The High Court has ruled in favour of a software provider in a case which highlights the importance of agreeing robust and clear contractual terms in a software licence.
The case of SAP UK Limited (SAP) v Diageo Great Britain Limited (Diageo) concerned a software licence and maintenance agreement (the Agreement) between SAP and Diageo by which SAP licensed various software products to Diageo. The licence provided that any "direct or indirect" access and/or use of the software was on a "named user" basis, i.e. allowing only certain named users to access the software on certain systems at any given time.
Diageo used two separate systems which interacted and interfaced with the SAP software. One system, 'Connect', enabled customers to place order and manage accounts directly with Diageo rather than through a call centre, and the second, 'Gen2', was a Salesforce.com platform for the management of customer visits and calls. Both systems interacted with the SAP software on a regular basis, with messages passing directly between the SAP software and the third party systems.
SAP claimed that the two third party systems "used" or "accessed" the SAP software "directly" or "indirectly", and that as a result Diageo had exceeded the number of allowed named users. According to SAP, this meant that Diageo had gone beyond the scope of the licence and owed SAP additional licensing and maintenance fees of more than £54 million.
The High Court ruled in favour of SAP. It held that the plain and obvious meaning of the licence grant wording was that only "named users" were authorised to access and use the SAP software. The terms "access" and "use" were not defined, but the High Court's view was that the obvious meaning of "use" was the "application or manipulation" of the software, and the obvious meaning of "access" was "acquiring visibility of, or connection to" the software.
On that basis, the interactions between the SAP software and the third party Connect system constituted "indirect access" to the SAP software. Diageo's customers were not "named users" but could access or use the SAP software indirectly through the use of the Connect system. As such, SAP was entitled to claim additional licence fees for the use of the software.
This case demonstrates the need to ensure that the software licence grant clauses in licence agreements are carefully drafted, particularly where licences are granted on a "named user" basis. Both software providers and customers should pay particular attention to the categories of named user who will require access as well as the type of access/use required to ensure that the licence is sufficient to cover all types of user and access. If it is intended for the software to interact with other systems, customers would be well-advised to check whether the proposed interaction will constitute "access" of the contract software by third party systems. If so, the licence scope should take this type of access into account.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions