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Case law: Businesses using licensed software should beware extending its use over time, or risk inadvertently breaching the licence terms

Businesses using licensed software should ensure the licence clearly defines their permitted uses of the software, and monitor and review their use of it periodically in light of technological innovation and business developments, or risk being in breach of the licence, a recent ruling makes clear.

Legal Alert

This update was published in Legal Alert - April 2017

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

A business licensed two software products from a supplier. The first helped the business manage its ops, finance and HR functions. The second enabled the first software to communicate with other software.

The licence for the first product provided that only named users could access and use it, whether directly or indirectly - although 'access' and 'use' were not defined. The licence for the first software charged different fees for different categories of named user. License fees for the second software product depended on the volumes of messages processed through it.

The business used other software to provide customers with remote access to its systems so they could place orders and monitor their accounts. It also licensed software from a third party that operated via an App, to help it manage customer visits and calls. Both pieces of software had to periodically access or use the supplier's software products in order to function as intended.

The supplier argued that this amounted to direct and indirect access and use of its software in circumstances which were not authorised by its licence to the business. This meant the business had breached the licence terms.

The High Court agreed. It said that "the plain and obvious meaning of 'use' in the context of the Agreement is the application or manipulation of the [supplier's] software. The plain and obvious meaning of 'access' in the context of the Agreement is acquiring visibility of, or connection to, the … software". In the circumstances, there had been both use of and access to the supplier's software over and above that permitted by the licence.

Operative date

  • Now

Recommendation

  • To avoid inadvertently breaching their licence, businesses licensing software should:
    • Ensure the licence clearly defines the permitted uses of the software, and what is chargeable
    • Monitor and review their use of the software periodically in the light of technological innovation and developments in the business

Case ref: SAP UK Ltd v Diageo Great Britain Ltd [2017] EWHC 189

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.