A recent judgment of the Court of Justice of the European Union (CJEU) has significant consequences for software providers which conduct sales of software to their customers through agents, both in the EU and the UK. It also highlights a wider debate around whether software should be treated as goods or services and why this matters.
What happened in this case?
In March 2013, Computer Associates UK Ltd (CAUL) entered into an agreement with The Software Incubator Ltd (TSI) for TSI to market CAUL's automation software (a product which helps businesses to co-ordinate and deploy other software). However, the arrangement between the two parties was short lived, as CAUL served notice to terminate the agreement seven months later. Following termination, TSI brought a claim against CAUL for post-termination payments under the Commercial Agents Directive 86/653 (the Directive) at the High Court.
The Commercial Agents Directive was implemented into UK law by the Commercial Agents (Council Directive) Regulations 1993 (the Regulations) and applies to certain commercial agency relationships relating to the "sale of goods".
Several terms are implied into commercial agency arrangements by virtue of the Regulations. Examples include rights to reasonable remuneration, minimum periods of notice and - relevant to this case - a right to a "compensation" or an "indemnity payment" on termination of the agency agreement.