Inform CPI Ltd v London Borough of Tower Hamlets was a 2018 judgment of the High Court of England and Wales, sitting in Manchester, in a dispute between a software licensor and a London council over fees payable under a one-year software licence. Inform CPI licensed the council a bundle of business-rates software for a fixed fee plus a contingency fee of 7.5 percent of rateable-value increases “supplied” by its RV Hunter database. It sued for nearly GBP 2 million on 78 invoices. By trial more than GBP 1 million plus interest remained in dispute; the court held that a fee was due only where the council’s use of the database was the effective trigger for its report to the Valuation Office Agency, and gave judgment for GBP 378.[1]
Background
The council is the billing authority for non-domestic rates in its borough. From 2013 local authorities kept a share of business rates collected, which gave them an incentive to find properties missing from the rating list or undervalued in it. Inform CPI developed software to help billing authorities do this.[1]
By an order form dated 2014-04-29 Inform CPI granted the council “a non-exclusive, non-transferable Licence” for one year from 2014-05-30 to three products: Analyse 8, for GBP 7,500 plus VAT as “an unlimited user licence”; Analyse Local Forecasting, at no extra fee; and RV Hunter, an online database of property assessment reports, for an “RV Finder Contingency of 7.5%”. The order form incorporated Inform CPI’s standard terms and conditions, although the copy supplied to the council named a different council. The council’s officer who signed the order form had not seen the terms, but did not dispute that the council was bound by them.[1]
Clause 4.2 required the licensee to pay, in addition to the subscription, a percentage contingency fee “of all identified and validated increases to ‘rateable value’ supplied by the Licensor” that the Valuation Office Agency (VOA) entered in the rating list. Clause 4.3 added that a new hereditament (a separately rated property) “must have been identified by the Licensor”, and that the licensee “must notify the Licensor of any hereditaments missing from its local rating list of which it is fully aware and therefore no fee will be payable”.[1]
The dispute
Inform CPI issued proceedings on 2016-07-14 claiming GBP 1,997,661.60 on 78 invoices. The council admitted the rating increases themselves but said they were not attributable to its use of the software: it had found the properties through its own inspections and other sources, and if it did not use the database information, no fee was due. After concessions and a consent order the claim was narrowed to 16 properties, still worth more than GBP 1 million plus over GBP 250,000 of contractual interest.[1]
The parties agreed that “supply” meant that the licensor had made information about a property available on RV Hunter and that the licensee had both accessed and used it to bring about the rating change. They disagreed about how close the causal link had to be and who had to prove it. Inform CPI also argued that the licence had continued until the end of July 2015 because of a council letter about bringing the contract “to a natural conclusion”.[1]
Decision or outcome
His Honour Judge Hodge QC gave judgment on 2018-06-11.[1]
Causation. The court held that “the necessary causal connection is only established if access to information on the Claimant’s Analyse Local database is the effective, albeit not necessarily the immediate, trigger” for the council’s report to the VOA. The licensor does not identify a property if it “is already actively on the council’s radar”. The burden of proving the connection lay throughout on Inform CPI.[1]
The notification duty. The court implied a term that the council had to notify missing properties of which it was “fully aware” as soon as reasonably practicable. If the council relied on such a notification as a defence, it had to prove it. An email in which Inform CPI’s staff said it had “moved away” from asking clients for lists of known properties did not waive the duty; it proposed an alternative way of notifying through the system.[1]
Expiry. The licence ran for one year from 2014-05-30. The council’s letter of 2015-07-02 confirmed that the agreement had expired, that the council had stopped using the product and was having it removed from its servers. No reasonable reader could treat it as extending the licence, and Inform CPI had itself offered a new quotation if the council wanted to continue.[1]
The properties. The court relied heavily on Inform CPI’s own access records, which showed whether council users had opened the property assessment report for each property (“level 2” access). The claims failed for every disputed property except one, where a council officer had opened the report shortly before instructing a colleague to raise the VOA report. Judgment was entered for that invoice of GBP 378, with interest from 2014-08-07.[1]
Significance for software licensing and SAM practice
The case concerns a fee model in which part of the licence price depends on the results the customer obtains with the software. The court read the fee clause as requiring actual, causative use rather than mere availability of the information, and it decided the facts property by property from the vendor’s usage logs. For public-sector buyers, it also shows how a standard-terms licence can be signed without the terms being read, and how the outcome then turns on construction of those terms.[1]
Lessons learned
- Usage-based or success-based fees in a licence need a clear trigger; vague words such as ‘supplied’ leave the licensor to prove that the licensee actually used the product to produce the result. The court required use of the database to be the effective trigger for each VOA report.[1]
- Access logs decide usage disputes, so know what the vendor’s system records about each user’s activity. The vendor’s records of level 2 access were treated as the most important evidence.[1]
- A licence for a fixed term ends on its expiry date unless a new contract is made; correspondence about winding down use does not extend it. The court rejected the claimed extension to July 2015.[1]
- Carry out notification or exclusion duties in the licence promptly, because they can shift the burden of proof to the customer. A council relying on having notified a property had to prove that it did so as soon as reasonably practicable.[1]