Introduction

A licensee of postcode look up software was found not to have been in breach of a licence which restricted the use of the software to a “public internet website” when its use of the software was via a password and login protected section of a website. In reaching that decision, the court held that the term “public internet website” did not have any recognised meaning and, as the licensor had not explained what that term meant in the context of the licensee’s use, it was for the licensee to conclude that its use was permitted under the terms of the licence.

In addition, the court found that, as the licensee had provided all the relevant facts regarding the use to which it would put the software and, in circumstances where, the licensor’s representative had recommended the software, the licensor was estopped from contending that the licensee was not able to use the software as it had done.

The facts

The claimant’s postcode lookup software enabled users to enter a postcode into an address form on, for example, a company’s website and the software would then autocomplete the rest of the address. The defendant, DCML, licensed the software from the claimant for use on its website and in various call centres for car dealerships.

Prior to DCML purchasing AFD’s software, it licensed equivalent software from an alternative provider for a fee of approximately £2,500 per year. When that provider informed DCML that it would no longer be providing the software, DCML undertook research to locate an alternative product. As a result of its research DCML understood AFD’s product to be the cheapest and subsequently discussed the product with AFD to find out what it would be used for. AFD informed DCML that the product identified would be suitable for DCML’s use and sent an evaluation copy of the software.

DCML decided to purchase a licence for the software. AFD sent an invoice to DCML containing its standard terms, which was duly paid and DCML started using AFD’s product in its business. Prior to installing the software, DCML also had to accept AFD terms via a click through text box. DCML continued to licence the software for five years DCML paying AFD a total of £7,475.

In December 2010, AFD contacted DCML to inform them that the costs of their licence would increase as a result of changes to AFD’s licensing of the underlying Royal Mail post code data. At that point there were further discussions between DCML and AFD regarding the use to which the software was put. AFD considered that DCML’s use was outside the terms of the licence. On 23 December 2010, AFD issued an invoice for retrospective licence fees in the sum of £12m plus VAT. By the time the case came to trial that figure was reduced to £2.5m.

AFD’s case was that the Licence Certificate provided that the product was only to be used on “public internet websites” and that DCML’s website did not fall within that description because, although the website could be accessed by anyone with an internet connection, the content could only be accessed by car dealerships via login and password. AFD also alleged that, in the course of DCML’s initial enquiries in January 2006, DCML deliberately misdescribed the use that DCML would make of the software.

The judgment

The judge rejected the allegation that DCML had misled AFD in January 2006 and found, on the evidence, that DCML had properly described to AFD the use to which the software would be put and that AFD had recommended the product to DCML on the basis of that description.

The court held that AFD was estopped from contending that DCML was not properly licensed to use the software in the way that it had done. DCML had properly explained what it wanted the software for; DCML had reasonably relied on the recommendations as to the licence terms; DCML had changed its position in reliance on the recommendation made by AFD by licensing AFD’s product as opposed to a cheaper alternative; and that reliance was to its detriment if the use amounted to a breach of contract of infringement of copyright.

Further, the use of the phrase “public internet website” was in AFD’s terms “not unambiguous” and it was not unreasonable for DCML to conclude its intended use was licensed by it. There was therefore no clause in the licence which forbids the use to which DCML made of the software so the breach of contract claim also failed.

Comment

This case came down to the evidence regarding the conversation between DCML and AFD in January 2006. In particular, the judge found elements of AFD’s evidence as to that conversation inconsistent and unreliable. In addition, the judge considered the sums claimed by AFD’s were grossly inflated which seems unlikely to have helped AFD.

Although DCML was able to establish a defence of estoppel and that was based on pre-contractual recommendations to DCML by a salesperson, the court did not make any finding that DCML was in breach of the terms of the licence and considered that it was reasonable for DCML to conclude its use was within the terms of the contract.