The Court's Analysis

The Court of Appeal upheld the dismissal of Nexus's copyright ownership claim, finding that the software had not been created "in the course of" the employee's employment within the meaning of section 13(3) of the Act. To succeed under section 13(3), an employer must show that (i) the creator was an employee; (ii) the work was created “in the course of” employment; and (ii) there was no agreement to the contrary. Since Krougly's employment status was undisputed and no written agreement addressed copyright, the central issue was whether Limedas was developed in the course of Krougly’s employment.

Several findings weighed against Nexus. Most critically, there was ample evidence that Krougly's role was limited to the development of CEMView and that he had not been directed to create other software. The Court of Appeal noted the trial judge’s findings that, notwithstanding certain similarities in function, there were substantial differences between CEMView and Limedas, including the fact that their source codes were different and the trial judge’s conclusion that Krougly did not copy any substantial portion of CEMView in creating Limedas.

The Court also noted that Krougly developed Limedas largely outside business hours without using Nexus's property or resources, and that Nexus had assumed none of the financial risk associated with its development. Further, there was no written employment contract or agreement restricting outside work or allocating intellectual property ownership.

Nexus argued that because it could have directed Krougly to develop software like Limedas, the work should be treated as having been made in the course of his employment. The Court rejected this argument, holding that the fact that an organization “could” require an employee to carry out a particular task is not a sufficient condition for that task to fall within the employee's course of employment. What is necessary, according to the Court, is that the employee's actual responsibilities include creating the work. On the facts, Krougly's responsibilities did not extend beyond the development of CEMView.

Who Owns the Code: Lessons for Employers in Canada from Nexus Solutions Inc. v Krougly