Who Owns What Your Employees Create?

When technology companies hire developers the letters cover salary, start date, vacation and probation. Close attention should also be paid to who owns what the developers build, since everyone assumes the company owns it.

In Nexus Solutions Inc. v. Krougly, 2026 ONCA 199, a senior developer spent two years quietly building a rival product while still on the payroll, resigned, and tried to sell it to the company's own customers. The company sued for ownership of that product and lost twice, at trial in February 2025 and on appeal on March 19, 2026. The claim was framed in copyright, and the facts that decided it came out of the employment relationship. This article works through the ruling from that angle, and sets out what technology employers should be fixing in their agreements and what the employee on the other side of the file should know.

01.Why this is an employment question

Section 13(3) of the Copyright Act sets three conditions, and each of them asks about the work and its scope. The first asks whether the person was an employee under a contract of service. The second asks whether making the work formed part of that person's job. The third asks whether any agreement to the contrary exists (para. 18).

Nexus and Krougly agreed on the first and the third. He was an employee at the relevant time, and nothing anyone signed said a word about copyright in what he might create (para. 19). The case came down to the second.

To answer it, the trial judge adopted a list of factors from the English Intellectual Property Enterprise Court in Penhallurick v. MD5 Ltd. (para. 10):

• the terms of the contract of employment;
• where the work was created;
• whether the work was created during normal office hours;
• who provided the materials for the work to be created;
• the level of direction provided to the author;
• whether the author can refuse to create the work; and
• whether the work is “integral” to the business.

02.How the dispute arose

Nexus Solutions Inc. was incorporated in London, Ontario in 1999. It develops and markets CEMView, a continuous emissions monitoring system that measures and reports the compounds in smokestack emissions from heavy industry (para. 5).

Vladimir Krougly was an original minority shareholder, officer and director of the company. He worked first as an independent contractor and became an employee in 2006. In 2008 he sold his shares and resigned as an officer and director, staying on full time as a senior software developer whose primary responsibility was writing source code for CEMView (paras. 5, 6).

By late 2008 or early 2009, while still employed, he began surreptitiously developing a competing product called Limedas, short for Live Measurement Data Acquisition System. He kept working on it until he resigned effective January 4, 2011, and after resigning he attempted to market it commercially, including to some of Nexus's customers. Nexus discovered what had happened shortly after he left and sued, seeking a declaration that it owned the copyright in Limedas and that Krougly and the other defendants had infringed it (paras. 7, 8).

03.The trial ruling

The trial was split into stages, and stage one dealt with copyright. Other causes of action Nexus had pleaded, including allegations about Krougly's duty of loyalty, were not considered at trial and were not at issue on appeal (para. 2).

Justice Spencer Nicholson found that Krougly had not developed Limedas in the course of his employment. Seven considerations carried that conclusion (para. 11).

• The two programs did similar things and used similar protocols to talk to the analysers in the smokestacks, and there were also substantial differences. The source codes were different, and the algorithms and data were dissimilar. Krougly did not copy any substantial portion of CEMView in creating Limedas.
• The bulk of the work happened outside normal business hours and did not involve Nexus property.
• His primary role was developing the existing CEMView software, and he was not permitted to create any other software for Nexus without prior authorisation, to the point that discovery of the project would have ended his employment.
• He had no written contract of employment, and no written agreement stopped him working on his own projects on his own time or allocated ownership of anything he might create.
• Developing emissions monitoring software fell squarely within his duties, and had he been ordered to build something like Limedas he would have had to do it, yet nobody asked or directed him to, and the work was not under the direction or control of anyone at Nexus.
• Nexus neither bargained for nor spent anything on the development of Limedas.
• Nexus assumed none of the financial, organisational or associative risk involved in creating, producing and distributing it.

The judge reached that conclusion “[w]ith considerable reluctance”, called it a “harsh result” given his finding that Krougly had built the software to compete with his employer's, and observed that while Nexus might have remedies in contract or otherwise, the purpose of copyright law is not “to punish bad actors simply because their actions may run afoul of their duties towards their employers” (para. 13).

04.The appeal ruling

Nexus appealed on three grounds, and the Court of Appeal dismissed all three.

Nexus argued that copyright attaches whenever the work falls within the general class or kinds of work the employer could direct the employee to make. The Court rejected that reading. An employer's power to require a task is a necessary condition and not a sufficient one, and what governs is whether the employer actually assigned responsibility for that task. The employer need not have directed the specific work, and the employee's actual responsibilities, as opposed to their potential responsibilities, must have included making it (para. 34).

The argument was tested with a hypothetical. An employee hired to write source code for a company's video games is assigned to develop Game A, with no responsibility for ideating new games. On their own computer and outside working hours, the employee writes Game B, similar to Game A but not a copy. On Nexus's theory the employer would own Game B, since writing game source code is the class of work the employee was hired for. That ignores what the employee was actually told to do, and it runs counter to the purpose of the provision, since the employer paid nothing towards Game B, controlled none of it, and carried none of its risk (paras. 35 to 37).

