The IP Pitfalls of Moonlighting to get Your Startup Going

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The IP Pitfalls of Moonlighting to get Your Startup Going

The IP Pitfalls of Moonlighting to get Your Startup Going

It’s not uncommon for a budding entrepreneur to get his or her startup going while keeping their full-time job.

Sure, moonlighting has some advantages for individuals looking to ramp up a new company, and in some cases, it’s the only way realistically to get started. However, there are some important considerations for entrepreneurs to bear in mind when choosing to work on a “side project” when employed by someone else.

Employment Contracts

When you first began working your “day job,” you undoubtedly signed a lot of contracts. Perhaps forms for health insurance, direct deposit, parking, and a few dozen other things. One of those may have been an acknowledgement that your employer retains all rights to any intellectual property that you create while employed there—regardless of whether you created it during work hours or when using work equipment. The fine print may indicate that your employer has the rights to your ideas—even those you dream up in your spare time or while you’re on vacation.

In some states, this acknowledgement is called an “assignment agreement.” In California, the law limits the scope of these agreements. Even so, if intellectual property was created on the job, employers might not need an assignment agreement to claim ownership of your idea. You shouldn’t assume that you’re home free if you never signed one of these documents. Your former employer might bring legal action, claiming that it owns the rights to your invention or company. Of course, this will occur only after you’ve become a success and devoted the time and energy to make it so. After carrying that risk, it’s a situation you want to avoid… and you can do that with the help of a seasoned intellectual property attorney.

How Intellectual Property Laws Intersect with Moonlighting

Moonlighting raises some major IP concerns. Contact a knowledgeable IP attorney and ask him to read through your employment agreements. Ask him to examine whether you’ll own your company free and clear when you decide to strike out on your own and quit your day job. California laws specifically address this, so you want to work with a lawyer who knows California startup and IP laws.

Remember that intellectual property will encompass everything that your startup creates. In addition to patents, trademarks, and inventions, IP also covers things like your startup’s company logo you designed or a specific process you created to solve an issue for your customers, like computer programming for a new service or solution.

Taking legal precautions is critical for a startup because moonlighting can cost you your day job if your employer doesn’t approve and discovers the work you’re doing for your startup. Equally as important, many investors are hesitant to partner with a startup if they might encounter IP issues.

Work Made for Hire

This term has a pretty complicated legal definition, but it basically means that if you’re an employee, any work you do for the company that is within the scope of your employmenr is “work made for hire,” or all the work you do is owned by the company. In that instance, there’s no agreement that needs to be signed. Generally, the work is “work made for hire” and owned by your employer if:

  1. it’s the type of work you were hired to do;
  2. it occurs during work hours; or
  3. it’s completed with the intent to benefit your employer.


Moonlighting or not, all entrepreneurs looking to get their startups off the ground should be aware of these concepts and take the appropriate measures to protect their ideas and inventions. Speak with an experienced intellectual property attorney who know the federal and California state IP laws and can apply them to your specific situation.

One of the most worthwhile things you can do to ensure the success of your startup is to protect your products and services from others who may try to profit from your work and ideas. That means the employer at your day job.

Meet with an experienced IP attorney and get the resources you need to guarantee all aspects of your IP will remain your own. Attorney Michael Ahmadshahi, PhD, focuses on patents, intellectual property, copyright, trademarks, and trade secrets in Irvine, California. The Michael Ahmadshahi, PhD, Law Offices are also located in Beverly Hills and Sherman Oaks. Call us toll free at (800) 747-6081 or direct at (949) 556-8800 or email and let us help you with your intellectual property questions and the IP strategy for your startup.

attorney Michael Ahmadshahi

Mr. Ahmadshahi’s area of practice is Intellectual Property Laws including Patent Prosecution and Litigation, Trademarks, Copyrights, Unfair Business Practices, and Business Litigation. He is also an entrepreneur and an inventor.

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Trade Secrets

IP & Business Litigation


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