Moonlighting – Can I Launch My Own Startup While Employed?

Moonlighting

It is not uncommon today for many people to hold more than one job. Many full-time employees often find themselves “moonlighting”—a term used for working a second job after one’s regular form of employment—in order to make ends meet. Sometimes, these jobs are launched by the individual who is attempting to draw a source of income from a passion or hobby and use it as a side project. For some, this additional source of employment may be the stepping-stone for moving onto another career.

Although it has grown popular in recent years, moonlighting can have significant legal issues that may be otherwise unknown or overlooked by entrepreneurs wanting to launch a startup.

A Startup May be a Conflict of Interest

While many people have heard of the term “conflict of interest,” many people are unaware as to what it means and its potential repercussions. The term itself is very broad and can encompass a variety of different things. Generally, however, a conflict of interest occurs whenever either an individual, an organization, or perhaps both are involved with multiple interests, financial or otherwise, that could affect the individual’s or organization’s motivations to act. Many times, conflicts of interests are identified as an association with either a direct or indirect competitor of the business with which the individual is associated. This could occur in a situation as simple as an employee owning a significant, controlling amount of stock of his or her employer’s largest competitor. The individual with a conflict of interest would be less likely to support or act in a manner which devalues his or her stock’s value.

Problems Concerning Intellectual Property (IP) Ownership

Intellectual property (IP) is referred to by the World Intellectual Property Organization (WIPO) as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.” Intellectual property is protected by both state and federal laws.

An employee who launches his or her own startup while moonlighting may face legal issues related to intellectual property. First, many employment agreements include provisions commonly known as invention assignment agreements. These provisions often include language that assigns the intellectual property rights to the employer if any of the employer’s facilities or assets are used in creating the intellectual property. The complexity of these provisions could lawfully encompass activities that would assign the intellectual property rights upon which the startup relies. It is important to note that California law does not allow a company to claim intellectual property ownership in certain situations.

Under California Labor Code 2870-2872, employers cannot claim ownership so long as the intellectual property is unrelated to the employer’s current or prospective business AND is developed outside of work without using the employer’s assets. Obviously, if an employee creates a product that does not include all of the elements of the aforementioned code, he or she risks assignment of intellectual property ownership.

CONTACT SILICON VALLEY STARTUP COMPANY COUNSEL TO PROTECT YOUR MOONLIGHTING INTERESTS

It is important that entrepreneurs be able to pursue their dreams and to develop their products free from potential legal issues. Many entrepreneurs moonlight, launching their own startups to bring a new product or service to market, while working at a full-time job. In most cases, entrepreneurs seek the legal counsel of knowledgeable and experienced business attorneys to ensure that no issues exist when it comes to intellectual property and conflicts of interest. The Silicon Valley attorneys at Startup Company Counsel will work with you to protect your interests and allow you to successfully launch your startup while being employed. To schedule your initial consultation with us today, call 408-441-7555 or send us an email.

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