Corporate Web Solutions v. Vendorlink was a Dutch civil case about a small licence with a large question inside it: can a software vendor stop a customer from handing its licence on to another company? Corporate Web Solutions Ltd. (CWS), a Vancouver vendor, sued the individual who had ordered a single-site licence of its web diagram tool and the Dutch company, Vendorlink B.V., that later used the software. On 25 March 2015 the Midden-Nederland District Court dismissed all claims. It held that the licence was in substance a sale, that the licence’s transfer ban was void after the CJEU’s UsedSoft ruling, and that Vendorlink had not broken any other licence term.[1]
Background
On 8 April 2008 the individual filled in an order form on CWS’s website for an Enterprise Edition licence, for use on the web server www.vendorlink.nl. CWS confirmed by e-mail, attached the licence key and sent the licence terms. They said that the licence covered one production website on one server, that the software was “licensed, not sold”, and that the licensee “may not transfer your rights under this license agreement”. They also said that the software “may not be integrated with or incorporated into any software product or script sold or offered to any 3rd party” and could not be rented or leased. The price was a single payment of USD 395 and the licence had no end date. Vendorlink B.V. was incorporated in 2009, and on 17 December 2013 CWS rescinded the licence out of court on the condition that a licence with Vendorlink existed.[1]
CWS claimed breach of contract against the individual and copyright infringement, or breach, against Vendorlink. It argued that the software had been passed on to Vendorlink, built into Vendorlink’s software and made available to Vendorlink’s customers.[1]
Decision or outcome
- The licence was a sale under the UN Sales Convention (CISG). Both parties were in contracting states. The court found that software downloaded online can be “goods” and that the contract was more like a sale than a rental because use was not limited in time and the whole price was paid at the start. It held that the reservation of ownership in the licence terms (CWS “retains ownership of the software/key”) was not valid, for the reasons it gave about the transfer ban.[1]
- Who was the licensee. The licence was concluded with the individual, not with Vendorlink B.V., because the order form never said he was acting for the company then being set up.[1]
- The transfer ban was void. Applying the UsedSoft judgment (C-128/11, paragraph 77, on terms that forbid later transfer), the court held that CWS’s right to distribute that copy was exhausted. It called the Dutch exhaustion rule in article 12b of the Copyright Act mandatory, so that terms contrary to it are void, and it said the licensee had to make his own copy unusable when transferring. The court placed the burden of checking this on the right holder, who holds the keys to technical protection.[1]
- Transferee bound by the other terms. Under Dutch law the rights and obligations in the licence passed with the software to Vendorlink, except for any term that bans later transfer.[1]
- No breach of the remaining terms. The integration ban applied only to integrated software that was sold or offered to third parties, and CWS had not alleged that. Calling the software’s DLL file from other code was not forbidden integration, since otherwise the product would be “volstrekt onbruikbaar” (completely unusable) for licensees. The 2008 terms did not limit use to the licensee personally, and CWS itself had later added separate SaaS and OEM licence types. Using the software as a service for customers was not renting or lending it, because customers could not run it without Vendorlink.[1]
CWS was ordered to pay EUR 11,653.75 of the defendants’ costs, plus later costs on conditions set in the ruling.[1]
Significance for software licensing and SAM practice
The ruling is a first-instance application of UsedSoft to a very small, downloaded licence outside the Oracle facts. Whether it would be followed depends on the facts: the court stressed the time-unlimited right, the one-off price and the download. The general topic of reselling licences is described in Software licence, and the CJEU case is covered in UsedSoft v Oracle.[1]
The case also shows that licence wording is read as a whole and as the customer could reasonably understand it. The court noted that the same sentence of the licence could be read as banning two separate acts or one combined act, and chose the reading that fitted the text.[1]
Lessons learned
- Perpetual, paid-up and downloaded licences may be treated as sales. The court relied on these features to apply the sales convention and the exhaustion rule.[1]
- Transferees inherit the terms. Even after a valid transfer, the new user was held to the original licence conditions other than the transfer ban.[1]
- Restrictions are read narrowly and literally. A ban on integration was limited to what the sentence said, and a reading that would defeat the product’s purpose was rejected.[1]
- Using software to serve customers is not automatically sub-licensing. Without a term limiting use to the licensee’s own purposes, providing a service from a licensed copy was allowed.[1]