Ways to work around creating a startup when working a job with a restrictive contract


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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asked Nov 12 '11 at 06:32
Maple Shaft
323 points
  • 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. – Tim J 12 years ago
  • @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 12 years ago

2 Answers


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.

answered Nov 12 '11 at 08:47
Patrick Ny
300 points


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.

answered Nov 13 '11 at 00:21
Jarie Bolander
11,421 points
  • @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 12 years ago
  • @DonWallace: This is an interesting discussion. It would be great to get a reference on this for future questions. I'm still dubious of the legality of restricting someone from doing their craft, independent of their day job. It just seems overly restrictive and the employee gets no compensation for giving up something they clearly have the right to do. I could see if the company paid them to not develop software. As it stands in this discussion, they don't do that. We could also do the thought experiment about writing software for charity. Does the company own that as well? – Jarie Bolander 12 years ago
  • @DonWallace: Well put. I'm starting to get really curious about this since varies so much from state to state. I agree, it's like corporate slavery and just feels wrong. Anyway, great discussion. This is what this forum is all about -- challenges assumptions and helping people do better. – Jarie Bolander 12 years ago

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