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Don’t Sign a Software Licensing Agreement Without Seeing a Lawyer!

Many modern businesses simply cannot function without computer technology and that is why it is a must to seek legal advice before entering into software licensing agreements. The point was made by a case in which a motor dealership found itself locked out of its own database following a dispute with its software provider.

The dealership had 20 branches and depended on the specialised software to record its business dealings, vehicle details and customer information. It had used the package for some years but had decided to migrate to alternative software. However, it continued to require access to the package during the transitional period.

The software provider argued that, under an amendment to its licensing agreement with the dealership, the latter was committed to using its package for a further five years. After sums allegedly owed to the provider went unpaid, it applied a remote lock that prevented the dealership from logging onto the system and accessing its data.

The dealership launched proceedings, seeking rectification of the agreement on the basis that the apparent five-year obligation to continue using the package amounted to a unilateral mistake. It argued that the remote lock was causing irreparable and ongoing harm to its business and sought an injunction, requiring the provider to unlock the software until the trial of the action.

The High Court acknowledged that the dealership had raised a serious issue to be tried. However, in refusing to grant the injunction sought, it found that the dealership had failed to establish that damages would be an inadequate remedy for any harm caused to its business.

The provider had made an open offer to unlock the system in return for payment of sums that it claimed to be owed. Its position was that it had accepted the dealership’s repudiation of the agreement, which had thus come to an end. In those circumstances, the Court accepted that it would be wrong to reinstate a one-sided version of the agreement by requiring the provider to give free access to its software. The balance of convenience therefore fell in favour of maintaining the status quo.

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