Our website is set to allow the use of cookies. For more information and to change settings click here. If you are happy with cookies please click "Continue" or simply continue browsing. Continue.

Law for Business

Knowhow - guidance - precedents

13 NOV 2013

Noemalife Spa V Infinitt Uk Limited

Clarkslegal

Not Following the Specified Contractual Procedure Fatal to Implied Software Licence

Background

In this decision, the Court decided that an implied software licence did not continue where a separate agreement to which it related was not extended in accordance its own terms.

Infinitt had been granted an implied royalty-free licence by its sister company in 2003 to use digital imaging software to provide services to an NHS Trust under a managed services agreement.  The MSA had an initial period of seven years but could be extended for further six month periods up to a maximum extension of three years.  Amendments to the MSA, including its term, had to be made in accordance with its change control procedure.

The MSA expired on 30 September 2010 and was initially extended for a period of six months to 31 March 2011.  It was later extended again, but this time for a period of 30 months under a single change control note.  Noemalife, the owner of the digital imaging software, argued that a new implied licence arose on 1 October 2010 and that under it Infinitt had to pay a reasonable fee for its use.

Decision

In deciding whether a new implied licence had come into effect on 1 October 2010 and the conditions attaching to it, the Court held that:

  • the initial implied licence was extended by six months until 31 March 2011 to tie in with the valid extension to the MSA but, as the further extension of 30 months was not in accordance with the provisions of the MSA, no further licence to use the software could be implied for this extension;
  • Noemalife had no right to recover any fees from Infinitt in relation to the initial six month extension to the implied licence as there was insufficient evidence to conclude that such an agreement had been reached;
  • similarly, there was no intent to create legal relations in relation to a licence fee after March 2011 and so no licence fee was payable to Noemalife.

Commentary

Businesses should note that the Court took a very strict view as to the way in which the MSA could be extended, pointing out that terms dealing with extensions had to be respected:  it could only be extended by six monthly intervals and so the attempt to extend for a period of 30 months did not comply with the terms of the agreement and was invalid.

In relation to the duration of Infinitt's implied licence to use the digital imaging software, the Court decided that the implied licence could only last for the period by which the MSA was validly extended, ie until March 2011.  As Infinitt was entitled to object to the attempt by the NHS Trust to extend the MSA by 30 months, the implied licence could not continue for that period as it should go no further than the minimum necessary to allow Infinitt to provide the services under the MSA. 

As Infinitt had no implied or express licence after March 2011, the Court confirmed that Noemalife could bring a claim for copyright infringement for any use of the software after that date.  Noemalife's attempt to bring that claim during the initial trial was rejected on the ground that it was raised too late to be tried fairly.  Noemalife are free to start fresh proceedings for copyright infringement if they wish. 

The key lessons to be learned from this decision are:

  • it is always vital to comply with the express procedures set out in a contract or rights may be lost or breaches committed;
  • by misunderstanding the terms of the MSA, Infinitt had continued to provide services to the NHS Trust when it was under no obligation to do so;
  • Infinitt had potentially infringed the copyright owned by Noemalife in the software;
  • express licences and terms are far better than implied ones - there is far more certainty as to their validity and scope, so try to ensure that they are included from the outset;
  • if an implied licence is going to change from being royalty-free to paying, it is imperative that there is clear evidence to support this change in status.

 
John Warchus, Partner, Clarkslegal LLP
Tel: 0118 953 3980 Email: JWarchus@clarkslegal.com

Jordan Publishing Company Administration and Governance

Jordan Publishing Company Administration and Governance

"This is an indispensable aid to the busy company secretary. The text is clear, the precedents...

Available in Company Law Online

Companies Limited by Guarantee

The only book available that deals exclusively with such companies

More Info from £80.00
Available in Company Law Online
Subscribe to our newsletters