Labor Code Section 2870

California law fundamentally limits what employers can claim regarding employee inventions. This is not merely a default that can be contracted around—it is a mandatory protection.

Labor Code Section 2870(a) - Full Statutory Text

Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

What Employees OWN (Cannot Be Assigned)

Protected Employee Inventions

An invention belongs to the employee if ALL of these are true:

1. Own Time: Developed entirely on employee's own time (not during work hours)

2. Own Resources: Without using employer's equipment, supplies, facilities, or trade secrets

3. Unrelated: Does not relate to employer's current business or anticipated R&D

4. Not Work Product: Does not result from work performed for employer

What Employers CAN Require Assignment Of

Inventions conceived or developed using employer equipment, supplies, facilities, or trade secrets
Inventions related to employer's current business or demonstrably anticipated R&D
Inventions resulting from work performed for employer
Work product created during work hours as part of job duties

Section 2871: No Retaliation

Labor Code Section 2871

No employer shall require a provision made void and unenforceable by Section 2870 as a condition of employment or continued employment. Nothing in this article shall be construed to forbid or restrict the right of an employer to provide in contracts of employment for disclosure, provided that any such disclosing party is protected by the limitations set forth in Section 2870.

Employers cannot discipline, terminate, or threaten an employee for refusing to assign an invention protected under Section 2870.

Section 2872: Mandatory Notice Requirement

Critical: You MUST Include This Notice

Any employment agreement with an invention assignment clause MUST include written notice of Section 2870 rights. Failure to provide this notice may render your entire assignment provision unenforceable.

Required Section 2870 Notice Language

"I have been notified and understand that the provisions of this Agreement requiring assignment of inventions to the Company do not apply to any invention which qualifies fully under the provisions of Section 2870 of the California Labor Code, which states:

'(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer. (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.'"

Best Practice: Prior Inventions Schedule

Have employees list any pre-existing inventions at hire. This creates clear documentation of what they brought to the job versus what was created during employment. Include a statement like: "If no prior inventions are listed, Employee represents that there are no prior inventions to disclose."

The Non-Compete Ban (Section 16600 Refresher) High Risk

Applies to: All California employees, regardless of where agreement was signed

Non-competes are void. 2024 laws require notification and prohibit enforcement. NDAs cannot function as disguised non-competes.

The Core Rule: B&P Code Section 16600

Business & Professions Code Section 16600

"Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

This is not "unenforceable"—it is void. California courts give non-compete provisions no effect whatsoever.

Full Details on Agreements Page

For complete coverage of non-compete rules, including what's prohibited and what's permitted, see the Non-Compete Ban section on the Agreements page.

2024 Update: Section 16600.1 (AB 1076)

Employers MUST provide individualized written notice to current and former employees (employed after January 1, 2022) that any non-compete clause in their agreement is void.

Notice deadline was February 14, 2024 for existing employees
Must be individualized written notice (not just general announcement)
Failure to notify: civil penalty plus attorney fees

2024 Update: Section 16600.5 (SB 699)

An employer shall not attempt to enforce a contract that is void regardless of where and when the contract was signed:

Non-compete is void even if signed in another state
Void even if governed by another state's law
Creates private right of action + injunctive relief + attorney fees
Applies to current and former employees

NDA as Disguised Non-Compete

This Is Prohibited

You cannot use an NDA or confidentiality agreement to achieve what a non-compete would accomplish. Examples of problematic provisions:

"You cannot use any skills or knowledge gained here..." - Too broad, functions as non-compete

"All customer relationships are confidential..." - May prevent employee from working with customers

"You cannot disclose that you worked on [broad category of work]..." - Effectively bars them from similar employment

What's Actually Permitted

Enforceable Alternatives

Trade secret protection: Legitimate confidentiality for actual trade secrets

Narrow employee non-solicitation: Cannot recruit specific former coworkers

Confidentiality agreements: With proper carve-outs (see Card 4)

IP assignment: Subject to Labor Code 2870 limits (see Card 1)

What Confidentiality Agreements CAN Cover Medium Risk

Applies to: All employees with access to proprietary information

Actual trade secrets are protectable, but "confidential" labels alone mean nothing. Information must meet specific criteria to be enforceable.

