UK Supreme Court considers if software should be considered as ‘goods’ or ‘services’ following successful application by The Software Incubator

April 30, 2019

Law firm, Fox Williams LLP advises The Software Incubator in Supreme Court hearing

In a significant case for the software industry, the UK Supreme Court will consider if software should be considered ‘goods’ or ‘services’. This follows the successful application at the end of last month by The Software Incubator Limited (“TSIL”). 

Fox Williams LLP acts for TSIL on the case and the team was led by partner Stephen Sidkin, with assistance from partner Tom Custance.

An earlier Court of Appeal judgment itself overturned the initial judgment of the High Court in favour of TSIL which decided that software was goods and, as such, TSIL was a commercial agent entitled to compensation on the termination of its agency agreement with Computer Associates (UK) Limited (“CA”) under the Commercial Agents Regulations. 

If the Supreme Court should decide that software is ‘goods’, this will have significant implications for the software industry’s business model which has agents selling software to businesses. 

At the same time as granting permission to appeal, the Supreme Court decided to ask two questions of the European Court of Justice: these concern whether:

1. bespoke software supplied electronically (and not on any tangible medium) constitute “goods” for the purpose of the definition of a commercial agent?

2. bespoke software supplied to a principal’s customers under a perpetual licence constitutes a “sale of goods” for the purpose of the definition of a commercial agent?

The European Court’s answer to these questions will impact the eventual judgment of the Supreme Court. 

Stephen Sidkin, Partner at Fox Williams commented: “The UK has established a strong foothold in the software industry and the digital tech sector as a whole is worth nearly £184 billion to the UK economy. If the Supreme Court should decide that software is to be considered as “goods”, this will have a significant impact on the industry where the use of agents is common place but businesses have not factored in their exposure to compensating agents on termination of agency contracts.”

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