BGH, CPU-Klausel (I ZR 3/00) is a judgment of the Federal Court of Justice of Germany (Bundesgerichtshof, BGH) of 24 October 2002 in a dispute between a software publisher and a licensee that had moved the licensed software to a more powerful computer. The court held that a “CPU clause” in standard licence terms, which ties the use of software licensed for a limited period to a named computer and makes use on a more powerful or additional computer conditional on agreeing an additional fee, does not unreasonably disadvantage the licensee. That was so even where the licensee used technical measures to stop the extra capacity affecting the software. The licensee still recovered the extra fee it had paid under protest, because the publisher could not show how the amount was calculated.[1]
Background
The defendant produced the software “AD/Advantage”. By a standard-form licence agreement of March 1994 it granted the claimant a non-exclusive, non-transferable licence. Section 1.2 stated that the customer was entitled to use the systems only at the installation site on the agreed hardware listed in the system schedule; additional use on further computers required a separate schedule, as did “use of other computers with greater capacity (so-called upgrades)”, in which case the vendor’s current list prices would apply and licence fees already paid would be credited in full.[1]
The system schedule named the installation site, the central processing unit and a fallback unit for breakdowns, each with the processor type and serial number. Use was limited to four developers and 128 end users. The parties agreed an initial licence fee of DM 210,000 and annual renewal fees of DM 31,500, with a one-year term renewing automatically. A side agreement acknowledged that installing a new version on a computer other than the agreed one might require a further licence.[1]
The dispute
In spring 1996 the licensee replaced the scheduled hardware with new, more powerful computers. Because of a program lock, the software would not run on the new machine. The vendor supplied a password that allowed use only until 30 April 1996, after which an integrated lock would activate, and sent a new system schedule requiring an initial fee of DM 278,000 and annual renewals of DM 41,700 for the upgraded computer.[1]
The licensee depended on the program and faced production stoppages if it was locked. It signed the new schedule under protest, stating that it believed the vendor was contractually obliged to allow use without conditions. The vendor then extended use only to 30 September 1996 and made a further password, needed to use the software for the rest of the already agreed term to March 1997, conditional on payment. The licensee paid DM 319,700 (DM 278,000 plus VAT), stating that it was compelled to pay because the software would otherwise be blocked and that payment was made without acknowledging any legal obligation.[1]
The licensee sued to recover the payment and for a declaration that the CPU clause was void. It argued that it had not used the software at any greater capacity: a logical partition on the new computer kept use within four developers, 128 end-user seats and the previous 106 MIPS. The Frankfurt Regional Court and the Frankfurt Higher Regional Court found for the licensee. The appeal court held the clause void under the standard terms legislation insofar as it applied where the licensee did not use the greater capacity, because the vendor then had only an interest in control, which less intrusive means could serve.[1]
Decision or outcome
The CPU clause is valid
The BGH reversed the appeal court on the declaration and dismissed that claim.[1]
- Subject to review, but fair. The use restriction went beyond a mere description of the product and so was subject to judicial review as a standard term. The clause did not forbid use on other computers; it made use on additional or more powerful computers conditional on agreeing an extra fee, and the adequacy of that fee was itself outside the review.[1]
- Contract, not copyright. The court said that under copyright law a right of use cannot be granted so as to permit use only on a specific computer, because restrictions must relate to usual, technically and economically distinct forms of use. Such a restriction could, however, be agreed as a contractual obligation, which was what the clause did.[1]
- Term licences differ from sales. The court distinguished software sold for a one-off payment from software provided for a limited period in a continuing relationship. Producers of “complex, high-priced computer programs” had a legitimate interest in tracking and controlling use; they did not have to sell the software, which would exhaust the distribution right, and could instead regulate time-limited use by contract.[1]
- Hardware renewal remains possible. The licensee had to remain able to renew its hardware, and the clause allowed that: it only had to expect a fee adjustment where the new computer was more powerful or use was otherwise extended.[1]
- Partitioning does not help. The logical partition was a measure solely within the licensee’s control and could be reversed at any time. The vendor’s terms applied to many customers, some of whom might be more open to suspicion of misuse. A licensor could contract for reporting duties and inspection rights to monitor such artificial limits, but could not be required to adopt such a complicated scheme in its standard terms; it was not unreasonable to tie the extra fee to the possibility of more intensive use rather than argue about whether it was exploited.[1]
- Transparency and section 69d. It was not possible at signing to say what replacement computer might be used, so the clause was not insufficiently transparent. Nor did section 69d(1) of the Copyright Act, which protects acts indispensable to using the program, invalidate the clause, at least while the contract did not exclude use on a replacement computer.[1]
The licensee still recovers the fee
The BGH nevertheless upheld the order to repay DM 319,700. The 1996 schedule was not a valid agreement because the licensee’s consent was given under an express reservation. Although the CPU clause entitled the vendor in principle to require an extra fee, the licensee’s protest was of the kind made under compulsion, to avoid a serious harm, which placed on the vendor the burden of proving its claim in the repayment action.[1]
The vendor had not discharged it. Under the contract the fee was the difference between its current list price and the DM 210,000 already paid, but it had produced no evidence of its spring 1996 list prices, relying instead on what was usual in the industry. To justify DM 278,000 after the credit, it would have had to show a list price of DM 488,000. Nor did copyright give a basis for keeping the money: the licensee had never used the software without permission, because it could run the program only with passwords the vendor supplied.[1]
Significance for software licensing and SAM practice
The judgment, which the court marked for publication in its official BGHZ reports, accepts that a vendor of term-licensed software may charge for moving to more powerful hardware based on the capacity available rather than the capacity actually used, and that sub-capacity measures controlled by the customer need not be recognised unless the contract provides for them. That reasoning is relevant to processor, core and partitioning rules in current licence agreements, which the wiki covers in Processor and core licensing and Virtualization and partitioning.[1]
The judgment also limits vendors in two ways. It distinguishes term licences from software sold outright, leaving open how far such restrictions bind a buyer. And it shows that a contractual price mechanism has to be followed: a vendor relying on “current list prices” must be able to prove them. The case also shows the use of licence keys and time-limited passwords to enforce a commercial position during a dispute.[1]
Lessons learned
- A clause tying a term licence to a named computer and charging extra for a more powerful or additional machine was upheld as fair in standard terms. The BGH relied on the vendor’s legitimate interest in controlling and sharing in the use of complex, high-priced software provided for a limited period.[1]
- Partitioning a more powerful machine down to the old capacity did not avoid the upgrade fee. The court treated the logical partition as reversible and within the licensee’s sole control.[1]
- A vendor that relies on a list-price uplift must be able to show how the figure follows from its price list. The vendor lost the fee because it produced no evidence of its list prices.[1]
- Paying under an express protest of compulsion shifted the burden of proof to the vendor in the repayment claim. The licensee’s written reservations, made when signing and when paying, were decisive.[1]