KPN v. CA Europe (Broadcom) was a 2023 action for provisional relief (kort geding) before the Amsterdam District Court. KPN B.V., the Dutch telecoms and IT provider, asked the court to compel CA Europe Sàrl, a subsidiary of Broadcom Inc., to let KPN keep using former CA Technologies software after its licence term had expired, at a price based on its much lower usage, and to keep supplying maintenance and support. In a judgment of 7 December 2023 the court refused all relief. It held that Broadcom was in principle free to decide whether and on what terms to contract again, that KPN bore the risk of its own late migration, and that KPN had not shown that Broadcom held a dominant position.[1]
Background
According to the judgment, Broadcom acquired Computer Associates (CA) in 2018. Computer Associates B.V., Broadcom’s legal predecessor, and KPN concluded a software license agreement in December 2006 that set the framework under which KPN could order products and services through order forms. The most recent order form covered licences from 1 July 2020 to 1 July 2023, under which KPN licensed 15 products for around EUR 5 million a year.[1]
In March 2022 KPN issued a request for proposal for the same software and services at higher volumes. In May 2022 it told Broadcom that its offer had been rejected because of “unattractive commercial conditions”, and a later Broadcom offer for lower volumes was also rejected as too expensive. KPN moved to another supplier. In November 2022 KPN told Broadcom it was investigating whether it could “progress with Broadcom for a subset, but critical part, of the licenses”, and on 8 March 2023 it asked for a quotation for continued use after 1 July 2023 of CoolGEN and CA Monitoring Software.[1]
On 21 April 2023 Broadcom replied that it would no longer sell licences directly to KPN, which would in future have to buy through a reseller. It wrote that, “in line with our go-to-market model, the best path forward is that you are serviced by our channel partners.” The cheapest reseller quotation KPN then received was more than EUR 11 million for the following year, which KPN rejected.[1]
The dispute
At KPN’s request Broadcom granted a two-month grace period after expiry, later extended to 8 September 2023 and then to the date of the judgment. On 1 September 2023 Broadcom wrote that licence needs had to be assessed “as of the contract renewal date (1 July), not as of today”, based on KPN’s June 2023 usage report, and that the grace period “does not qualify as a temporary contract extension to create a title for extended use of our software”. It said the minimum licence period it could offer was one year.[1]
KPN replied on 2 September 2023 that Broadcom’s software was crucial to services for its customers, which the court noted included banks, the Dutch railways and public bodies such as Rijkswaterstaat, and that the continuity of services such as the national emergency number (112) and water management could not be guaranteed after 8 September. Broadcom carried out an audit of KPN’s actual usage on 25 September 2023. On 6 October 2023 it proposed a package: about EUR 1.4 million for the bridging period from 1 July to 11 October 2023 on the 2020 order form terms, and a one-year licence from 12 October 2023 through its reseller channel. Resellers then quoted KPN between EUR 4 and 4.5 million a year, which KPN also rejected.[1]
KPN argued that Broadcom acted unlawfully, contrary to reasonableness and fairness, and in breach of the abuse-of-dominance prohibition in Article 24 of the Dutch Competition Act. It said the audit showed its usage had fallen by about 90%, while the October 2023 offer was almost 80% of its existing annual fee. It disputed the audit’s measurement method, saying its real usage was 5.38% of what the agreement allowed, and calculated price increases of 729% on Broadcom’s method and 1,475% on its own. It also objected that the offers included a product (UCM) it had uninstalled and that the minimum term was one year when it needed six months.[1]
KPN asked the court to order Broadcom to allow continued use of the six products it still used, for about EUR 29,374 a month, until two months after a ruling in full proceedings, with maintenance and support at no extra charge; in the alternative, to allow use of all products on the 2020 terms until 1 July 2024; and in both cases to prohibit Broadcom from disabling the keys used to run the software.[1]
Decision or outcome
The court accepted that KPN had an urgent interest, because the grace period would end with the judgment, but refused every measure sought.[1]
- Freedom of contract. The court started from freedom of contract: Broadcom was in principle free to decide whether to contract again with KPN and on what terms. Reasonableness and fairness in negotiations could limit that freedom, but the bar was high and KPN had not met it.[1]
