Employee-Created IP: Ownership Should Not Be Assumed
Charities and not-for-profits (NFPs) regularly create and rely on intellectual property in carrying out their missions, including educational materials, research, publications, fundraising resources, policies, program content, branding materials, databases, and websites. These assets may be developed by employees, volunteers, contractors, or collaborators, sometimes without clear written terms addressing ownership. The Ontario Court of Appeal’s decision in Nexus Solutions Inc. v. Krougly is a useful reminder that ownership of intellectual property created in the workplace should not be assumed. For charities and NFPs, the case highlights the importance of clear agreements and policies that identify when works created by individuals will belong to the organization.
The dispute concerned ownership of copyright in software created by a former employee. Nexus Solutions Inc., a software company, employed Vladimir Krougly as a senior software developer. His work primarily involved writing source code for Nexus’s product, known as CEMView. While still employed by Nexus, Mr. Krougly secretly developed a competing software product called Limedas. When Nexus discovered this, it sought a declaration that it owned the copyright in Limedas on the basis that Mr. Krougly had created it while employed by Nexus.
The central issue was the interpretation of section 13(3) of the Copyright Act. As a general rule, the author of a work is the first owner of copyright. However, section 13(3) creates an exception where a work is made by an employee “in the course of” employment. In those circumstances, unless there is an agreement to the contrary, the employer is the first owner of copyright. The question before the court was therefore whether Limedas had been created in the course of Mr. Krougly’s employment with Nexus.
At trial, the judge dismissed Nexus’s claim. Although Limedas was designed to compete with Nexus and was developed while Mr. Krougly was still an employee, the trial judge found that the software was not created in the course of his employment. In reaching this conclusion, the trial judge considered the factors from Penhallurick v. MD5 Ltd., including the terms of the employment contract, where and when the work was created, whether the employer’s equipment or resources were used, and the degree of direction given by the employer.
Several facts were important. The work on Limedas was done largely outside office hours. Mr. Krougly did not use Nexus property to create it. Most importantly, his assigned role was to maintain and develop the existing CEMView software, not to create new software products. The trial judge accepted that Mr. Krougly may have acted improperly from the perspective of his duty of loyalty to his employer. However, the court emphasized that copyright law is not intended to punish an employee for disloyal conduct if the work itself falls outside the scope of the statutory employment exception.
Nexus appealed to the Ontario Court of Appeal. It argued that the trial judge had applied too narrow a test by focusing on whether Mr. Krougly had been specifically directed to create the software. Nexus proposed a broader approach, arguing that an employer should own copyright where the work falls within the general class or kind of work that the employer could have required the employee to create.
The Court of Appeal rejected that argument. It held that an employer’s ability to require an employee to perform a task may be relevant, but it is not enough on its own. The focus must be on the employee’s actual responsibilities, not merely on what the employer might theoretically have asked the employee to do had they possessed knowledge of facts they were unknown to them. The court also emphasized that section 13(3) is an exception to the general rule that authors own their own works. That exception is justified where the employer has assumed the financial and organizational risks associated with creating the work and has paid the employee to produce it.
On the facts, Nexus had not funded or directed the creation of Limedas and did not assume the risks associated with its development. Mr. Krougly’s assigned duties were connected to the existing CEMView product, and he had been told not to undertake unauthorized projects on Nexus’ behalf. The Court of Appeal therefore agreed that Limedas was a side venture, rather than a work created in fulfillment of his employment duties. The appeal was dismissed, and Mr. Krougly retained copyright in the software.
For charities and NFPs, the key takeaway is that ownership of employee-created intellectual property should be addressed before disputes arise. Organizations should not assume that they automatically own all works created by employees, even where those works relate broadly to the organization’s activities. Employment agreements, contractor agreements, job descriptions, and IP policies should clearly set out who owns software, written materials, databases, training resources, fundraising tools, branding materials, and other works created in connection with the organization’s operations. This is particularly important where employees have technical, creative, communications, research, or program development responsibilities. Clear documentation can help avoid uncertainty, protect organizational assets, and reduce the risk of costly disputes over ownership.
