In Computer Associates UK Limited v The Software Incubator Limited  EWCA Civ 518 the Court of Appeal found that the Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) did not apply to agents selling downloadable software as it was not classed as a “sale of goods”. This reversed an earlier decision from 2016. The Court of Appeal further suggested that this might be an area for parliament to consider further and update the law.
The 2016 decision
The case was concerned with release automation software (“RAS”) which, aimed at large institutions, is used to introduce other bespoke software to operating systems and often sold as a download rather than on a disk. Computer Associates Limited (“CA”) terminated an agreement with commercial agents, The Software Incubator Limited (“TSI”), to supply RAS when TSI began a business relationship with another software company. TSI sought and were awarded damages, certain post-termination commissions due as well as compensation pursuant to the Regulations which apply only to “the sale of goods”.
The Court of Appeal decision
The Court of Appeal has now handed down judgment partially reversing the earlier decision. The court was primarily concerned with the question of whether the licence to use electronically supplied software could constitute the “sale of goods”.
The Court found that software which is downloaded cannot be considered ‘goods’ due to its intangibility – the law as it stands does not consider information to be property. The court acknowledged that the decision may be “out-moded in light of technological advances” nevertheless felt compelled due to the number of authorities which already maintained the tangible/intangible distinction. TSI were therefore denied compensation pursuant to the Regulations. The Court of Appeal called for reform from the legislature on this point rather than the judiciary.