The Court of Cassation considers that the sale of a copy of software by permanent download is a sale

The software supplier’s retention of title clause therefore applies.

Background

In these three cases, a software supplier invoked a retention-of-title clause against a customer placed in receivership who had not paid its invoices, to demand payment of the price of the software from the sub-purchasers of the software.

A factoring company, to which the customer had assigned its receivables, objected to the supplier’s claims. In support, it argued that the granting of software licences could not be classified as a sale, in the absence of transfer of ownership, but would constitute a contract for the hire of goods.

Consequently, the retention of title clause would be inapplicable.

The Court of Cassation’s solution

The Court of Cassation did not follow this analysis and dismissed the factoring company’s three appeals in identical terms.

In reaching this decision, the Court interpreted the concept of ‘sale of a software copy’, referred to in article L122-6, 3° of the French Intellectual Property Code, concerning the exhaustion of the author’s rights to market software.

As this provision relates to the transposition of Directive 2009/24/EC on the legal protection of computer programs, the Court refers to the interpretation of that directive by the case law of the CJEU (CJEU judgments of 3 July 2012, Usedsoft, C – 128/11; 12 October 2016, Ranks et al. v Microsoft corp. Et al, C – 166/15; 16 September 2021, Software incubator, C – 410/19), the latter having established that:

‘the making available of a copy of computer software, by means of a download, and the conclusion of a related user licence agreement, intended to make the copy usable by customers, on a permanent basis, and in return for payment of a price intended to enable the copyright holder to obtain remuneration corresponding to the economic value of the copy of the work of which he is the owner, imply the transfer of the right of ownership of that copy’.

The Court concluded, in terms virtually identical to the European case law cited above, that making software available by downloading and concluding a related user licence agreement aimed at making the copy usable by the customer on a permanent basis in return for payment of a price implies the transfer of ownership of that copy.

As this transfer of ownership qualifies as a sale, the supplier’s retention of title clause is applicable.

Analysis

While this solution appears to clarify the classification of software as a sale, its scope remains limited.

The way in which software is made available has changed: many publishers now prefer online access via a SaaS subscription to permanent downloading by the customer of a copy of the software.

However, the Court’s solution does not seem to be applicable to SaaS models, where the software is neither permanently available nor does it constitute the transfer of a copy of the software to the customer in the absence of a download.

In any event, software publishers using the model of selling copies of software by download with an associated perpetual licence will be well advised, in the light of this case law, to include (if they have not already done so) a retention of title clause in their contractual documentation.