Two features of that example matter. Ownership does not depend on whether the employer knew about Game B, and it does not depend on whether Game B competes with Game A. Where the work falls outside the assigned responsibilities, copyright stays with the employee. Where it falls inside them, the employer owns it even without knowing the specific thing was being built (para. 38).

Applied to the facts, the relevant question was what Nexus actually asked Krougly to do rather than what it could have instructed him to do. His responsibilities were limited to developing CEMView, so creating a different emissions monitoring system fell outside them (para. 40). He had been expressly told that his responsibilities stopped at the ongoing development of CEMView, that he should not undertake unauthorised software development, and that he would not be paid for it if he did (para. 41).

The Court distinguished Corso v. Nebs Business Products Ltd., where the employee had a duty to use his creative skills to generate concepts for his employer, arising from a business development role and his leadership of a committee tasked with new products. Krougly had no mandate to innovate and was told the opposite (para. 43).

Nexus's second ground failed on a reading of what the trial judge meant. His point was that Nexus did not fund the development, which is why it mattered that Krougly drew the same salary he had been paid before starting Limedas on his own time, took no increase in compensation, and worked almost entirely on his own time and equipment while still working full time in his existing role (para. 48). Resource expenditure was one factor among several relevant considerations rather than a precondition (para. 49).

The third ground relied on emails about a possible next generation product using an upgraded OPC UA communications protocol. Those showed at most a future intention. Nexus pointed to no evidence that a decision to proceed had been made or that Krougly had been assigned the task, and thirteen years after he resigned OPC UA had still not been integrated into CEMView (para. 51). The Court saw no palpable and overriding error and declined to reweigh the evidence (para. 52).

05.Where the employee stands

A court starts with the author

Section 13(1) makes the author the first owner, and section 13(3) is the exception to it (para. 17). Where an employee works on their own time, with their own equipment, and outside their assigned duties, copyright stays with the employee (para. 28). Krougly kept a competing software product he had built while drawing the same salary he had always drawn (para. 48).

Winning on ownership is not winning the case

Stage one dealt with copyright alone, and Nexus's other causes of action went undecided (para. 2). The Court added that although the employer's knowledge of the work and whether it competed do not bear on copyright, they may well be relevant to a claim for breach of contract or breach of the duty of loyalty (para. 38, fn. 2). Exposure of that kind comes from putting the employer's time, systems or confidential information into the project, from approaching its customers, and from what leaves with the employee at the end.

A signature displaces all of it

The rule applies only in the absence of an agreement to the contrary, and the two sides can agree on a different framework, which will then govern (para. 30). A broad assignment of all work product captures a personal project outright. Two requests are ordinary before signing in technology hiring: a carve-out for work created outside the scope of the role on the person's own time and resources, and a schedule listing work the person already owns so that it stays theirs.

06.Claims that survive a copyright loss

The Court set the ruling against the purpose of the statute, which is to balance the public interest in encouraging and spreading works of the arts and intellect against a just reward for the creator (para. 22). Section 13(1) gives the author first ownership because that gives authors an incentive to create and the public access to works that might never have existed (para. 23). Section 13(3) carves out an exception because, where the employer paid for the work and assumed the risks of developing it, the reward should accrue to the employer instead (para. 25). The trial judge took the same purpose from Guibault and others, Canadian Intellectual Property Law, quoted at paragraph 9.

Against that purpose, the limits of the ruling are narrow. A finding that section 13(3) does not give the employer copyright settles ownership of the work and settles nothing else. The Court of Appeal pointed to contract and the duty of loyalty as the places those arguments live (para. 38, fn. 2), and on these facts the trial judge had already said as much (para. 13).

Nothing in the ruling addresses what would have followed had Limedas reproduced a substantial part of CEMView. The courts never had to reach it, given the finding that Krougly copied no substantial portion (para. 11). An employer on similar facts would be running an infringement claim alongside the ownership claim, and the two turn on different things.

07.Fixing the agreements

An employer can replace the assumption with five questions and answer each one.

• Work out the status of each person creating anything of value. The rule covers employees under a contract of service. Contractor work falls outside it and needs a signed assignment.
• Check what is in writing. The rule applies only where the parties have not addressed ownership themselves (para. 30).
• Ask what each person was actually asked or expected to do. Job descriptions, assignment records, objectives and written instructions answer that. Emails about what the company might build one day do not (para. 51).
• Weigh the connection between the work and those duties: the direction given, the resources supplied, the equipment used, the hours worked, and whether the employer knew (para. 29).
• Where ownership is uncertain and the work is valuable, get a written assignment from the right owner. Section 13(4) requires it to be in writing and signed by the owner of the right or an authorised agent.

For agreements going forward, an employer needs a clause assigning work product as it is created, a waiver of moral rights, a confidentiality clause, a non-solicitation clause where the role warrants one, a written policy on outside projects, and a job description that reflects any expectation that the person will create or invent.