Digital Download And Supply Of Goods

Paul Waddington from Australia pointed me to this rather interesting story. In summary, the Supreme Court of New South Wales has upheld the ruling of a lower court stating that a digital download of software does not amount to “supply of goods” and hence cannot be protected by the Sales of Goods Act.

As it turns out, Comrad Medical Systems, a medical software developer developed a patient registration and appointment system for Gammasonics Institute for Medical Research. After the software was deployed at Gammasonics they found that it was lacking in some respects. For example, it could not interface with Medicare, a feature which was mentioned in the contract between the two companies. So Gammasonics decided to terminate the contract and refused to pay. Comrad turned around and sued Gammasonics in the hope of getting them to pay up.

Gammasonics decided to use the provisions of the Sales of Goods Act to make their case that Comrad supplied them goods that were not fit for their intended purpose. And here is where things get interesting. The judge threw out that argument because the software did not fall into the definition of “goods” since it was downloaded from the Comrad web site and not shipped to them by physical media such as a DVD. No kidding. However, the judge, in his infinite wisdom, did admit that this “could” lead to injustice and said that if there was an injustice, it was up to the parliament to change the law and not him.

I thought the job of a judge was to interpret and apply the law on behalf of the state that created it. I am definitely no legal expert, but it is quite evident to me that grave injustice was done in this case and the judges in both courts blamed the law for the injustice that they admittedly delivered in their courts. Even an idiot will understand that the goods in this case is the software and not the medium. Gammasonics were not going to stamp or engrave their patient data on DVD’s supplied by Comrad. So I am curious to know exactly how much interpretation and application of the law these judges actually did.

I find this case particularly interesting because software vendors are moving from physical distribution of software on DVD to digital downloads, which I believe is a good thing, for reasons other than those found useful by the Gammasonics lawyers. In all the twelve years that I have been in the software business I have never shipped a single CD or DVD to anyone. All my products are available as digital downloads only. Funny thing is, with the cloud, there won’t even be a download since the software will be running on the vendor’s server. So obviously these laws need to be changed to reflect the present state of affairs.

Are the laws in your country or state regarding the sale of goods as hopelessly outdated as those of New South Wales? Wait. Don’t bother to answer that question. You sign off all your rights in the EULA anyways. 😉