The UK High Court decision in BMS Computer Solutions Limited v AB Agri Limited [2010] EWHC 464 (Ch) serves as a practical reminder of the importance of clearly expressing whether a perpetual software licence is intended to survive termination or expiry of the relevant agreement, because this will not automatically be the result.

Background

BMS Computer Solutions Limited (BMS) and AB Agri Limited (AB) entered into a licence agreement and a separate support agreement for packaged software. Both agreements were subsequently amended by a variation agreement which included the following provision: “The Program Licence will be extended to a UK-wide perpetual licence.”

AB later terminated the support agreement, but asserted that its licence to use the software under the licence agreement was “perpetual” and so would still continue in effect. BMS argued that termination of the support agreement automatically terminated the licence agreement, which was consistent with the termination provisions of the licence agreement.

Decision

The Court held that by terminating the support agreement, AB had also terminated the licence agreement (including AB’s right to use the software). In reaching this decision, the Court noted:

  • the word “perpetual” can carry different shades of meaning, including “never ending” (i.e. incapable of being brought to an end) or “operating without limit of time” (i.e. a licence of indefinite duration, subject to any contractual provisions governing termination of the licence). The latter meaning applied here; and
  • the variation agreement omitted to refer to the termination provisions of the licence and support agreements, indicating that those provisions were intended to continue in force. Had the parties intended otherwise, they would have made their intention clear in the variation agreement, rather than leaving it to be interfered from the use of the term “perpetual”, the meaning of which was uncertain in the particular context in which it was used.

Things to remember

  • When drafting perpetual software licences, the intention of the parties needs to be clearly expressed. This is particularly important where the licensing provisions are part of a broader commercial arrangement.
  • If the perpetual software licence is intended to survive termination or expiry of the relevant agreement, this should be expressly stated, e.g. in the licensing, termination or survival provisions.