SOFTWARE AND DIGITAL CONTENT

1
SOFTWARE AND DIGITAL CONTENT

• -by-
• Professor John N Adams
• University of Sheffield (emeritus)/
• Notre Dame University

2
OVERVIEW

• THIS PAPER ADDRESSES THE ISSUE AS SOFTWARE ARE
  SALES OF GOODS
• IN ADDITION, IT CONSIDERS THE APPLICATION OF THE
  DISTANCE SELLING REGULATIONS TO SUCH TRANSACTIONS

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SALES OF GOODS AND SUPPLIES OF SERVICES MUST BE
DISTINGUISHED

• SO FAR AS DOMESTIC UK LAW IS CONCERNED IT IS
  IMPORTANT TO DISTINGUISH BETWEEN SALES OF GOODS,
  AND SUPPLIES OF SERVICES

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• THE SALE OF GOODS ACT IMPLIES QUALITY WARRANTIES
  INTO THE FORMER, AND LIABILITY UNDER THOSE IS
  STRICT
• THE DUTY IN RELATION TO SERVICES IS ONLY TO
  EXERCISE REASONABLE CARE AND SKILL

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SUPPLIES OF SOFTWARE ARE GENERALLY SALES OF GOODS

• NOTWITHSTANDING THAT SOFTWARE IS BY ITS NATURE
  DIGITAL CONTENT WHICH THE PROPRIETOR LICENSES THE
  END-USER TO USE, THERE IS US AUTHORITY THAT
  SUPPLIES OF SOFTWARE ARE SALES OF GOODS

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THE PREDOMINANT PURPOSE TEST

• UNDER THIS TEST THE COURT MUST LOOK TO THE
  ESSENCE OF THE AGREEMENT TO DETERMINE WHETHER
  THE SALES ASPECT OR THE SERVICE ASPECT DOMINATES

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EXAMPLES

• ANALYSTS INTERN CORP v RECYCLED PAPER PRODUCTS -
• CUSTOMIZED SOFTWARE, BUT THE COURT TOOK THE VIEW
  THAT HAD THERE BEEN NO TRANSACTION INVOLVING A
  GOOD, THERE WOULD HAVE BEEN NO PURPOSE TO IT AT
  ALL

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• COLONIAL LIFE INSURANCE COMPANY OF AMERICA v
  ELECTRONIC DATA SYSTEMS CORP -
• A LICENSE OF SOFTWARE AND AN ONGOING RELATIONSHIP
  BETWEEN THE PARTIES INVOLVING SUBSTANTIAL
  SUPPLIES OF SERVICES
• HELD THRUST OF CONTRACT WAS THE SUPPLY OF
  SOFTWARE, AND THE SUPPLY OF SERVICES WAS MERELY
  ANCILLARY TO THIS, AND THEREFORE ARTICLE 2 UCC
  APPLIED

9

• MICROMANAGERS v GREGORY -
• 55,968 OUT OF PRICE OF 59.828 FOR LABOR, AND
  SERVICE LANGUAGE PREDOMINATED IN THE CONTRACT
• HELD CONTRACT FOR SERVICES

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• ALTHOUGH THERE IS AUTHORITY IN THE UK THAT WHERE
  SOFTWARE IS BOUGHT ON DISK, IS SALE OF GOODS, THE
  MEDIUM OF DELIVERY SHOULD NOT MATTER -
• EURODYNAMIC SYSTEMS v GENERAL AUTHOMATION per
  STEYN J

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• IN THE ABSENCE OF MUCH AUTHORITY, IT APPEARS THAT
  THE US PREDOMINANT PURPOSE TEST IS THE RIGHT
  ONE, BECAUSE UNDER THAT TEST THE MODE OF DELIVERY
  IS IRRELEVANT
• UNDER THIS TEST, MOST ORDINARY SALES OF SOFTWARE
  WILL BE SALES OF GOODS