December 02
2021
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Emilija Berzanskaite
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16th September 2021
Data, Tech & IP Internal Market

Court of Justice: Granting of a perpetual software licence can be characterised as the ‘sale’ of ‘goods’ within the meaning of the Commercial Agents Directive

In The Software Incubator (C-410/19), the Court of Justice found that the supply of computer software by electronic means accompanied by the grant of a perpetual licence can be characterised as the ‘sale’ of ‘goods’ within the meaning of the Commercial Agents Directive 86/653/EEC.

The case stems from proceedings between The Software Incubator Ltd and Computer Associates (UK) Ltd, which licenses software for deploying and managing applications across different operational environments. Computers Associates (the principal) signed an agreement with The Software Incubator (the commercial agent), which entailed the latter approaching potential clients for the purpose of promotion and marketing of that software on behalf of Computer Associates, without, however, having the authority to transfer property in that software.  

Computer Associates terminated the agreement and The Software Incubator brought an action for damages on the basis of the Commercial Agents Directive 86/653/EEC. Computer Associates disputed the classification of its relationship with The Software Incubator as a commercial agency contract, contending that the supply of computer software to a customer by electronic means accompanied by the grant of a perpetual licence to use that software did not constitute a ‘sale of goods’ within the meaning of Article 1(2) of that directive.

The Court of Justice was asked to rule whether (i) a copy of the software supplied by electronic means constitutes ‘goods’; and (ii) the granting of a perpetual licence to use software constitutes a ‘sale’ of goods.

The Court finds in its judgment that computer software can be classified as ‘goods’ because it has a commercial value and is capable of being the subject of a commercial transaction, fulfilling the definition developed by the Court’s case law. Such conclusion is irrespective of whether the software is supplied on a tangible medium or by electronic download.

Further, the Court recalls that ‘sale’ is an agreement by which a person, in return for payment, transfers to another person his rights of ownership in an item of tangible or intangible property belonging to him. In this regard, the Court finds that allowing customers to download a copy of computer software and concluding with them a licence agreement, which is intended to be used by a consumer permanently, in return for payment, involves the transfer of the right of ownership of that copy, and therefore can be classified as a ‘sale’ of goods.

The judgment is available here.

An Op-Ed on this case by Johanna Jacobsson will be published soon on EU Law Live.

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