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Copyright - Ownership. Nexus Solutions Inc. v. Krougly [ownership by employer]
In Nexus Solutions Inc. v. Krougly (Ont CA, 2026) the Ontario Court of Appeal dismissed an appeal, here brought against the dismissal of the plaintiff's "s.13(3) of the Copyright Act, R.S.C. 1985, c. C-42 (the “Act”), which provides that an employer is the first owner of the copyright in a work created by an employee “in the course of” their employment.":[9] The trial judge held that the purpose underlying the grant of copyright to an employer in works created by an employee had been correctly described by Lucie Guibault et al. in Canadian Intellectual Property Law (2025), 2022 CanLIIDocs 4489[1], at pp. 62-63, as follows:The basis for the attribution of the initial ownership of rights to the employer is that since the latter assumes the major financial, organizational, and associative risks involved in the creation, production and distribution of the work, they should have full control, including with respect to third parties, over the exploitation of that work. In these circumstances, the author receives compensation for their intellectual creation not in the form of an exclusive economic right in the work – which is presumed transferred to the employer, but in the form of a salary or any other form of agreed remuneration. [10] The trial judge found that in interpreting the scope of an employer’s rights under s. 13(3), it was relevant to consider the factors identified by the Intellectual Property Enterprise Court (a specialist court of the High Court of England and Wales) in Penhallurick v. MD5 Ltd., [2021] EWHC 293 (IPEC), aff’d [2021] EWCA Civ 1770. Penhallurick holds, at para. 58, that the following circumstances may be considered in determining whether a work has been created “in the course of” a person’s employment:(i) the terms of the contract of employment;
(ii) where the work was created;
(iii) whether the work was created during normal office hours;
(iv) who provided the materials for the work to be created;
(v) the level of direction provided to the author;
(vi) whether the author can refuse to create the work; and
(vii) whether the work is “integral” to the business. ....
A. Governing principles
[17] This appeal turns on the proper interpretation of s. 13(3) of the Act, which must be considered alongside s. 13(1). The two provisions provide in relevant part as follows:Ownership of 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 ... [18] Thus, in order for an employer to hold copyright in a work created by an employee, three conditions must be satisfied:(i) the creator of the work must be, in law, an employee;
(ii) the work must have been created “in the course of … employment”; and
(iii) there is no agreement to the contrary. [19] In this case there is no dispute that the first and third of these conditions are satisfied, since it is agreed that Krougly was an employee at the relevant time, and there was no agreement, in a contract of employment or otherwise, which addressed the copyright in works he might create. Thus, the appeal turns on whether Krougly created Limedas “in the course of his employment”, within the meaning of s. 13(3).
[20] It is well established that the modern approach to statutory interpretation requires that the court examine the words of the provision “‘in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament’”: Piekut v. Canada (National Revenue), 2025 SCC 13, 502 D.L.R. (4th) 1, at para. 42, citing Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21.
[21] Thus, the plain meaning of the text alone is rarely determinative, and the statutory interpretation analysis is therefore incomplete “without considering the context, purpose and relevant legal norms”: R. v. Alex, 2017 SCC 37, [2017] 1 S.C.R. 967, at para. 31.
[22] The purpose of the Act is to strike a balance between “the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator (or, more accurately, to prevent someone other than the creator from appropriating whatever benefits may be generated)”: Théberge v. Galerie d'Art du Petit Champlain inc., 2002 SCC 34, [2002] 2 S.C.R. 336, at para. 30; see also Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association, 2022 SCC 30, [2022] 2 S.C.R. 303, at para. 67.
[23] On this basis, s. 13(1) of the Act provides that the author shall generally be the first owner of the copyright in works they create. This fulfills the broader purpose of the Act since it provides authors with an incentive to create and disseminate works, while also benefitting the public by providing them with access to creative works that might otherwise never have come into existence.
[24] What, then, is the purpose of s. 13(3), which provides an exception to the general rule set out in s. 13(1) and grants an employer first copyright in a work created by an employee in the course of their employment?
[25] As Guibault et al. point out at pp. 142-44 of their text, this exception is justified by the fact that where the employer has paid for the development of the work (including through compensating the author(s) for their work in developing it), and assumed the risks associated in its development, the “just reward” should accrue to the employer rather than the individual author(s). Allocating reward to the entity that caused the work to be created is consistent with the principle that copyright should vest in the entity for whom the work was created and who paid for it.
[26] This understanding of the purpose of the s. 13(3) exception, alongside the text of the provision and the surrounding context of copyright law and the scheme of the Act, assists in understanding the proper meaning and scope of the phrase “in the course of … employment”.
[27] Simply put, the s. 13(3) exception is premised on the determination that the employer ought to hold copyright over works that were made by the employee as part of their responsibilities to the employer. The supporting rationale is that the employee was paid to make the work and did so in fulfillment of their agreed role with the employer.
[28] This would likely be the case where the work was made under the employer’s instructions and using its resources. Conversely, where the employee made the work on their own time, using their own equipment, and not as part of their assigned duties or responsibilities, the making of the work would likely fall outside of the course of their employment, and copyright would vest in the employee.
[29] There will inevitably be instances which are less clear cut, and the assignment of copyright in such cases will turn on the strength of the connection between the making of the work and the employee’s responsibilities. In assessing that nexus, the factors identified in Penhallurick will assist in the inquiry, but others may also be relevant. The overriding issue is whether the making of the work in question is something that the employee was asked or expected to do, either expressly or by necessary implication, as part of their employment responsibilities.
[30] Of course, an employer and employee may agree that entitlement to copyright in works made by an employee should be determined on the basis of a different legal framework, which will then govern. This is because the “in the course of … employment” rule set out in s. 13(3) applies only “in the absence of any agreement to the contrary”.
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