Case In Point
Lessons In Employer Copyright Ownership From Nexus Solutions Inc. v. Krougly
Date: April 16, 2026
In Nexus Solutions Inc. v. Krougly, the Ontario Court of Appeal (OCA) dismissed an employer’s appeal seeking ownership in software secretly developed by an employee during the period of his employment. The decision reaffirms that copyright does not vest in the employer unless the work was created by the employee “in the course of” their employment, within the meaning of s. 13(3) of the Copyright Act.
The OCA emphasized that the inquiry turns, “in the absence of any agreement to the contrary,” on whether “the employee was asked or expected to do the work, either expressly or by necessary implication, as part of their employment responsibilities.”
Governing Legislative Framework
The following provisions of the Copyright Act are relevant to the central issue in this decision:
Ownership in copyright
13(1) Subject to this Act, the author of a work shall be the first owner of the copyright therein.
Work made in the course of employment
13(3) Where the author of a work was in the employment of some other person under a contract of service or apprenticeship and the work was made in the course of his employment by that person, the person by whom the author was employed shall, in the absence of any agreement to the contrary, be the first owner of the copyright…
Background
Nexus Solutions Inc. (Nexus), a software company in Ontario, develops and markets a continuous emissions monitoring system (CEMS) software product called CEMView. The employee, a senior software developer, was responsible for CEMView’s maintenance and development. While still employed by Nexus, the employee surreptitiously developed a competing CEMS software system, Limedas, largely on his own time and using his own equipment.
After resigning from his employment with Nexus, the employee attempted to market Limedas, including to some of Nexus’ customers. Nexus discovered that the employee created Limedas while he was in its employment. Arguing that Limedas had been created by the employee in the course of his employment with Nexus, Nexus commenced an action seeking a declaration that it owned the copyright in Limedas.
The Trial Decision
The trial judge dismissed Nexus’ copyright claim, noting it was a “harsh result” but that the purpose of copyright law is “not to punish bad actors simply because their actions may run afoul of their duties towards their employers.” The trial judge’s key consideration, among others, was that the work the employee performed in creating Limedas was not part of his assigned responsibilities at Nexus.
OCA Decision
The OCA confirmed that the appeal turned on whether the employee created Limedas “in the course of his employment”, within the meaning of s. 13(3) of the Copyright Act.
The court held that to make this finding, it is necessary that the employer “actually assigned responsibility to the employee to carry out the task or perform the function in question” either expressly or by necessary implication, as part of their employment responsibilities. [Emphasis added]. Copyright will not vest in an employer merely because it could have required the employee to perform the work had it chosen to.
The OCA noted that:
- The employer did not (a) invest financial or other resources in Limedas or undertake any risk in connection with its development, (b) authorize the employee to develop new software products, or (c) control or direct the development of Limedas.
- The employee (a) did not receive an increase in compensation when he began developing Limedas, (b) developed Limedas largely on his own time while still working full-time in his existing role with Nexus, and with his own equipment, and (c) was restricted by Nexus to CEMView’s development.
- There was no written employment contract addressing ownership of intellectual property.
- Limedas’ similarity to CEMView was not determinative of copyright ownership.
Although the court did not hold that these contextual factors were requirements for a finding that the employee did not create Limedas in the course of his employment with Nexus, it took each factor into consideration when it made this finding.
Importantly, the OCA also emphasized that an employer and employee may agree that entitlement to the copyright “should be determined on the basis of a different legal framework, which will then govern.”
The court dismissed the appeal and confirmed that the employee owned the copyright in Limedas. Costs of $25,000 were awarded to the employee.
Key Takeaways
Nexus Solutions Inc. v. Krougly leaves no doubt that copyright law will not be used by courts “to punish bad actors” who are disloyal to and competitive with their employers. To avoid the outcome in this decision, employers should not rely on the statutory default in s. 13(3) of the Copyright Act, which focuses on an employee’s actual assigned responsibilities. Instead, employers should ensure ownership in copyrights contractually by entering into written agreements with their employees. Such agreements should operate independently of whether the work was created “in the course of employment.” They should assign to the employer copyright in works created by the employee during their employment or, at a minimum, in works that relate to the employer’s business or arise from the skills or knowledge the employee uses in their role with the employer. These agreements should also expressly address whether side projects are permitted, must be approved by the employer, and who owns the intellectual property arising from them.
If you have any questions about your employment agreements as they relate to this recent decision, please contact your Hicks Morley lawyer.
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