• GL
Choose your location?
  • Global Global
  • Australian flag Australia
  • French flag France
  • German flag Germany
  • Irish flag Ireland
  • Italian flag Italy
  • Polish flag Poland
  • Qatar flag Qatar
  • Spanish flag Spain
  • UAE flag UAE
  • UK flag UK

Software = Goods says European court

20 September 2021

The supply of software electronically is a "sale of goods" under the Commercial Agents Regulations. That is the decision of the Court of Justice of the European Union ("CJEU") which had been asked to determine the issue by the English Supreme Court."

The decision ends years of uncertainty for agents and principals working in the IT sector who, until now, were unclear as to whether or not their activities were regulated by  the Commercial Agents (Council) Directive 1993 (the "Regulations").

The question matters because commercial agents who sell goods on behalf of a principal (and who also satisfy other criteria) are protected by the Regulations, whilst agents who promote a principal's services, are not.

The Regulations, which remain in force in the UK post-Brexit as part of a body of law known as EU-retained law, provide significant protections to agents, not least the often substantial post-termination payments that are usually due under the Regulations.

The CJEU was asked to determine the issue by the English Supreme Court in the case of Computer Associates UK Ltd v Software Incubator Limited. In that case, the English Court of Appeal concluded that where software is supplied electronically and not on any tangible medium, such as a CD or USB drive, it cannot be classified as "goods". That decision meant agents who promoted software which is supplied electronically, rather than on a CD or USB drive, did not benefit from the protections provided by the Regulations. 

That decision was appealed to the Supreme Court and the Supreme Court referred the question to the CJEU. Significantly, the Supreme Court referred the matter to the CJEU before the end of the Brexit transition period and under the Withdrawal Agreement, the CJEU continues to have jurisdiction to give rulings in cases referred to it before the end of the transition period.

The CJEU has now made it clear that the supply of computer software by electronic means together with the grant of a licence falls within the definition of "sale of goods" for the purposes of the Regulations. It noted that the term "goods" is to be understood as meaning products which can be valued in money and which are capable of forming the subject of commercial transactions. 

The CJEU also concluded that software can be classified as "goods" irrespective of whether it is supplied on a tangible medium such as a USB drive or CD-ROM or by electronic download, as a download is the functional equivalent of supply via a material medium. 

This means that agents selling software which is provided electronically together with the grant of a licence will be protected by the Regulations and can claim a lump-sum payment on termination.

This decision is in line with cases in which other non-physical media, including gas and electricity, have been determined to be "goods" under the Regulations.

If you require any more information please contact Ben Griffin, a specialist in commercial agency law on T: +44 333 320 3147; M: +44 (0)7712 356 402; or by emailing ben.griffin@dwf.law.

Further Reading