Downloaded software presents legal woes

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.

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.

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