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Supreme Court decides to refer whether software constitutes “goods” to the Court of Justice of the European Union

28/03/19

Computer Associates UK Ltd v The Software Incubator Ltd

Today, the Supreme Court has decided to refer two questions concerning the meaning of Council Directive 86/653/EEC of December 1986 on the co-ordination of the laws of members States relating to self-employed commercial agents (“Directive”), including whether electronically supplied software amounts to “goods”, to the Court of Justice of the European Union (“CJEU”).

By a judgment in 2016, the High Court awarded compensation under the UK Regulations implementing the Directive to the Software Incubator Ltd. (“TSI”), which was engaged to promote the grant of licences by Computer Associates UK Ltd. (“Computer Associates”) to customers to use release automation software aimed at large institutions.  Computer Associates provided the software to its customers electronically and it was never provided using any tangible media. In concluding that TSI was within the scope of the Directive, the High Court held that electronically supplied software amounted to “goods” and the supply of the software by way of a perpetual licence amounted to the “sale of goods” within the meaning of the Directive. 

In 2018, the Court of Appeal unanimously allowed Computer Associate’s appeal and dismissed TSI’s claim under the Regulations by holding that the meaning of “goods” is limited to tangible property and, therefore, electronically supplied software cannot constitute “goods”.

On TSI’s application for permission to appeal to the Supreme Court, the Supreme Court convened an oral hearing in order to consider whether to refer the question as to whether electronically supplied software amounts to “goods” within the meaning of the Directive. The oral hearing before the Supreme Court was fixed for 28 March 2019, the day before “exit day” according to the European Union (Withdrawal) Act 2018.

After hearing oral argument, the Supreme Court decided to refer two questions as to the meaning of the Directive to the CJEU: (1) whether electronically supplied software amounts to “goods”; and (2) whether the supply of software by way of a perpetual and/or limited term licence to use it amounts to the “sale of goods”.  Computer Associates UK Ltd. v. The Software Incubator Ltd.

Today, the Supreme Court has decided to refer two questions concerning the meaning of Council Directive 86/653/EEC of December 1986 on the co-ordination of the laws of members States relating to self-employed commercial agents (“Directive”), including whether electronically supplied software amounts to “goods”, to the Court of Justice of the European Union (“CJEU”).

By a judgment in 2016, the High Court awarded compensation under the UK Regulations implementing the Directive to the Software Incubator Ltd. (“TSI”), which was engaged to promote the grant of licences by Computer Associates UK Ltd. (“Computer Associates”) to customers to use release automation software aimed at large institutions.  Computer Associates provided the software to its customers electronically and it was never provided using any tangible media. In concluding that TSI was within the scope of the Directive, the High Court held that electronically supplied software amounted to “goods” and the supply of the software by way of a perpetual licence amounted to the “sale of goods” within the meaning of the Directive. 

In 2018, the Court of Appeal unanimously allowed Computer Associate’s appeal and dismissed TSI’s claim under the Regulations by holding that the meaning of “goods” is limited to tangible property and, therefore, electronically supplied software cannot constitute “goods”.

On TSI’s application for permission to appeal to the Supreme Court, the Supreme Court convened an oral hearing in order to consider whether to refer the question as to whether electronically supplied software amounts to “goods” within the meaning of the Directive. The oral hearing before the Supreme Court was fixed for 28 March 2019, the day before “exit day” according to the European Union (Withdrawal) Act 2018.

After hearing oral argument, the Supreme Court decided to refer two questions as to the meaning of the Directive to the CJEU: (1) whether electronically supplied software amounts to “goods”; and (2) whether the supply of software by way of a perpetual and/or limited term licence to use it amounts to the “sale of goods”.  

Jasbir Dhillon QC, instructed by CMS Cameron McKenna Nabarro Olswang LLP, acted for the respondent, Computer Associates.