By Richard Stobbe

Let’s say an employee is hired as a software engineer to develop an application for the employer.  The employee completes the project, and the software program is launched as a commercial product. Copyright is registered in the software, showing the employee as author, and the employer as owner.  So far so good.

The employee leaves, and her company launches its own software product, which seems to compete directly with the software that was created for her former employer. Ok, now we have a problem.

Or do we?  These are the basic facts in the interesting case of Knowmadics v. Cinnamon and LDX Inc., 2019 ONSC 6549 (CanLII), where an ex-employee left her employment in 2017, and within two months of signing a Non-Disclosure Agreement, her company LDX was offering software products that seemed to contain similar features and competed directly with Knowmadics, the former employer.

Knowmadics sued its former employee, claiming that the LDX software infringed the copyright of Knowmadics. The claim also alleged breach of the Employment Agreement, a Subcontractor Agreement, and a Non-Disclosure Agreement.

An analysis of the code showed that there were similarities and overlap between the software written for Knowmadics, the former employer, and the software sold by Ms. Cinnamon, the former employee through her company LDX.  However, Ms. Cinnamon raised a defence that makes perfect sense in light of the way that many software projects evolve: any similarities, the employee argued, were due to the simple fact that she used her own prior code in developing the program for Knowmadics, during her employment, and that same code was incorporated into a database that she wrote for an earlier client, and the same code was subsequently incorporated into the software she wrote for her own company, LDX. So of course it has similar features, it’s all from the code originally authored by the same developer.

To borrow from the court’s analysis: “The relevant issue as far as the database goes is a legal one for the Court to determine at trial: once Ms. Cinnamon delivered SilverEye to Knowmadics incorporating that prior database without identifying that she was doing so, and Knowmadics copyrighted SilverEye with that database code and schema, was Ms. Cinnamon then permitted under copyright law or her agreements with Knowmadics to take a shortcut and use the same code and schema to create a competing software with the same functionalities?  This is a serious issue to be determined at trial…”

The reported decision dealt with a pre-trial injunction application. The order granted by the court simply maintained the status quo pending trial, so the merits of this case are still to be decided. If it does proceed to trial, this case will engage some very interesting issues around copyright, software, originality and licensing of code.

Stay tuned.

Calgary – 07:00 MT