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I am happily employed as a software developer currently and have no plans to leave.

An amazing opportunity presented itself to my dad that just screamed of a lucrative niche market with only a handful of competitors. A business contact for my dad can set him up to meet with an industry insider with valuable information that lowers the barrier of entry and can be used as the basis for building a solid product. In return we provide his organization a solution for low cost and a glowing testimonial, as well as being able to use him informally as an industry expert.

My dad needs help and wants me to help him with this idea and eventually build the software. He is thinking of starting an LLC, funding it personally and giving me 50% ownership.

I am concerned though because the contract I signed at my current job (and primary source of income) is extremely restrictive about IP that I produce. It claims pretty explicitly that any IP I create regardless of location, work hours, use of company resources, etc... is 100% owned by the company. This means that any product I would build for this startup would be owned by my current employer.

I was thinking, perhaps I can work around this by not actually being affiliated with this startup in anyway? Have an agreement with my dad, behind closed doors, develop the product secretly at his house, he owns 100% on paper and then if its successful and makes money he can cut me a check. Financially on paper it is a father writing his son a check from his personal bank account.

I of course trust my dad on this, I am his own flesh and blood, he wouldn't screw me over.

Besides the obviously ethical implications of this, is there really any chance of getting in serious trouble? Is it illegal in anyway?

EDIT: I would like to add that this startup will in no way shape or form be in any market or position to compete in anyway directly or indirectly with my current employer.

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So you know before you start that they claim ownership of your work? Yet you want to go ahead anyway - and you have a statement now on the internets clearly showing you understand and are aware of the fact that your contact assigns them ownership? If you are concerned about it then you have to ask to modify the contract - otherwise, just accept the risk and go ahead with it. – TimJ♦ Nov 12 '11 at 16:08
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"is there really any chance of getting in serious trouble? Is it illegal in anyway?" - it doesn't sound illegal. It does sound like it could trigger legal action by your current employer, even if you left later, if they found out. As discussed elsewhere in this thread. If it becomes a regular thing, the IRS may take an interest in why you are receiving substantial regular "gift" payments from your father. The IRS wants everyone who performs services in exchange for payments to be payrolled with taxes taken out. – user2757 Nov 13 '11 at 3:22
@DonWallace Thanks for pointing out about the tax implications. You inspired me to ask my neighbor who does taxes for a living. He told me that if I receive under $13k a year as a gift then I do not need to report it. If I receive more than this, then I need to report it and pay taxes on it, which are high, but as long as I pay the taxes then they shouldn't care either way. – maple_shaft Nov 13 '11 at 23:39

2 Answers

up vote 3 down vote accepted

You might want to check with an attorney and have him review the IP agreement you signed. These things are determined under state law, so it depends where you live. I have some doubt that such an agreement could cover unrelated IP topics, especially for a programmer working for the company, but you should check that with the attorney. Even if your employer has no rights - they could decide to fire you if you proceed. I don't understand your point about not working for your father's company, I don't think that matters. Of course your father can't copyright your work if you won't stand up for it. What's your long-term intent? If this works out, are you still going to stay with your old job? First get the legal facts, then you still have some serious decisions to make. As a last resort, you could always ask your employer to let you work with your father and waive any resulting IP. They may do it when you tell them what you will be doing. Just get it in writing.

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Patrick - you nailed it. Absolutely agreed with every point. I'll add this. What the OP proposes to do is an "under the table" arrangement. The reality is that the OP is still writing code that the employer would allow so it puts both him as well as his father's company at risk. The code he would write would not be "100% free and clear" of competing interests. – user2757 Nov 13 '11 at 3:25
up vote 1 down vote

Disclosure: I'm not a lawyer but I have gotten advice on this in California and here it's illegal. You need to check with a local attorney to see what it means in your state.

Anything you produce on your own time, that does not violate your employment agreement, is yours.

If you signed that contract in the California, it's unenforceable.

As long as you don't infringe on your present employers IP and don't violate your employment agreement, you can do pretty much whatever you want on your own time -- they own none of it.

An employer does has an expectation that you will be Ready, Willing and Able to perform your duties. If you have several jobs, fatigue may prevent that from happening.

Personally, I find this practice appalling and shocked that it's not illegal. Be careful and please consult an attorney if you feel you may be in violation of your employment agreement.

EDIT: I refined the answer above based on the insightful discussion (see below). Dom brought up some excellent points and made this thread valuable.

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First of all, California is a very special case under US law. CA broadly disallows non compete agreements against individuals. Most other US jurisdictions have no such laws. Secondly, "As long as you don't infringe on your present employers IP, you can do pretty much whatever you want on your own time" - a fallacy - one's employer can fire you if they think you are doing side work, and many small company owners will do so out of pure spite and paranoia. – user2757 Nov 12 '11 at 18:06
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(cont'd) Besides dismissal, a lawsuit will force you to hire your (own expensive) attorney to defend yourself. We have political freedom of speech only. "If you signed that contract in the US, it's unenforceable." - NOT NECESSARILY. "Anything you produce on your own time, without company resources is yours." - that just depends. What does your employment agreement say? Anyone can sue you as a civil matter, and the basis of any concern about an employment contract really needs to be checked by an attorney. Overall your advice is horrible for most employee types to follow. Sorry. – user2757 Nov 12 '11 at 18:08
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@DonWallace: Good point. My experience is only in California. It would suggest you post your comments as an answer. It's good stuff. I did suggest maple_shaft consult an attorney just to be sure. I also respectfully disagree with your assessment. In your line of reasoning, a hobby you undertake that sells nick-nacs on eBay would be the property of your employer. Clearly that's not the case. – Jarie Bolander Nov 12 '11 at 19:02
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@JariBolander: Thank you. But... regarding: "In your line of reasoning, a hobby you undertake that sells nick-nacs on eBay would be the property of your employer." - This is not even close as an analogy. The original poster stated that the work for his father's company would consist of developing software - the specific work duty that he now has which his employment contract disallows as a side activity. He could do ANYTHING ELSE on the side - except write software. – user2757 Nov 13 '11 at 3:24
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StackExchange is now nagging me that this is a chat :) so I will try to tie this up. The essential problem is that the OP depends on his job, and his employer holds all the legal cards. The OP can't even directly pose the question about what threshold of activity is acceptable or not without putting himself at risk. An attorney examining the employee agreement is pretty much the only way to find out where he stands and what the actual risks are. – user2757 Nov 13 '11 at 16:35
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