Opinion of Advocate General Tanchev delivered on 17 December 2020.

Celex Number:62019CC0410
Court:Court of Justice (European Union)
ECLI:ECLI:EU:C:2020:1061
Jurisdiction:Unión Europea

OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 17 December 2020(1)

Case C410/19

The Software Incubator Ltd

v

Computer Associates UK Ltd

(Request for a preliminary ruling from the Supreme Court of the United Kingdom)

(Reference for a preliminary ruling – Self-employed commercial agents – Directive 86/653/EEC – Article 1(2) – Definition of commercial agent – Concepts of ‘sale’ and ‘goods’ – Supply of computer software to a principal’s customers by electronic means accompanied by the grant of a perpetual licence)






I. Introduction

1. This request for a preliminary ruling submitted by the Supreme Court of the United Kingdom relates to the interpretation of Article 1(2) of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents. (2)

2. Article 1(2) of Directive 86/653 defines a commercial agent as a self-employed intermediary whose activities involve in particular the sale or purchase of goods on behalf of another person known as the principal. The main issue arising in the present case concerns whether the supply of computer software to a principal’s customers by electronic means accompanied by the grant of a perpetual licence can be characterised as the ‘sale’ of ‘goods’ within the meaning of that provision.

3. Consequently, this case presents the Court with the first occasion to give a ruling on the interpretation of the concepts of ‘sale’ and ‘goods’ under Article 1(2) of Directive 86/653. In the main proceedings, this is required in order to determine whether Directive 86/653 applies to an agent engaged to promote the computer software in question, so that the claim for compensation based on that directive can succeed.

II. Legal framework

A. EU law

4. Article 1(2) of Directive 86/653 provides:

‘For the purposes of this Directive, “commercial agent” shall mean a self-employed intermediary who has continuing authority to negotiate the sale or the purchase of goods on behalf of another person, hereinafter called the “principal”, or to negotiate and conclude such transactions on behalf of and in the name of that principal.’

B. United Kingdom law

5. Directive 86/653 was implemented in United Kingdom law by the Commercial Agents (Council Directive) Regulations 1993 (Statutory Instruments 1993/3053), as amended (‘the Regulations’). (3) Regulation 2(1) of those regulations states:

‘In these Regulations—

“commercial agent” means a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the “principal”), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal; …’

III. Facts, main proceedings and questions referred

6. According to the order for reference, Computer Associates UK Ltd (‘Computer Associates’) is a company that markets a kind of computer software known as application release automation software (‘the software’). The software is complex, expensive and non-bespoke, meaning that it is not custom-made for a particular customer. The purpose of the software is to coordinate and implement automatically the deployment of and upgrades for other software applications across different operational environments in large organisations, such as banks and insurance companies, so that the underlying applications are fully integrated with the software operating environment.

7. The Software Incubator Ltd (‘The Software Incubator’) is a company owned by Mr Scott Dainty.

8. On 25 March 2013, Computer Associates and The Software Incubator entered into a written agreement (‘the agreement’).

9. Under clause 2.1 of the agreement, The Software Incubator, through Mr Dainty, agreed to act on behalf of Computer Associates to approach potential customers in Ireland and the United Kingdom ‘for the purpose of promoting, marketing and selling the Product’. The ‘Product’ denoted the software, as indicated by the first recital of the agreement. Accordingly, for the purpose of the agreement, Computer Associates was the principal and The Software Incubator was the agent.

10. As indicated by the order for reference, the main characteristics of the supply of the software in the main proceedings were as follows. First, Computer Associates supplied the software to its customers electronically via an email containing a link to an online portal from which they downloaded it. While the possibility of supplying the software by a tangible medium existed, it was not used in practice.

11. Moreover, under clause 4.1 of the agreement, Computer Associates had the exclusive right to determine the terms and conditions in connection with the licensing of the software to customers and, according to clause 6.1 thereof, Computer Associates charged and collected all fees due from customers associated with the use of the software. The Software Incubator’s authority as agent was therefore concerned with the promotion of grants by Computer Associates to its customers of licences to use the software. The Software Incubator did not have any authority to transfer title or property in the software.