What IS Protectable as Confidential

Under the California Uniform Trade Secrets Act (Civil Code Section 3426), information qualifies as a trade secret if it:

Derives independent economic value from not being generally known to others who could benefit from its disclosure or use
Is subject to reasonable efforts to maintain its secrecy

Categories Typically Protectable

Enforceable Confidentiality

Actual trade secrets: Formulas, processes, algorithms, source code specifics

Customer lists: With limitations—must have independent value beyond public info, and employer must take steps to keep confidential

Proprietary processes: Manufacturing methods, business processes unique to company

Financial information: Non-public pricing, margins, financial projections, deal terms

Business strategies: Unpublished marketing plans, product roadmaps, M&A activity

Technical specifications: Product designs, technical documentation, engineering specs

What Does NOT Qualify as Protectable

Not Enforceable

General skills and knowledge: Employee's general expertise, training, know-how developed over career

Publicly available information: Anything disclosed in marketing, patents, public filings

Information not kept confidential: If you share it freely, you cannot later claim confidentiality

Customer relationships: General relationships and goodwill belong to the employee (though specific customer data may be protectable)

Industry knowledge: General information known in the industry or trade

Information learned before employment: Prior knowledge employee brought to the job

The "Reasonable Efforts" Requirement

For information to be protectable, you must demonstrate reasonable efforts to maintain secrecy:

Access controls (password protection, need-to-know basis)
Confidentiality agreements with employees who access it
Marking documents as confidential
Secure storage and transmission
Exit procedures (access revocation, return of materials)
Employee training on confidentiality obligations

Customer List Nuances

Scenario

Protectable?

Customer names that are publicly known

No - public information

Customer names + detailed buying patterns/preferences

Likely Yes - compilation with value

Customer contacts built by employee's personal relationships

Contested - often employee's property

Pricing negotiated with specific customers

Yes - if kept confidential

Trade Secret Carve-Outs Required High Risk

Applies to: All confidentiality and NDA agreements

Your NDA must include whistleblower protections, DTSA immunity notice, and cannot prohibit wage discussions or reporting illegal activity.

Required Carve-Out #1: Whistleblower Protection

Labor Code Section 1102.5

An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information... to a government or law enforcement agency, or to a person with authority over the employee, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation.

Your confidentiality agreement cannot prohibit employees from:

Reporting suspected violations to government agencies
Cooperating with government investigations
Providing information to law enforcement
Reporting internally to supervisors or compliance personnel

Required Carve-Out #2: DTSA Immunity Notice

18 USC Section 1833(b) - Defend Trade Secrets Act

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(A) is made—(i) in confidence to a Federal, State, or local government official... or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

Required DTSA Immunity Notice

"Pursuant to the Defend Trade Secrets Act of 2016 (18 USC 1833(b)), Employee is hereby notified that: An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (B) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order."

Consequence of omission: If you fail to include this notice, you cannot recover exemplary damages or attorney fees in a trade secret misappropriation action against the employee.

Required Carve-Out #3: Wage Discussion Rights

NLRA Section 7 Rights

Under the National Labor Relations Act Section 7, employees have the right to discuss wages, hours, and working conditions with coworkers. This applies to non-union workplaces.

Your NDA cannot prohibit employees from discussing their compensation with colleagues. Broad language like "all personnel information is confidential" violates this right.

Required Carve-Out #4: Reporting Illegal Activity

Beyond Section 1102.5, your NDA cannot prohibit employees from:

Filing complaints with the EEOC, DFEH, OSHA, SEC, or other agencies
Participating in agency investigations as witnesses
Testifying in legal proceedings when required
Responding to subpoenas or court orders

Sample Carve-Out Language

Combined Carve-Out for California NDAs

"Nothing in this Agreement shall prohibit or restrict Employee from: (i) disclosing information to any government agency, including but not limited to the Equal Employment Opportunity Commission, the California Department of Fair Employment and Housing, the Securities and Exchange Commission, or the Occupational Safety and Health Administration; (ii) filing a charge or complaint with any government agency; (iii) communicating with any government agency or otherwise participating in any investigation or proceeding conducted by a government agency; (iv) discussing the terms and conditions of employment with coworkers, union representatives, or any other person; or (v) engaging in any other conduct protected by law."

