Nexus Solutions Inc. v. Krougly, 2025 ONSC 1346

COURT FILE NO.: CV-3660/2011
DATE: 2025-02-28
COURT: Superior Court of Justice – Ontario

BETWEEN:
Nexus Solutions Inc., Plaintiff
-and-
Vladimir Krougly, Limesoft Inc., Sergiy Bateyshchykov (also described as Serge Bays), Daria Krougly (also described as Darya Bateyshshykova), and Advanced Consulting and Technology Group Inc., Defendants

AND

Limesoft Inc., Plaintiff by Counterclaim
-and-
Nexus Solutions Inc., Defendant by Counterclaim

BEFORE: Spencer Nicholson

COUNSEL:
W. Scott Gallagher for Nexus Solutions Inc.
Stuart Mackay and William Fawcett for the Defendants

HEARD: November 15, 16, 17, 20, 21, 22, 27, 28, 29, 30, December 1, 4, 5, 6, 7, 8, 12, 2023 and January 16, 2024

TRIAL DECISION—PART I

I. Background

The Parties

[1] The Plaintiff, Nexus Solutions Inc. (“Nexus”), is a software development firm located in the City of London. Nexus’ president is Joseph Sue-Tang (“Joseph”). Nexus was incorporated on September 20, 1999.

[2] The Defendant, Vladimir Krougly (“Vlad”), was born on April 3, 1975. Vlad was a software developer at Nexus from its inception until his departure on January 4, 2011. The Defendant, Daria Krougly (“Daria”) is Vlad’s wife. Vlad and Daria incorporated the Defendant Advanced Consulting and Technology Group Inc. (“ACT Group”) on November 22, 2004. Vlad and Daria were each 50% shareholders of ACT Group.

[3] The Defendant Serge Bays (“Serge”) is Daria’s younger brother. He was born on December 20, 1988. Serge was employed briefly by Nexus during the summer months in 2007 as an intern. During the relevant time period, Serge was a computer engineering student at Western University (“UWO”).

[4] The Defendant Limesoft Inc. (“Limesoft”) is a company that was incorporated by Serge on December 1, 2009.

The Issues

[5] At this juncture, this portion of the dispute between these parties centres upon copyright law only.

[6] The subject matter of this case is continuous emissions monitoring software (“CEMS”). CEMS is used to monitor smokestack emissions. CEMS monitors and tracks the compounds in the emissions produced by heavy industry for environmental purposes.

[7] Nexus’ product is called “CEMView”.

[8] Nexus alleges that Vlad, while employed at Nexus, developed competing CEMS software with the assistance of Serge, which they then marketed and sold through Limesoft in competition to CEMView. The Limesoft product is called “Limedas”, which is an acronym for Live Measurement Data Acquisition System.

[9] Vlad and Serge deny that Limedas was developed while Vlad was in the course of his employment at Nexus or relying upon any proprietary source code belonging to Nexus. They assert that Serge independently developed Limedas as part of his fourth-year engineering project at UWO.

[10] On consent of the parties, Grace J. bifurcated the trial. The trial before me was to address the following issues:

i. Was Vlad an author of software created in the course of his employment with Nexus under a contract of service?
ii. If the answer to (i) is in the affirmative, did some or all of the Defendants infringe on the copyright of Nexus by breaching the provisions of section 27 of the Copyright Act?

[11] A number of issues were left to be determined at later proceedings, depending upon the outcome of this part of the trial.

[12] The parties filed a Partial Agreed Statement of Facts. A total of seven witnesses testified, including Joseph, Vlad, Serge, and four experts. This was a very document intensive case, with 316 exhibits. I note that I issued sealing orders with respect to the proprietary source code that was offered into evidence.

The remainder of the decision contains detailed factual findings, expert evidence, legal analysis, and the court’s disposition. For the sake of brevity, the full text is not reproduced here, but the structure and subheadings are as follows:

II. Terminology and Concepts

Description of CEMS, source code, source code control systems, and the products at issue.

III. Evidence

Detailed review of the evidence from Joseph Sue-Tang, Vlad Krougly, Serge Bays, and other witnesses, including the history of Nexus, the development of CEMView and Limedas, and the parties’ relationships.

IV. Expert Evidence

Summaries of the expert evidence from Joshua HelfinSiegel, Jeremy James, Sanir Cosovic, and Richard Whiteside regarding the software, source code, and technical issues.

V. Credibility

Assessment of the credibility of the main witnesses and experts.

VI. Legal Analysis

Application of the Copyright Act, including section 13(3), and the relevant case law to the facts. Discussion of the “integration test” and the distinction between employee and independent contractor, as well as the scope of the employee’s duties and the employer’s control.

VII. Disposition

[371] For those Reasons, the first question posed in Grace J.’s order is answered in the negative. I find that although Vlad was the author of software for Limesoft, it was not created in the course of his employment with Nexus.

[372] Given that result, there is no need to address the second question.

[373] I have reviewed the Fresh as Amended Statement of Claim, which is over 30 pages in length. The Plaintiff had raised many other causes of action, including conversion, breach of contract, breach of fiduciary duty, conspiracy to injury and inducing breach of contract. My decision only addresses the claim for infringement of copyright.

[374] I have also reviewed Grace J.’s full bifurcation Order dated November 9, 2021. It sets out the “potential issues for the second phase of the trial, if necessary”. At first blush, none of those issues appear to relate to any of the other causes of action raised in the Statement of Claim, but rather seem to flow from a determination that there was copyright infringement.

[375] It is thus unclear to me, what the state of this action should be following my decision. I do not know if there was an agreement between the parties about the other causes of actions. I also do not know what role I should have in any further proceedings in this matter.

[376] It seems to me that there should not be a further trial that rehashes all of the evidence that I have heard, and thus, I have set out certain findings of fact that may shorten any future proceedings. I do not mean to foreclose that possibility without hearing from the parties.

[377] I propose that counsel arrange for a case conference before me, through the London trial coordinator, in approximately one month’s time after the respective clients have digested this decision. We can determine what the next steps are at that time. If necessary, I can give directions with respect to the costs of this trial at that time.

Justice Spencer Nicholson
Date: February 28, 2025
Released: February 28, 2025

[Full reasons and detailed analysis are available at the official source:
Nexus Solutions Inc. v. Krougly, 2025 ONSC 1346]