12. In that regard, pursuant to the agreements between Computer Associates and its customers, (4) the customer was granted a licence to use the software, which in most situations was perpetual, meaning that it was for an unlimited period. The licence allowed the customer, inter alia, to install and deploy the software in the specified territory up to the authorised number of end users and to permit the authorised end users access to the software. It was also subject to the customer’s compliance with obligations, in particular, not to access or use any unauthorised portion of the software, nor to de-compile, modify or reverse-engineer it, and not to rent, assign, transfer or sub-license it. Computer Associates and related entities retained all rights, title, copyright, patent, trade mark, trade secret and all other proprietary interests in and to the software. Either party could terminate the relevant agreement for material breach or the other party’s insolvency, in which case the licence was revoked and the customer had to return any copies of the software or destroy them.

13. By letter dated 9 October 2013, Computer Associates terminated the agreement with The Software Incubator.

14. The Software Incubator brought an action against Computer Associates before the High Court of Justice (England & Wales), Queen’s Bench Division (United Kingdom), claiming in particular compensation pursuant to the provisions of the Regulations implementing Article 17 of Directive 86/653. Computer Associates denied any liability on the ground, inter alia, that the Regulations did not apply because the supply of the software promoted by The Software Incubator did not constitute the ‘sale of goods’ for the purpose of the definition of commercial agent contained in Regulation 2(1) of those regulations implementing Article 1(2) of Directive 86/653.

15. By its judgment of 1 July 2016, (5) the High Court of Justice (England & Wales), Queen’s Bench Division, held that the supply of the software electronically accompanied by a perpetual licence amounted to the ‘sale of goods’ under Regulation 2(1) of the Regulations and awarded The Software Incubator, inter alia, 475 000 pounds sterling (GBP) (approximately EUR 531 100) as compensation pursuant to those regulations. According to that court, the ‘sale of goods’ should have an autonomous definition for the purpose of the Regulations, which did not exclude the supply of the software as a ‘good’ because it is not tangible or as a ‘sale’ because the ownership of the intellectual property rights therein will not usually be transferred absolutely.

16. Computer Associates lodged an appeal against that judgment before the Court of Appeal (England & Wales) (Civil Division) (United Kingdom).

17. By its judgment of 19 March 2018, (6) the Court of Appeal (England & Wales) (Civil Division) held that the supply of the software electronically, and not on any tangible medium, did not constitute ‘goods’ within the meaning of Regulation 2(1) of the Regulations. According to that court, the weight of authority compelled that finding, despite concerns that its approach might appear to be outmoded in light of technological advances, and thus it did not proceed to examine whether the grant of licences of the software to Computer Associates’ customers qualified as a ‘sale’ under that provision. As a result, it concluded that The Software Incubator was not a commercial agent for the purpose of the Regulations and dismissed its claim for compensation thereunder.

18. By order of 28 March 2019, the Supreme Court of the United Kingdom granted The Software Incubator permission to appeal against the decision of the Court of Appeal (England & Wales) (Civil Division).

19. The referring court has indicated that it is not clear whether the definition of commercial agent contained in Article 1(2) of Directive 86/653, which is confined to the ‘sale of goods’, applies to the situation in the main proceedings.

20. It was in those circumstances that the Supreme Court of the United Kingdom decided to stay the main proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Where a copy of computer software is supplied to a principal’s customers electronically, and not on any tangible medium, does it constitute “goods” within the meaning of that term as it appears in the definition of commercial agent in Article 1(2) of Council Directive 86/653/EEC of [18] December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents …?

(2) Where computer software is supplied to a principal’s customers by way of the grant to the customer of a perpetual licence to use a copy of the computer software, does that constitute a “sale of goods” within the meaning of that term...

To continue reading

Request your trial