Remote Work IP Complications Medium Risk

Applies to: All remote employees, especially in technical roles

Remote work blurs the lines on "own time" and "own equipment." Clear policies are essential for gray areas.

When Does "Own Time" Begin for Remote Workers?

Section 2870 protects inventions made on employee's "own time." For remote workers, this distinction is less clear than for office workers with defined hours.

Scenario

Likely Status

Work during defined work hours (9-5)

Work time - assignable to employer

Evening/weekend work on personal project

Own time - potentially protected

Flexible schedule employee, unclear when "off"

Ambiguous - needs clear policy

Non-exempt employee after clocking out

Own time - clearer boundary

Using Personal Equipment for Work Projects

Section 2870 excepts inventions made using "employer's equipment, supplies, facilities, or trade secret information." Remote work complicates this:

Blurred Lines

Company laptop used for personal project: Using employer equipment = invention likely assignable

Personal laptop used for work project: Work project = assignable regardless of equipment

Personal laptop for personal project: Own equipment + own time = protected if unrelated to business

BYOD device where employer reimburses cost: Ambiguous - treat as employer equipment

Moonlighting and Side Projects

Remote workers may have more opportunity for side projects. Key considerations:

Timing: Must be outside work hours (own time)
Equipment: Must use personal equipment, not employer-provided
Subject matter: Must not relate to employer's business or R&D
Resources: Cannot use employer's trade secrets, customer data, or proprietary information

Clear Policies Needed for Gray Areas

Best Practices for Remote IP Policies

Define work hours: Even for exempt employees, establish expected core hours

Equipment clarity: Document which devices are employer-provided vs. personal

Side project disclosure: Require disclosure of side projects (but not automatic assignment)

Pre-approval process: Create process for employees to confirm 2870 protection

Open source policy: Address contributions to open source projects

SaaS/Tech Side Project Matrix

Scenario

Likely Ownership

Personal GitHub repo, own laptop, weekends, unrelated app

Employee (protected by 2870)

Personal project using company laptop after hours

Employer (used company equipment)

Weekend app similar to company's product

Employer (relates to business)

Open source contribution to unrelated project

Usually Employee (get policy approval)

Hackathon at company-sponsored event

Likely Employer (company facilitated)

Freelance consulting for non-competitor

Depends on subject matter overlap

NDAs for California Employees - Required Elements Medium Risk

Applies to: All confidentiality agreements with CA employees

Reasonable scope, temporal limits, required carve-outs, and no overbroad provisions. Many standard NDAs are unenforceable in California.

Reasonable Scope (Not Overbroad)

California courts will not enforce NDAs that are broader than necessary to protect legitimate business interests.

Language

Enforceable?

"All information learned during employment is confidential"

No - too broad

"Customer pricing, technical specifications, and product roadmaps"

Yes - specific categories

"Everything marked confidential"

Weak - marking alone insufficient

"Trade secrets as defined by California law"

Yes - ties to legal standard

Temporal Limits

NDAs should specify how long confidentiality obligations last:

Trade secrets: Perpetual is acceptable (as long as information remains a trade secret)
General confidential information: 2-5 years post-employment is typical
Time-sensitive information: May warrant shorter periods

Geographic Considerations

Unlike non-competes, geographic limits are less relevant for trade secret protection. Trade secrets can be protected regardless of where the employee goes. However, a "no working in California" clause would be an invalid non-compete.

Carve-Outs That Must Be Included

Whistleblower protections: Cannot prohibit reporting to government agencies (Labor Code 1102.5)
DTSA immunity notice: Required language about disclosures to attorneys and government officials
Wage discussions: Cannot prohibit discussing compensation with coworkers (NLRA Section 7)
Legal process: Responding to subpoenas, court orders, legal requirements
Prior knowledge: Information employee knew before employment
Public information: Information that becomes publicly available
Independent development: Information developed independently without using confidential info

Common Unenforceable Provisions

These Will Likely Be Struck Down

"Employee shall not use any skills or knowledge gained..." - Restrains employee's profession

"All personnel matters are confidential" - Violates wage discussion rights

"Employee may never discuss any aspect of their work" - Overbroad, impossible to comply

"Violation of this NDA is grounds for immediate termination and criminal prosecution" - Intimidating language may invalidate

No exceptions for legally required disclosures - Must carve out legal process

Enforceable NDA Checklist

Specific, defined categories of confidential information
Reasonable temporal limits (perpetual only for true trade secrets)
Whistleblower protection carve-out
DTSA immunity notice (required language)
Wage discussion exception
Prior knowledge exception
Public information exception
Independent development exception
Legal process/subpoena exception
Return of materials clause

Enforcement & Remedies Medium Risk

Applies to: Employers seeking to enforce IP/confidentiality rights

What you can actually enforce in California, injunctive relief standards, damages limitations, and employee defenses.