- No right to a price that falls with usage. KPN could not set the terms unilaterally, and could not assume the same rates would apply when it cut the licences to a few products for six months. Broadcom had stated, without contradiction, that it normally offered three-year contracts and exceptionally one-year contracts, “but in any event not for a rate that falls as actual use falls”, and the court said it had that freedom.[1]
- Late migration was KPN’s risk. The court found no basis for KPN’s claim that Broadcom had deliberately delayed negotiations. KPN had probably known by November 2022 that it would need part of the software after expiry but made its formal request only in March 2023, and so took the risk that there would be too little time to agree terms.[1]
- The audit as starting point. Broadcom was asking KPN to license only what the audit showed it was using. Because KPN had agreed to the audit, the court took its results as the starting point despite KPN’s objections to the method, adding that KPN had not shown its method would make a substantial price difference. Broadcom’s last offer was not provisionally found to be evidently unreasonable; the court noted Broadcom’s explanations that KPN was no longer a “strategic partner” receiving high discounts and that resellers add their own fee, and held that Broadcom could not be forced to disclose more of its price build-up.[1]
- No dominance shown. KPN had not defined the relevant market. Broadcom estimated its share of the market for the IT operations management software in question at between 1 and 10% and said, without contradiction, that there were many alternative suppliers. Without a dominant position there could be no abuse.[1]
- Support and keys. Broadcom had not threatened to stop maintenance and support, and the court assumed it would continue as long as KPN paid. There was no reason to expect it to disable licence keys, which it had firmly denied.[1]
The court added that the continuity of KPN’s infrastructure was KPN’s own responsibility, and that if it were put at risk this would result from KPN’s commercial choice not to accept the licence offer. KPN was ordered to pay Broadcom’s costs of EUR 2,295. The judgment records that KPN had announced a possible complaint to the Netherlands Authority for Consumers and Markets (ACM) and full proceedings on the merits; no later judgment between the parties was found on rechtspraak.nl.[1]
Significance for software licensing and SAM practice
This is a provisional ruling in summary proceedings and does not bind a court hearing the merits. It addresses a common position at the end of a term licence: a customer that has chosen a replacement product but cannot finish migrating before the licence expires.
- Exit timing. The court treated the timing of the renewal request as decisive. A customer that knows months before expiry that it will need some licences afterwards, but asks late, bears the commercial consequences.[1]
- Shrinking footprints. A licence reduced to a fraction of the original usage does not entitle the customer to a proportionally lower price, a shorter term, or the discounts it had as a larger customer. Moving the customer to a reseller channel was not unlawful.[1]
- Audit data. The audit carried out after expiry, with KPN’s agreement, became the basis for the licence requirement. Disputes over measurement methods are best settled before data is collected.[1]
- Grace periods. Broadcom’s position, which the court did not reject, was that a grace period was a negotiating accommodation rather than a contract extension, and that any new licence would run from the expiry date.[1]
The same court later dealt with a different Broadcom dispute, over VMware support for Rijkswaterstaat, in Rijkswaterstaat v. VMware and Broadcom. Current licensing of former CA mainframe products is covered in Broadcom mainframe software licensing.
Lessons learned
- Start renewal or exit negotiations well before a licence term expires. The court found KPN had probably known by November 2022 that it would need the software after July 2023, but asked only in March 2023, and put the consequences of the late migration on KPN.[1]
- A vendor is generally free to set the price, minimum term and sales channel of a new licence term. The court accepted Broadcom’s freedom to offer one-year minimum terms through resellers and not to lower the rate as usage fell.[1]
- An audit the customer agreed to will be the starting point for the licence position. KPN’s objections to the measurement method did not displace the results in summary proceedings.[1]
- A grace period after expiry is not necessarily a contract extension. Broadcom priced the bridging period from the expiry date on the old order form terms, and the court did not treat the grace period as giving KPN a right to continue on its own terms.[1]