Ontario Court of Appeal Clarifies When Employers Own Employee‑Created Copyright
A recent Ontario Court of Appeal decision reinforces the limits on when employers automatically own copyright in works created by employees and highlights the importance of clear role definitions and written intellectual property (IP) protections.
In Nexus Solutions Inc. v. Krougly, 2026 ONCA 199, the Court examined section 13(3) of the Copyright Act, which provides that copyright generally belongs to an employer when a work is created “in the course of employment,” unless there is an agreement to the contrary. The decision confirms that employers cannot assume ownership simply because work relates to their business or is developed during the employment relationship.
Background
Nexus Solutions Inc. developed a continuous emissions monitoring system (CEMS) software product called CEMView. One of its senior software developers, Vladimir Krougly, worked on that product.
While still employed by Nexus, Mr. Krougly independently developed a separate CEMS software product, Limedas, without using the company’s resources. After leaving Nexus, he attempted to market Limedas to Nexus’s customers.
While still employed by Nexus, Mr. Krougly independently developed a separate CEMS software product, Limedas, without using the company’s resources. After leaving Nexus, he attempted to market Limedas to Nexus’s customers.
The Court’s Decision
Both the trial court and the Court of Appeal rejected Nexus’s claim.
The Court confirmed that an employer relying on section 13(3) must show that:
the creator was an employee;
the work was created in the course of employment; and
there is no agreement stating otherwise.
Although Mr. Krougly was an employee, the Court found that Limedas was not developed in the course of his employment. His role was limited to work on CEMView, he was never directed to create other software products, and Limedas was developed largely outside working hours without using Nexus’s equipment or assuming any risk to Nexus. There was also no written agreement addressing IP ownership or restricting outside development work.
Although Mr. Krougly was an employee, the Court found that Limedas was not developed in the course of his employment. His role was limited to work on CEMView, he was never directed to create other software products, and Limedas was developed largely outside working hours without using Nexus’s equipment or assuming any risk to Nexus. There was also no written agreement addressing IP ownership or restricting outside development work.
Practical Lessons for Employers
This decision offers several important takeaways for employers, particularly those in technology and innovation‑driven sectors:
Section 13(3) has limits: Copyright will not automatically belong to an employer simply because a work relates to its business. The work must be closely connected to the employee’s actual job duties.
Written IP ownership clauses are critical: A clear IP assignment in an employment agreement can avoid uncertainty and eliminate the need to rely on the “course of employment” analysis.
Restrictive covenants matter: Confidentiality obligations, invention disclosure obligations, non‑competition provisions (where enforceable), and non‑solicitation covenants can help prevent employees from developing and commercializing competing products.
Define the role in writing: Job descriptions and employment documents should clearly outline whether an employee is expected to create software, inventions, or other protectable intellectual property.
Employers may wish to review their employment agreements, job descriptions, and IP protection strategies to ensure they are aligned with current legal expectations.
