The Court of Appeal has recently decided that software provided electronically did not constitute ‘goods’ for the purposes of the Commercial Agents Regulations.

The Regulations set out the rights and obligations between agents and their principals, including the agent’s right to receive compensation or an indemnity on termination of the agency agreement.

However, the Regulations only apply to agents who sell goods on behalf of their principals, not services. It has long been debated whether software falls within the ambit of ‘goods’. The Regulations themselves provide no assistance in resolving this debate as they do not contain a definition of goods.

In the latest decision in Computer Associates UK Ltd v Software Incubator Ltd, it was held that software supplied electronically and not on any tangible medium did not amount to goods. The Regulations therefore did not apply.

The Court relied on the commonly understood distinction between tangible goods and intangible goods, with only the former being recognised as goods for the purposes of the Regulations. The Court recognised that excluding electronically supplied software from the definition of goods for this reason could create a rather arbitrary distinction, particularly in light of technological advances. However, it concluded that it could not simply ignore the precedents that had been laid down by the courts in maintaining the distinction between tangible and intangible goods. It was for the legislature, rather than the courts, to reform the law in this respect.