Software trade bodies gave a cautious welcome to the proposals
and one legal expert has said that the changes, if made, could
force UK lawmakers to reconsider whether software should be classed
as goods or services.
The European Parliament has not passed a new law. Instead, it
passed a Resolution that endorsed a
Green Paper on EU consumer laws (34-page / 126KB PDF).
The Green Paper was published by the European Commission in
February. It examined various consumer laws, among them the
Consumer Sales Directive (5-page / 121KB PDF). That
Directive gives certain rights to consumers. It says that goods
sold to consumers must conform to the contract; it provides
remedies where they do not; and it says that where goods come with
a guarantee, that guarantee should be legally enforceable.
The Consumer Sales Directive applies only to consumer goods –
and it defines a consumer good as a "tangible moveable item".
The Green Paper stops short of saying that the definition should
be extended; but it asks the question: should the Directive's scope
be extended, "to include intangible goods, such as software and
data"?
The concern that the Commission expressed in its paper is that
the exclusion of software and data "may prompt professionals to try
to avoid responsibility for possible damages/non conformity of such
products through conditions in End User Licence Agreements (EULAs),
preventing consumers from making use of remedies for non-conformity
and invoking damages."
The Commission paper identifies this as a "potential consumer
protection lacuna." It continues:
"With the increase in digital
content consumption, questions of liability (e.g. when software
damages hardware) and guarantee from defects will grow in
importance. Several consumer complaints point, for instance, to
problems with music downloaded from the internet or used in MP3
players, software and digital content to be used in mobile phones
(e.g. ring tones). An extension of the coverage of consumer
protection rules to such situations would allow consumers to make
use of remedies for nonconformity and obtain damages. Such an
extension of the scope of the Directive may, however, require
specific rules since digital content is usually licensed rather
than sold to the consumers."
The
text adopted by the European Parliament in last week's
Resolution acknowledges the need "to examine issues relating to the
protection of consumers when they conclude contracts providing
digital content, software and data, in the light of the protection
afforded by [the Consumer Sales Directive]".
The Parliament Resolution also asks the Commission "to examine
the matter in detail so as to determine whether it is appropriate
to propose one or more specific rules or to extend the rules set
out in that Directive to this type of contract."
The Consumer Sales Directive is not the only law to limit the
rights of those who buy software.
Another key piece of consumer law, the Distance Selling
Directive, gives consumers a cancellation period for most
purchases. However, the right to cancel is excluded for the supply
of audio or video recordings or computer software which have been
unsealed by the consumer. The rationale behind the exclusion is
that DVDs and CDs can otherwise be unsealed, copied and returned
for a refund.
The exclusion, which is repeated in the UK's implementing
Regulations, presents a practical problem for consumers who do not
agree to the terms of the software licence agreement which are only
presented upon loading a disc. Consumers have to break the seal to
see the conditions, so they must rely on laws of contract if they
want a refund, perhaps arguing that conditions were attached to the
sale that were not made known to the consumer at the point of
placing the order.
Reaction from the software industry
The Business Software Alliance (BSA) said it was keen to liaise
with policymakers to move the issue forward.
Francisco Mignorance, BSA Director of Public Policy Europe,
said: "We look forward to working with the EU Commission to examine
whether there are circumstances under which existing consumer
protection rules and software customer assistance – including
reimbursement, warranties, product replacement, technical support,
and customer assistance – do not provide redress."
The European Software Association (ESA) also backed the move,
but cautioned against proposals which might have a negative effect
on smaller software firms.
ESA Vice Chairman Eilert Hanoa said: "We will support fact-based
policies that do not put European software companies at a
competitive disadvantage – mostly to the detriment of Europe's
small and medium sized enterprises – and that could have unintended
consequences on product prices and choice for consumers."
Software as goods or services: the UK position
A change at the EU-level to the legal protection that is
afforded to buyers of software could force a re-think of the
legal protection under English law and Scots law, according to one
IT law expert, because the position across the UK is somewhat
unclear.
The UK implemented the Consumer Sales Directive with the Sale
and Supply of Goods to Consumers Regulations of 2002. These
Regulations for the most part amended existing legislation, notably
the Sale of Goods Act of 1979 and the Supply of Goods and Services
Act of 1982.
A DTI paper on EU
consumer laws (21-page / 100KB PDF) of February 2006 said
that the UK's implementation went further than the EU Directive
required in several respects. But on the definition of goods, the
UK Regulations refer to the definition in the Sale of Goods Act.
That definition was written without digital downloads in mind and
its application to software is ambiguous by comparison to the
European Directive.
The Sale of Goods Act says 'goods' includes "all personal
chattels other than things in action and money, and in Scotland all
corporeal moveables except money; and in particular 'goods'
includes emblements, industrial growing crops, and things attached
to or forming part of the land which are agreed to be severed
before sale or under the contract of sale; and includes an
undivided share in goods".
"It's an out-dated definition," said David Woods, a lawyer
specialising in IT disputes at Pinsent Masons, the law firm behind
OUT-LAW.COM. "It is generally believed that packaged software is
'goods' while bespoke software and digital downloads are services,"
he said.
The distinction matters in determining the legal duties and
protections that apply to buyer and seller, according to Woods.
"At the moment, legislation like the Sale of Goods Act is
unhelpful when it comes to working out the legal status of
software," he said. "We have to rely on case law to guide us on
when software will be goods and when it will be services. There
really isn't all that much case law on the point, though. If the EU
forces the UK Government to re-think the legal protections afforded
to software and digital downloads, we might get some clarity here,
which should be helpful to everyone."
