Is there a conflict of interest between my side project and employer?

I have developed an iPhone photo sharing App on the App store and recently I started interning for a company that makes iPhone games. During my interview I showed them my App as part of my resume (so they were well aware of it). Upon employment, I remember signing an agreement that states anything I create or invent using company time and equipment belonged to them, and anything outside of that was mine.

After joining the company I took over development for a photo sharing app of theirs. Now this is where I am getting a little sketchy, since the release of version 1.0 of my App, I have been working on upgrading it and adding many new features. Features including friending, commenting, etc. Now to be honest with you, these are core features of any photo sharing app (including the one I'm in charge of developing at work).

Now, my question is will there be a conflict of interest if I release an update to my photo App? Technically, my photo sharing app is a competitor to theirs, but the core business of their company is iPhone games (they are trying to enter the photo sharing market).

I know I signed a contract that (supposedly) protects me, and I've read on the California labor law that states I should be protected, but does anyone else have any more insight?

What about you talk to them and get them agree it is not, or drop the job. Legally the easiest way.

For a superb review of this whole area, take a look at this answer by Joel Spolsky.

I'm not a lawyer, and you're certainly in enough of a gray area that you should consider getting qualified legal advice.

Given that you had, and disclosed, a photo app, it would seem just and reasonable both that you should retain and continue to update that app.

On the other hand, you have been given the task of developing a rival app for your employer, and this has to be a clear conflict of interest.

So the question is, how do you manage that conflict, which was essentially created when you were asked, and you agreed, to take over their photo app.

My practical suggestion is that you take the situation to them and explore alternative ways forward that will work for both of you.

If I were your employer, in this situation I would either want you off the project, or for you to sell out your interest in your own photo app (possibly to me!).