High Court Rules Software = Goods In Commercial Agency Relationship

The question of whether software constitutes goods or services has always been problematic. The answer can determine if and when certain terms are implied into a commercial contract, which in turn may have significant financial consequences for the losing party in a dispute.

This was illustrated most recently in the High Court case of The Software Incubator Ltd v Computer Associates UK Ltd [2016] EWHC 1587 (QB). Here Judge Waksman QC held that the software promoted by agent TSI was "goods" for the purposes of the Commercial Agents (Council Directive) Regulations 1993. The court found in favour of TSI and awarded it £475,000 in compensation under the Regulations and £24,355 in contractual damages.

This decision will be of interest to software agents, principals - including software licensors and anyone involved in negotiating commercial agency agreements, particularly where those agreements relate to software or other intangible products.

What are the Regulations?

Readers will recall that the Regulations aim to protect commercial agents in relation to their principals. This is achieved, in part, through mandatory provisions such as the payment of compensation to an agent on termination of his agency and, in some cases, payment to the agent of a post-termination commission. One practical effect of the legislation, where it applies, is that a principal may...