Kompaktwerk GmbH v LivePerson Netherlands BV is a 2024 English High Court decision on whether a partner that sold a vendor’s software-as-a-service (SaaS) subscriptions could claim compensation as a commercial agent when the relationship ended. The court held that LivePerson’s LiveEngage platform, licensed for renewable twelve-month terms and hosted on LivePerson’s servers, was a service supplied temporarily and not a sale of goods, so the partner had no real prospect of bringing itself within the Commercial Agents (Council Directive) Regulations 1993.[1] It is the main English decision applying the CJEU’s Software Incubator ruling to subscriptions.
Background
The parties signed a Master Partner Agreement on 26 August 2013 and, on 18 September 2013, an addendum adding a referral partnership. The product was LiveEngage, described in the referral exhibit as “a software package which is licensed on a subscription basis and is centrally hosted (SaaS product)”. It is a digital engagement platform that lets businesses communicate with consumers on their own websites, with ancillary services such as optimisation and technical support.[1]
Businesses bought licences for twelve months at a time that renewed automatically for further twelve-month terms unless terminated. They used LiveEngage through a web dashboard, and embedded a bespoke piece of code in their own websites that connected to LiveEngage on LivePerson’s servers.[1]
There were two kinds of arrangement. Under the referral agreement, Kompaktwerk introduced customers who then contracted with LivePerson. Under the resale exhibit, Kompaktwerk bought the services at a 30% discount, was invoiced by LivePerson, set its own retail price and contracted with customers in its own name.[1]
The dispute
Kompaktwerk sued in December 2018 for fees it said were outstanding. The claim was stayed from June 2019 pending the CJEU’s ruling in Software Incubator, given on 16 September 2021. Kompaktwerk then applied to amend its claim to add compensation under regulation 17 of the Regulations, commission under regulations 7 and 11, and claims relating to the resale exhibit. LivePerson opposed the amendments and sought reverse summary judgment, so the question was whether the new claims had any real prospect of success.[1]
Decision or outcome
Christopher Hancock KC refused the amendments in a judgment of 4 September 2024.[1]
- No sale, because the licence was not permanent. The judge held that Software Incubator involved a perpetual licence and that permanence was an essential part of the CJEU’s reasoning. Although the twelve-month licence was usually or almost invariably renewed, each term was limited and each renewal earned LivePerson a further payment: “this is akin to a rental and not a sale”.[1]
- A service, not goods. On the evidence LivePerson provided a hosting service: customers accessed a web platform on LivePerson’s servers, with LivePerson staff providing services to a greater or lesser extent. “The heart of the product was the service to which the customer subscribed.” That customers installed a code snippet, sometimes ran the platform with their own teams, and usually renewed did not change the result.[1]
- No commission under the Regulations. Because Kompaktwerk was not a commercial agent within the Regulations, any commission had to be claimed under the contract.[1]
- Resale is not agency. Under the resale exhibit Kompaktwerk contracted with customers in its own name and was not acting on behalf of LivePerson. The court declined to look behind the contracts on the basis of evidence that LivePerson controlled customers, terms and pricing in practice.[1]
The judge also recorded that the Software Incubator ruling remains binding on UK courts as a starting point because the reference was made before the Brexit transition period ended.[1]
Significance for software licensing and SAM practice
Read with Software Incubator, the decision draws a line between perpetual licences, which can be a sale of goods, and time-limited hosted subscriptions, which are not.[1] The same distinction matters elsewhere in licensing, for example in whether a licence is exhausted and can be resold, as in UsedSoft v Oracle. The decision is a ruling on an amendment application at first instance, not a trial judgment.
Lessons learned
- A renewable twelve-month SaaS subscription was treated as akin to a rental, not a sale, even though customers almost always renewed. The court looked at the term of each licence, not the expected life of the customer relationship.[1]
- Hosted software with vendor-run services was characterised as a service, not goods, which kept the partner outside the Commercial Agents Regulations. The court found the heart of the product was the service subscribed to.[1]
- A partner that buys and resells in its own name is a distributor, not an agent, even if the vendor controls pricing and customer terms in practice. The court applied the contractual position under the resale exhibit.[1]
- Vendors moving from perpetual licences to subscriptions change the legal character of their channel relationships as well as of their customer contracts. The contrast with Software Incubator turned on the licence term.[1]