Commercial Agents Regulations – Court of Justice of the European Union (CJEU) rules on whether software can be ‘goods’
Paul Hardman reflects on a decision which will have far reaching effects on the IT industry. The CJEU has ruled that software in any form, whether that is tangible (such as a CD or USB stick) or intangible (such as made available by licence) can amount to ‘goods’ for the purposes of The Commercial Agents (Council Directive) Regulations 1993.
Up till now case law held that only software which was sold in a tangible form could be ‘goods’ with intangible software being ‘services’ which are not caught by the Regulations.
Impact
We have moved away from the days of shrink wrap CD’s as the medium for selling computer programme towards downloads and licences and software-as-a-service (SaaS) models of delivery. This decision, once confirmed by the Supreme Court, will change the understanding of the law and will mean that anyone involved in the promotion, marketing or negotiation of another IT business could qualify as a commercial agent. Commercial agents under the Regulations enjoy certain rights, the most important in a commercial context being the right to compensation on termination of their appointment.
Limitation
However, there are limitations and issues to be resolved so not every ‘commercial agent’ will benefit from this ruling. The CJEU held that downloading a programme with a user licence intending to making it available permanently was equivalent to selling the programme. It did not express any view as to whether making available a programme on a subscription basis would also amount to selling it (the Regulations only apply if there is a ‘sale or purchase of goods’). In addition, amongst other exclusions, the Regulations do not apply to agents whose activities are secondary and the Regulations set out a number of indicators of what that means (such as, that the agent does not devote substantially the whole of his time to representative activities).
Further clarification
For the moment, it is likely that, having referred the case to the CJEU before the end of the Brexit transition period, the Supreme Court will follow the CJEU in its ruling and this will therefore become UK law. How the UK courts chose to clarify further legal issues associated with the Regulations remains to be seen but it is noted that at least one of the tenets that the CJEU applied, namely the need for harmonisation of interpretation across the EU, will no longer be a factor in any decision affecting the UK.
For further advice on The Commercial Agents (Council Directive) Regulations 1993 please contact Paul Hardman or Richard Gore by calling 0117 906 9400 or email hello@gl.law