Alberta Court Finds Constructive Dismissal After Employer Imposes New Contract
Charities and not-for-profits (NFPs) often rely on long-serving employees whose roles and responsibilities may have evolved over time without formal written employment agreements. The decision in Yakubow v Edmonton Granite Memorials Ltd., decided on May 8, 2026, is a useful reminder that introducing new written employment contracts for existing employees must be handled carefully. While written agreements can help clarify expectations and reduce uncertainty, they can also create legal risk if they impose significant new terms without proper process or consideration.
The Court of King’s Bench of Alberta considered a constructive dismissal claim brought by Dwayne Yakubow, who had worked for Edmonton Granite Memorials Ltd. for more than 20 years. In January 2023, Mr. Yakubow resigned after being presented with a new written employment contract that he believed fundamentally changed the terms of his longstanding unwritten employment arrangement. The court agreed, finding that he had been constructively dismissed and awarding him $149,812.50 in damages, representing 15 months of reasonable notice.
The court applied the two-part test for constructive dismissal from the Supreme Court of Canada’s decision in Potter v New Brunswick Legal Aid Services Commission. The first part considers whether the employer breached an essential term of the employment contract. Because Mr. Yakubow’s earlier employment arrangement was not in writing, it was governed by common law employment principles. The proposed written contract introduced several significant changes, including changes to his job title and duties, changes to his bonus structure, a limitation of termination pay to statutory minimums, and the addition of both non-solicitation and non-competition clauses. The court found that these changes affected fundamental components of the employment relationship.
The second part of the test considers whether the employer’s conduct showed that it no longer intended to be bound by the original employment agreement. The employer argued that the proposed contract was only a negotiable draft. However, the court found that the employer’s conduct suggested otherwise. Mr. Yakubow was pressured to sign within a matter of days, the agreement was dated to take effect immediately, the employer repeatedly stated that other employees had already signed, and it suggested that new ownership could require employees to enter into whatever agreement it chose. Taken together, the court concluded that the employer’s conduct objectively communicated an intention not to continue honouring the original employment arrangement.
In assessing damages, the court considered the usual factors relevant to reasonable notice, including Mr. Yakubow’s age, length of service, position, and the availability of similar employment. He was 45 years old and had worked for the employer for nearly 21 years, most recently as a sales manager. While his age and general management experience weighed against an especially lengthy notice period, his long tenure weighed heavily in his favour. The court determined that 15 months was appropriate.
The damages award included salary, bonuses, and benefits over the notice period. Mr. Yakubow’s base salary was assessed at $8,625 per month. The inclusion of lost bonuses and benefits brought the total monthly compensation to $9,987.50, resulting in a total award of $149,812.50.
The employer argued that Mr. Yakubow had failed to mitigate his damages by not making sufficient efforts to find comparable employment. The court rejected this argument as the employer did not provide enough evidence to show that comparable work was available. The court also declined to deduct income he earned as a hockey referee during the notice period, since he had historically performed that work alongside his full-time employment and it was not replacement income.
Mr. Yakubow also sought aggravated damages, but the court declined to make such an award. Although the employer’s pressure to sign the new contract was inappropriate and contributed to the constructive dismissal, the court found that the conduct did not meet the high threshold required for aggravated damages. The employer had not acted dishonestly, maliciously, or with an intention to humiliate him.
For charities and NFPs, the key takeaway is that new employment agreements should not be treated as routine paperwork when introduced to existing staff. Organizations should consider whether proposed terms materially change the employment relationship and whether fresh consideration is required. Particular care should be taken with termination clauses, compensation changes, and revised duties. Boards and senior management should also ensure that employees are given adequate time to review any new agreement and are not pressured to sign. For organizations with limited resources, the financial consequences of mishandling employment contracts can be significant, making careful legal review an important risk management step before rolling out new agreements.