Cécile de Lagarde discusses the Court of Appeal decision in Computer Associates UK Ltd v Software Incubator Ltd

  • April 27, 2018
  • By Hunters Law

Software does not amount to goods for the purposes of the Commercial Agents Regulations ruled the Court of Appeal in Computer Associates UK Ltd v Software Incubator Ltd[1]

The Commercial Agents (Council Directive) Regulations 1993 (1993 Regulations) gives protection to commercial agents in their relationship with their principals and provide them in particular with the right to financial compensation when their agency agreements come to an end.

A commercial agent, The Software Incubator Limited (TSI), had been appointed to promote software produced by Computer Associates UK (CA). When CA terminated the agency agreement, arguing that TSI was in breach of its obligations, TSI brought a claim in the High Court against CA and asserting its rights under the 1993 Regulations. TSI claimed that it was entitled to compensation for the damages it had suffered as a result of the termination of its agreement with CA.

The 1993 Regulations only protect agents who, on behalf of their principal, sell or purchase goods as opposed to services. The question was therefore whether software supplied electronically amounted to “goods” under the 1993 Regulations. As there is no definition of “goods” within the 1993 Regulations themselves, the Court of Appeal went on to examine case law and European legislation in relation to the sale of goods in order to make a decision.

The Court of Appeal held that software supplied electronically and not on a tangible medium did not constitute “goods” under the 1993 Regulations. Although the Court recognised that the tangible/intangible distinction in relation to software was illogical and lead to an undesirable result from the perspective of commercial agents, it held that reform in light of technological advances had to come from Parliament as opposed to from the judiciary.  The Court also justified its decision by stating that, as the 1993 Regulations are aimed at commercial parties rather than consumers, commercial parties are not so much in “need of protection that the judiciary should adopt a completely different approach to interpreting “goods” than that established by precedent”.

This decision, which reversed the decision of the High Court in 2016, which decided that software supplied electronically did amount to “goods” for the purposes of the 1993 Regulations, will not be welcome from the perspective of commercial agents.[2]

For queries in relation to commercial matters, please contact the partner at Hunters with who you normally deal or a member of our Business Services team.

Cécile de Lagarde

[1] Computer Associates UK Ltd v Software Incubator Ltd [2018] EWCA Civ 518

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