WORKING (OUTSIDE) 9 TO 5: Employer’s Appeal in Respect of Copyright Ownership Dispute Dismissed

The Ontario Court of Appeal in Nexus Solutions Inc. v. Krougly, 2026 ONCA 199 has dismissed the appeal of an employer, Nexus Solutions Inc., regarding copyright ownership of a software secretly developed by one of its former employees. The decision, which was released on March 19, 2026, provides further guidance on the scope of s. 13(3) of the Copyright Act, which provides that employers are the first owners of copyright in works created “in the course of” their employees’ employment.

The decision centers on a software named “Limedas”, created by the respondent while he was a software developer at Nexus, a software development company. The respondent’s primary responsibility was to write source code for Nexus’ software, which performed similar functions to Limedas. The lower court made numerous findings of fact at trial, including that there were substantial differences between the software, that the majority of the work in creating Limedas occurred outside business hours and did not involve the use of Nexus property, that there was no written agreement prohibiting the respondent from working on his own projects or allocating ownership of such projects, and that Nexus had not asked the respondent to develop a software such as Limedas. Thus, the trial judge found that s. 13(3) of the Copyright Act did not apply, as Limedas was not created in the course of the respondent’s employment; instead, ownership in Limedas vested in the employee.

On appeal, Nexus alleged the trial judge made several errors in the trial decision, including  requiring Nexus to establish it had “specifically” directed the employee to develop Limedas, as well as relying on the “irrelevant” factor of whether Nexus had bargained for or expended resources in the creation of Limedas.

In their analysis, the Ontario Court of Appeal assessed the purpose of s. 13(3) of the Act based upon rules of statutory interpretation. They concluded that s. 13(3) is based on the premise that employers should retain copyright rights over works made by their employees when such works are part of the employees’ responsibilities, with the rationale being that the employee was paid for the work in fulfilment of their duties to the employer. As such, s. 13(3) is likely to apply in cases where the work was made under the employer’s instructions and with their resources. Conversely then, s. 13(3) is unlikely to apply to works made by employees on their own time, with their own resources, and for which the work is not a part of their assigned duties.

The Court of Appeal then assessed each of the alleged errors raised by Nexus. First, the trial judge rejected Nexus’ argument that, instead of taking into account whether Nexus had asked the respondent to develop software akin to Limedas, the court should have assessed whether Limedas fell into a general class of works that Nexus could have asked the respondent to make. The Court of Appeal opined that the question of “could” the employer direct the employee to make the work was a necessary condition of s. 13(3), but was not a sufficient condition to meet the provision. This is because Nexus’ interpretation would run afoul of the purpose of s. 13(3), as it would give employer’s rights over works for which they expended no resources and assumed no risks in their creation. The Court of Appeal further found that the trial judge did not require Nexus to provide a “specific direction” to develop Limedas, as the court’s decision also considered whether Nexus had impliedly instructed the respondent to create such a software and, in any event, the respondent’s responsibilities were limited to ongoing development of Nexus’ existing software.

The Court of Appeal also rejected Nexus’ argument that it was an error for the trial judge to consider whether it had expended resources in the development of Limedas, as it could not satisfy the requirement given that Limedas was developed secretly by the respondent. The Court of Appeal found this submission misconstrues the point the trial judge was making, which was simply that the respondent undertook creating Limedas nearly entirely with his own time and resources, such that Nexus did not fund the creation of the software. Moreover, this factor was but one of many taken into account in the trial judge’s analysis.

In short, this decision strengthens the copyright rights of employees to works created on their own time, and that fall outside of their employment responsibilities. Employers are thus advised to ensure employment contracts provide clear and cogent provisions on employee roles, duties, and ownership of IP.