Service or Good? Software-as-a-Service in the case of Kompakwerk GmbH v Liveperson Netherlands B.V. (2024)

The High Court case

In the 2024 case of Kompaktwerk GmbH v LivePerson Netherlands B.V. ([2024] EWHC 2278 (Comm)), the High Court addressed the key legal question of whether Software-as-a-Service (“SaaS”) is considered a "good" under the Commercial Agents (Council Directive) Regulations 1993 (“CARs”).

The High Court held that SaaS is not a "good" for the purposes of the CARs and classified it as a service. This distinction is crucial because the CARs only apply to agents involved in the sale or purchase of goods and not services.

The High Court decision

The High Court emphasised that under both UK and EU law, a "sale of goods" typically involves a permanent transfer of ownership.

In this case, Kompaktwerk was marketing and referring customers to LivePerson’s cloud-based software platform, LiveEngage (which users accessed via a limited licence), which the Court concluded was not a transfer of ownership. Therefore, the arrangement was deemed a service provision and not a sale of goods.

Implications for agents

• Lack of CARs protection: Without CARs protection, agents may face challenges in securing fair compensation and commission
• Legal Uncertainty: The classification of SaaS as a service creates uncertainty for agents regarding their legal rights and protections

Next steps for agents in the SaaS market

Negotiate strong contractual terms including:

• Clear commission structures
• Notice periods
• Termination clauses
• Compensation provisions

Seek legal advice:

• before signing contracts, especially if the product is not clearly a "good"
• to explore alternative legal frameworks, such as general contract law or employment law (if applicable), for potential remedies

Stay informed:

• Keep up-to-date with legal developments and court rulings that may impact the classification of SaaS and other digital products

CARs legal article series

Please check out the other articles which are part of this CARs legal article series:

• The Commercial Agents (Council Directive) Regulations 1993 (“CARs”) explained

• Surviving the consultation: Commercial Agents Regulations 1993 remain, but what does this mean for agents?