Dutch Police v. Microsoft Ireland Operations was a Dutch civil case in which the national police tried to recover about EUR 2.96 million it had paid for 13,656 licences for Microsoft Office Professional Work at Home. The licences had been included by mistake in a report the police sent to its reseller in May 2008, and the police said they were never used. On 15 March 2017 the District Court of The Hague rejected the claim. It held that under the parties’ Select Agreement the report counted as an order, and that a licence fee pays for the right to use software, not its actual use.[1]
Background
The police is the legal successor of vtsPN, the body that until 1 January 2013 bought software licences centrally for the Dutch police forces. In May 2002 the parties concluded a Microsoft Business Agreement (MBA) for an indefinite term and a Select Agreement (SA) running to 31 May 2005; both were extended on 17 June 2005 without relevant changes. The SA let the police acquire licences on an ad hoc basis by placing monthly orders after the event for software installed from master copies. The judgment quotes the SA (wiki translation): a registered affiliate “may use as many copies as it wishes during the term of its registration, provided that it places monthly orders for those copies”.[1]
Orders were placed with, and invoiced and paid to, a reseller, a predecessor of Insight Enterprises Netherlands B.V., under a framework agreement. From May 2002 to June 2005 the parties also had an Enterprise Agreement (EA), under which a yearly true-up of installed software was compared with the previous true-up and any increase was charged as an additional order.[1]
The dispute
On 14 May 2008 the police sent the reseller a list of applications showing 13,656 for Microsoft Office Professional Work at Home. On 16 May 2008 Microsoft e-mailed the police asking whether the growth shown was “in fact the order you are going to place in Select with Insight” and why the police used Work at Home licences. The police did not reply. On 29 May 2008 the reseller invoiced EUR 2,488,259.76 excluding VAT (EUR 2,961,029.11 including VAT) for these licences, and the police paid.[1]
After payment it emerged that the number came from a wrong user count supplied by one regional unit and included in vtsPN’s combined report. On 6 February 2009 the police asked Microsoft to credit the invoice; correspondence and meetings did not lead to a refund. The police issued a summons on 11 January 2016, claiming repayment on grounds of undue payment, unjust enrichment, or a duty arising from reasonable interpretation and good faith to prevent unnecessary licence fees and refund fees for unused software. It also argued that an oral arrangement allowed it to make an annual true-up under the SA as under the EA.[1]
Decision or outcome
- The report was an order. Under the SA system, the report to the reseller counted as an order under the framework agreement. Microsoft and the reseller could reasonably treat it as the police’s intention to order. The police had bought Work at Home licences before, though never so many at once, and the size alone gave Microsoft no reason to doubt the order, especially after its unanswered e-mail of 16 May 2008.[1]
- A large professional customer. The court took into account that the police was a large professional party whose orders passed through several internal levels, that it had itself taken a long time to notice the mistake, and that by its own account its internal invoice checks had failed.[1]
- No undue payment or enrichment. Because the payment rested on the framework agreement read with the SA, there was a legal basis for it, which also excluded unjust enrichment.[1]
- Use is irrelevant. The fee “relates to the right to use the software, not to its actual use” and is owed even if that right is not exercised. Whether Microsoft could easily have checked actual use did not matter.[1]
- No true-up arrangement. The alleged oral arrangement was not substantiated, conflicted with Article 11 of the SA requiring amendments signed by both parties, and did not fit the SA, under which each report is an order. Even as a true-up, the much higher count would have had to be paid for.[1]
- No duty to warn or refund. There was no unwritten duty on Microsoft to check whether a large professional customer had made a mistake, to warn it about software it did not use, or to refund unused licences.[1]
- Earlier credit. Microsoft had once before issued a credit note for a mistaken report. It said, without contradiction, that this was done voluntarily because of the relationship and that it had told the police no credit would be given for a further mistake. The earlier credit gave the police no right to a new one.[1]
The court rejected the claims and ordered the police to pay Microsoft’s costs of EUR 10,325.[1] No appeal judgment is published on rechtspraak.nl.
Significance for software licensing and SAM practice
Most licence disputes concern under-licensing found in an audit. This case is the reverse: a customer over-reported and paid for licences it did not need, and could not get the money back. In programs where the customer self-reports usage, such as the monthly orders under this Select Agreement or a true-up under an Enterprise Agreement, the report itself is the commercial commitment.[1] Current Microsoft program terms are described in Microsoft volume licensing programs and True-up.
Lessons learned
- Check licence reports before they are sent. The mistaken count from one unit passed through several levels and became a binding order.[1]
- Unused licences are still owed. The fee pays for the right of use, not actual use.[1]
- Answer vendor questions about unusual volumes. Microsoft’s unanswered e-mail asking about the Work at Home count weighed against the police.[1]
- A goodwill credit is not a precedent. The earlier voluntary credit did not oblige Microsoft to correct a second mistake.[1]
- Put side arrangements in a signed amendment. The claimed oral true-up arrangement failed partly because the agreement required written, signed changes.[1]