Software is a good

In a recent case, the ECJ corrected an anomaly that only lawyers care about. Oh, and commercial agents.

Software provided on physical media such as a CD, DVD or USB stick is goods. SaaS is a service obviously. The answer is in the name – software as a service. Downloaded software was also a service.

This distinction didn’t matter to most people. But it matters to commercial agents who sell software. The Commercial Agents Regulations entitle agents to compensation if they help sell goods, but not a service. So, the Regs did not protect agents who helped sell downloads of software.

The Court of Appeal maintained this distinction when it last looked at this point in 2018. The UK Supreme Court referred the case to the ECJ for clarification.

The ECJ ruled that the supply of downloaded software under a perpetual licence is a sale of goods rather than services. The licensee “owns” that copy of the software. This is consistent with its previous ruling that a licensee can resell software it has paid for. This is on the basis that the licensor has “exhausted” its rights by selling that copy.

There are a few factors to consider. First, it applies to software which is subject to a “perpetual” licence. It might apply for a shorter duration of licence while that licence is in effect since the licensee arguably “owns” that copy during the licence. Secondly, this should see the reversal of the UK Court of Appeal decision. Third, this applies despite Brexit. Finally, it doesn’t appear to apply to software as a service.

Agents aren’t automatically entitled to compensation. For example, if they’re not performing well. You should use this opportunity to review your agreements with your agents who help sell your software.

If you need advice, contact me or +44 (0) 20 7611 2338.

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