Data Direct Technologies Ltd v Marks & Spencer Plc

Under a software maintenance agreement, maintenance charges are payable automatically unless the licensee gives the contractually required notice of cancellation before the fee becomes due. A later product schedule may alter that regime only through clear language. An apparent option concerning maintenance for a licence extension will not ordinarily be construed as creating a separate, partial maintenance regime where the software must realistically be maintained as a whole. The court interprets the agreement as a reasonable person with the relevant background knowledge would understand it, while giving effect to the agreement as a whole.

Data Direct Technologies Ltd claimed £135,844 plus VAT from Marks & Spencer Plc for annual software maintenance between 26 October 2007 and 25 October 2008. The parties had entered into a perpetual software licence agreement containing a Maintenance Schedule, under which maintenance was payable annually unless cancelled by 30 days’ written notice.

A later Product Schedule provided that maintenance for a licence extension would be available at the customer’s option. