Downloaded software presents legal woes

Downloaded software presents legal woes

Summary: A court decision ruling that the supply of software through a digital download mechanism is not a supply of "goods" has been upheld in the Supreme Court of NSW, setting a precedent that software downloaded via the internet is not protected by the Sale of Goods Act.

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TOPICS: Legal, Software
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A court decision ruling that the supply of software through a digital download mechanism is not a supply of "goods" has been upheld in the Supreme Court of NSW, setting a precedent that software downloaded via the internet is not protected by the Sale of Goods Act.

It's a court decision that lawyer Patrick Gunning said attorneys had been waiting to have clarified for some time. "There's always been — since the early 80's — a reasonable level of doubt as to whether the suppliers of software electronically through a download mechanism would have been involved in a supply of goods," Gunning told ZDNet Australia.

The case itself was between Gammasonics Institute for Medical Research and Comrad Medical Systems. Gammasonics had entered into a contract for the provision, delivery and installation of a software package for patient registration and scheduling appointments, as well as handling online referrals from medical practitioners and the processing Medicare claims.

According to the Supreme Court judgement, after Comrad delivered the software package, Gammasonics wanted to terminate the contract for breach of a number of terms. Gammasonic said that the package was unable to perform all of its functions, such as a failure to interface with Medicare. Comrad had failed to provide goods of a merchantable quality and/or had delivered a software package that was not fit for its intended purpose, according to Gammasonics.

This led to Comrad suing Gammasonics in the hopes of receiving the money owed under the repudiated contract. Gammasonics was ordered to pay damages of $58,011.21.

"What was interesting about this case from a legal point of view ... is the argument that Gammasonics ran, which was that the Sale of Goods legislation operated to imply to terms in the contract," Gunning said.

"It was found that it actually wasn't available to them as an argument at all because the way that the software was delivered was [via] an electronic fulfilment mechanism."

What this meant was that "people who purchase software will have more legal rights if they buy over the counter rather than downloading", said Gunning.

The judge recognised in the case that what had been ruled could lead to an injustice, especially with the way technology had changed since the Sale of Goods Act was made law. "The judge said that if there was any injustice, it was up to parliament to change the law and not for the court," Gunning said.

He added that draft legislation amendments to the consumer protection provisions of the Trade Practices Act to the definition of "goods" would soon specifically include computer software, but said that this wouldn't apply to businesses, only consumers.

For a more detailed legal explanation read Gunning's blog about the case.

Topics: Legal, Software

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4 comments
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  • What a classic example of how pathetic the legal system has become. Instead of honouring the spirit of the law presented in the provisions of the Trade Practices Act to uphold consumer protection, the lawyers are arguing for amendments to legislation. All this will do is increase the complexity of interpreting and applying these rules to particular cases, and open up further loopholes that will continue to be exploited by the unscrupulous.
    The fact that software was delivered via "an electronic fulfillment mechanism" does not obviate that goods were exchanged - it is just that the previous "legislation amendments" did not include the concept of software downloading, and so was not covered.
    Even the judge "recognised in the case that what had been ruled could lead to an injustice", but saw this as something that "was up to parliament to change the law and not for the court" - obviously more concerned with the minutiea of the rules than what the spirit of law was supposed to achieve.
    allan11
  • This comes as no surprise. Even if you buy software on physical media (disc), most licence agreements specifically disavow claims of "fitness for a specific purpose".

    I have documents that were done back in DOS Word 5 that contain extremely complex formatting which none of the Windows versions of Word that I've tried have yet been able to match. Microsoft isn't going to refund my purchase of "Office" because they specifically don't guarantee "fitness for purpose". MS is not the only party guilty of this practice.

    Whether downloaded or in physical form, the software industry has relied on this carefully worded "loophole" to 'sell' incomplete, bug-ridden product, and then charge more for the next 'improved' version that still isn't up to the standard that the first version should have been.

    Perhaps by the time I've upgraded and replaced all the way up to Freezer 19.7 I'll actually be able to produce an Ice Cube, but if I want to make a tray of them I'll have to wait until version 33.0.1b
    Treknology
  • You cannot disavow your obligations under the Trade Practises Act by any sort of contract. So even though the EULA says that the software is provided without warranty, etc, etc it is still obliged under the Trade Practises Act to be fit for purpose and of merchantable quality.
    Dean Harding
  • Allan11 - Perhaps read the article more carefully.
    1) It was not lawyers who said that it is the responsibility of the legislature to change the legislation in order to be in line with the more modern ways of distribution - it was the judge.
    2) The particular case in question concerns the 'Sale of Goods Act' which applies to a specific section of sellers. It specifically excludes applying to 'back-yard / one off traders' and similarly does not apply to incorporated companies (that is for the TPA).
    3) I believe that the judgment hinged on the fact that the supply was not for goods, but for service. The Sale of Goods Act does not apply to supply of services - only to supply of goods.
    4) in summary what Justice Fullerton stated regarding the role of the courts and the parliament is one of the key principle of maintaining a fair justice system. The role of the courts is to interpret the law as made by the legislature. This ensures that Legislation is made by those who the people elect, not the judiciary. In this instance Fullerton J interpreted the law in line with the Act. If you feel particularly strongly about the matter, perhaps write to your local member about the need to amend the Sale of Goods Act in your state.
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