On 16 September 2015, the Court of Appeal of Brussels (the "Court") applied the reasoning adopted by the Court of Justice of the European Union in UsedSoft (See, VBB on Business Law, Volume 2012, No. 7, p. 10 and 11, available at www.vbb.com) to a case relating to the delivery of defective software programs.

In June 2005, Richa ordered from Saga Consulting the Business One software program, developed by SAP, expanded with the software Fashion Add On. Fashion Add On is produced by Straton IT-Consulting ("Straton") specifically and exclusively for use with the Business One software. Saga Consulting ordered Business One directly from SAP and ordered Fashion Add On licences from CTAC, which acts as an intermediary for Straton's software. Fashion Add On was delivered, by means of a login and a password, from Straton to CTAC which passed it on to Saga Consulting. Saga Consulting installed the software on Richa's IT systems.

Once installed at Richa's premises, the software did not function properly as it was extremely slow to handle large orders. Saga Consulting and Straton attempted to solve the problem, but the problems persisted.

Richa therefore initiated proceedings against Saga Consulting for termination of the agreement. It also claimed damages. Saga Consulting compelled CTAC and Straton to intervene in the proceedings.

The first judge sided with Richa. It confirmed the termination of the agreement between Richa and Saga Consulting and ordered the latter to pay damages to Richa. The judge also ordered CTAC and Straton to indemnify Saga Consulting for damages paid to Richa.

Straton appealed this decision to the Court and all parties repeated their claims.

The Court first looked at Richa's request to terminate the agreement. It held that Saga Consulting, as the seller, was liable for hidden defects preventing the software from being suitable for its intended purpose. According to the Court, Saga Consulting was – or at least should have been – aware of Richa's intended purpose for the software (i.e., processing of large orders). As a consequence of the termination, Richa was allowed to choose between returning the software to Saga Consulting and receiving its money back or keeping the software and recovering part of its money.

Richa's request to return the software, prompted the practical issue of how such software could be returned to Saga Consulting efficiently since there were no physical copies to return and Richa had knowledge of the login and password to use the software. The Court decided that the termination of the agreement between Richa and Saga Consulting was sufficient in that regard since it triggered the extinction of the right to use the software. The Court also ordered Saga Consulting to pay damages to Richa.

Next, the Court focused on Saga Consulting's claims against CTAC. Saga Consulting contended that the agreement concluded with CTAC was a purchase agreement and that the software which CTAC had delivered did not comply with the agreement.

Referring to the UsedSoft case, the Court found that all the constitutive elements for the transfer of the right of ownership of the copy of a computer program were present: (i) downloading onto the customer's server of a copy of a computer program; (ii) conclusion of a user licence agreement for that copy; (iii) payment of a fee intended to enable the right holder to obtain compensation corresponding to the economic value of that copy of the work. The Court therefore held that the agreement between Saga Consulting and CTAC was to be regarded as a purchase agreement and CTAC as a reseller. The fact that the agreement between Straton and CTAC provided that all rights relating to the software belonged exclusively to Straton, also when changes or expansions occurred, had, according to the Court, no bearing on the above. The Court clearly distinguished between the software and the associated rights on one hand and the copies with licence agreements for its use on the other. The retention of title clause only applied to the first case.

In addition, the Court decided that Saga Consulting was not allowed to pursue remedies against its seller, CTAC, for non-compliance of Fashion Add On with the purchase agreement. CTAC had no knowledge of the use which Richa intended to make of Fashion Add On. It therefore had no possibility to warn, either Richa or Saga Consulting, of the possible weaknesses of Fashion Add On when used with Business One for large orders. It was Saga Consulting's responsibility to make sure that the software was suitable for the use which Richa intended for the software.

The Court then stated that the same reasoning applied to CTAC's claims against Straton. Saga Consulting was therefore held solely responsible for the damages suffered by Richa.

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