Meaning
The danger of a previous or concurrent employer claiming ownership of a founder’s new technology arises from existing employment agreements. The employer moonlighting risk is particularly high when a founder starts a new venture while still employed elsewhere. If the founder uses their day-job laptop, office hours, or proprietary tools, the employer can legally claim the new startup’s assets.
It represents a serious threat to the independence of the startup’s intellectual property.
Conflict Potential
Conflict is intensified when the startup’s product is in the same field as the founder’s former employer. The employer may argue that the invention is directly derived from their proprietary research or confidential information. This can result in costly litigation that drains the startup’s cash reserves.
Statutory Separation
Careful scheduling of work and clear separation of resources help insulate the startup from such claims. The founder must use their own personal computers, internet connections, and workspaces to develop the new product. Keeping detailed logs of the development hours and resources helps prove that the work was done independently.
Due Diligence
Financiers evaluate the employment history of each founder to verify that no former employer has a claim. They will review previous employment agreements to ensure there are no non-compete or intellectual property assignment terms that affect the new startup. Confirming this clear separation is a prerequisite for receiving venture backing.
