Qualification as a commercial agent for the sale of software/applications/NFT’s/etc.? Beware of the consequences…

In its decision of 16 September 2021, the Court of Justice established that a software marketeer/seller too can qualify as a commercial agent if it is (i) a self-employed intermediary who (ii) continuously (iii) negotiates (and potentially concludes) the sale/purchase of goods in name and on behalf of a principal (art. 1.2 of the Commercial Agency Directive).

The qualification as a commercial agent has a severe impact on the termination indemnities/modalities of the agreement.

The facts of the case were as follows:

  • Computer Associates is a company that markets and provides licences for an application management software. The software, that can be downloaded from the website, is accompanied by a permanent or temporary licence;
  • In 2013, Computer Associates concluded an agreement with Software Incubator to approach potential customers to promote, market and sell the software on behalf of Computer Associates. This agreement was terminated soon after it was concluded;
  • After the termination, Software Incubator filed a claim to receive (the beneficial) termination indemnities as a commercial agent, which qualification was contested by Computer Associates.

Two questions were asked to the Court of justice in order to determine whether Software Incubator could be qualified as a commercial agent (with the corresponding response) i.e.:

  • Software as a ‘good’: Should software that is provided electronically (e.g. by download instead of on a CD) be qualified as a ‘good’: Goods are products which can be valued in money and which are capable of being the subject of commercial transactions. Software can furthermore be classified as a goods irrespective of whether it is supplied on a tangible medium or, as in the present case, by electronic download;
  • Permanent licence as ‘sale of goods’: should software that is supplied to the customer with a perpetual licence be qualified as ‘sale of a good’: a sale is an agreement where, in return for payment, the right of ownership is transferred. Making available a copy of computer software and the conclusion of a permanent user licence agreement in return for payment of a fee, qualifies as a transfer of the right of ownership of that copy.

Consequently, the supplier of downloadable computer software, accompanied by a perpetual licence and in return for of a fee, can be qualified as a commercial agent.

Two interesting takeaways from this decision should be considered, i.e.:

  • If a software supplier is qualified as a commercial agent, the mandatory protective legislation will be applied, e.g. entitlement to commissions during and after the agency agreement, notice period (up to 6 months) or indemnity in lieu of notice, goodwill indemnity (up to 1 year of average annual remuneration), non-compete clauses, etc.;
  • Other sales of digital goods could come within the remit of the Commercial Agency Directive, e.g. the sale of non-fungible tokens (NFT), applications, etc.

Please do not hesitate to contact EY Law if you would have any questions regarding the qualification of a sale of software agreement or the rights and obligations in case of termination.