HT-2021-000363 - [2025] EWHC 532 (TCC)

The defendants rely on the Software Directive, embodied in English Law by the CDPA, in support of their defence that, regardless of the terms of the ICA, as a lawful user of the ICA Programs, Winsopia had the benefit of its statutory rights to make back-up copies, decompile, observe, study and test the functioning of the computer programs, copy and adapt them in accordance with their intended purpose, including for error correction and interoperability.

The defendants’ case is that the ICA must be construed against the background of the Software Directive so as to permit the acts taken by them to develop the SDM; alternatively, the provisions of the ICA that contradict the relevant provisions of the Software Directive must be null and void.

IBM disputes that the Software Directive is engaged; the allegations of reverse engineering advanced in this case do not fall within the scope of the permissive provisions relied on by the defendants. The terms and conditions of the ICA relied on by IBM are clear and valid.

The facts and matters the subject of the key allegations in this dispute occurred prior to the end of 2023. For the purpose of these claims, the European Union (Withdrawal) Act 2018 (as amended by the European Union (Withdrawal) Act 2020) is applicable. Although those Acts were amended by the Retained EU Law (Revocation and Reform) Act 2023, which disapplies general principles of EU law, that provision applies only after the end of 2023. Therefore, EU-derived domestic legislation, as it had effect in domestic law immediately before 30 January 2020, continued to have effect in respect of these claims as set out in section 5(2) of the 2018 Act.

As explained in Wright & Ors v BTC Core & Ors [2023] EWCA Civ 868 per Arnold LJ at [34]:

“Legislation which transposed an EU directive into domestic law prior to 31 December 2020 remains part of UK law unless and until it has been repealed or amended. None of the legislation which implemented the Software Directive and the Information Society Directive has been repealed or amended, and the CDPA remains in force (as amended). Furthermore, the principle of supremacy of EU law continues to apply "so far as relevant to the interpretation, disapplication, or quashing of any enactment or rule of law passed or made before" 31 December 2020: see section 5(2) of the European Union (Withdrawal) Act 2018 and R (Open Rights Group) v Secretary of State for the Home Department [2021] EWCA Civ 800 at [12]–[13] per Warby LJ. Although this Court now has the power under the 2018 Act (as amended) to depart from decisions of the CJEU rendered before 31 December 2020 in an appropriate case, the default position is that such decisions remain binding.”

It is well established that domestic legislation enacted or amended to implement a European directive must be construed so far as is possible in conformity with, and to achieve the result intended by, the directive: Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentación SA [1990] ECR I-4135 at [8]; Litster v Forth Dry Dock and Engineering Co Ltd [1990] 1 AC 546, HL at 558C-H (Lord Templeman) and 576E-577D (Lord Oliver of Aylmerton); Joined Cases C-397/01 to C-403/01 Pfeiffer v Deutsches Rotes Kreuz, Kreisverband Waldshut eV [2004] ECR I-8835 at [113]-[117]; and R (IDT Card Services Ireland Ltd) v Commissioners for Her Majesty's Revenue and Customs [2006] EWCA Civ 29, [2006] STC 1252 at [73]-[92] (Arden LJ). 

This requires the court to address any potential incompatibility between such domestic legislation and EU law by a purposive interpretation: Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C-106/89) at [8], subject to the proviso that the meaning should go with the grain of the legislation and be compatible with the underlying thrust of the legislation being construed: Vodafone 2 v Revenue and Customs Commissioners [2009] EWCA Civ 446 per Sir Andrew Morritt at [37]-[38].

Further, the court must interpret both European and domestic legislation as far as possible in the light of the wording and purpose of relevant international agreements to which the UK/EU is a party, such as TRIPS and the WIPO Copyright Treaty.

I accept the defendants’ primary argument as to the approach to construction, namely, that the ICA must be construed against the factual matrix of the Software Directive, so as to avoid any conflict. Clause 4.1.3 of the ICA, prohibiting acts of reverse engineering, contains the proviso: “unless expressly permitted by applicable law without the possibility of contractual waiver” indicating a common intention to read the words in the light of, and subject to, provisions such as the Software Directive. If it were impossible to construe the relevant provisions of the ICA in accordance with the provisions of the Software Directive, it is clear that the defendants’ alternative approach to construction, namely, that the conflicting provisions should be null and void, would apply.

Both sides referred to travaux preparatoires as materials to assist in the interpretation of the Software Directive. Such materials are an aide only where there is ambiguity in the words used in the Directive. Although they are of general interest and provide useful background information, the parties have not identified any ambiguity that requires reference to those materials to determine specific issues in this case.