What Employers Can Actually Enforce

California courts will enforce trade secret and IP protections, but only if properly structured:

Enforceable Claims

Trade secret misappropriation: Under California Uniform Trade Secrets Act (Civil Code 3426)

Breach of confidentiality: If NDA meets California requirements

IP assignment claims: For inventions that don't fall under Section 2870 protection

Return of company property: Physical and digital materials

Copyright infringement: For copied work product

Injunctive Relief Standards

To obtain a temporary restraining order or preliminary injunction:

Likelihood of success: Must show you'll likely win on the merits
Irreparable harm: Monetary damages would be inadequate
Balance of hardships: Harm to employer outweighs harm to employee
Public interest: Not contrary to public policy

California Disfavors Overbroad Injunctions

Courts will not issue injunctions that effectively prevent an employee from working in their field. An injunction must be narrowly tailored to protect specific, identified trade secrets—not general knowledge or skills.

Available Damages

Actual damages: Lost profits, unjust enrichment of the employee or new employer
Royalties: Reasonable royalty for continued use of trade secrets
Exemplary damages: Up to 2x actual damages for willful and malicious misappropriation (requires DTSA notice)
Attorney fees: Available in bad faith cases (and if DTSA notice included)

Damages Limitations

Employers may face limitations on recovery:

Must prove causation: Damages must be caused by the misappropriation, not independent development
Mitigation required: Employer must take reasonable steps to mitigate damages
No windfall: Cannot recover more than actual loss plus unjust enrichment
Trade secret must exist: If information doesn't qualify, no damages available

Employee Defenses

Defense

When It Applies

Section 2870 protection

Invention on own time, own equipment, unrelated to business

Not a trade secret

Information is publicly known or not kept confidential

Overbroad NDA

Agreement is too broad to enforce

Independent development

Employee developed information without using trade secrets

Prior knowledge

Employee knew information before employment

General skills/knowledge

Information is general professional knowledge, not trade secret

Whistleblower protection

Disclosure was to report suspected legal violations

Statute of Limitations

Trade secret misappropriation claims must be brought within 3 years of when the misappropriation was discovered or should have been discovered through reasonable diligence.

The Core Protection: Labor Code Section 2870

What Employees OWN (Cannot Be Assigned)

What Employers CAN Require Assignment Of

Section 2871: No Retaliation

Section 2872: Mandatory Notice Requirement

Best Practice: Prior Inventions Schedule

The Core Rule: B&P Code Section 16600

2024 Update: Section 16600.1 (AB 1076)

2024 Update: Section 16600.5 (SB 699)

NDA as Disguised Non-Compete

What's Actually Permitted

What IS Protectable as Confidential

Categories Typically Protectable

What Does NOT Qualify as Protectable

The "Reasonable Efforts" Requirement

Customer List Nuances

Required Carve-Out #1: Whistleblower Protection

Required Carve-Out #2: DTSA Immunity Notice

Required Carve-Out #3: Wage Discussion Rights

Required Carve-Out #4: Reporting Illegal Activity

Sample Carve-Out Language

When Does "Own Time" Begin for Remote Workers?

Using Personal Equipment for Work Projects

Moonlighting and Side Projects

Clear Policies Needed for Gray Areas

SaaS/Tech Side Project Matrix

Reasonable Scope (Not Overbroad)

Temporal Limits

Carve-Outs That Must Be Included

Common Unenforceable Provisions

Enforceable NDA Checklist

What Employers Can Actually Enforce

Injunctive Relief Standards

Available Damages

Damages Limitations

Employee Defenses

Statute of Limitations

IP Clause Builder Coming Soon

Need Your IP Agreement Reviewed?