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Agency Law Gives No Recourse to Dumped Software Reseller

Under law which originated in the EU, agents of firms have considerable protection if their agency is terminated, and can normally be compensated. This reflects the commercial reality that agents frequently make a considerable investment in time and money in promoting the products for which they act as agents.

Recently, a case came to the Court of Appeal regarding the termination of an agency under which a company supplied licences to its customers to use software which was owned by another company. When the company that owned the software found that its agent had set up a similar deal with a competitor, it terminated the agency agreement and the agent claimed compensation.

The legislation which protects agents in such circumstances (the Commercial Agents (Council Directive) Regulations 1993) relates to the supply of 'goods' and the argument put forward by the software company was that software is not goods and in any event a licensing agreement was different from one which involves a physical transfer of goods or title to them, so there was no actual 'sale' of goods.

The Court agreed that electronically supplied software was not 'goods' and that, as drafted, the Regulations did not offer the agent any right of recourse. Since software was not considered to be goods, the Court did not have to consider the second argument that there was no sale.

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    This decision has significant implications for owners and resellers of software. However, it also highlights how the law has failed to keep up with changes in commercial reality. It remains to be seen if and when a review of the law in this area will take place, but one does seem to be overdue.

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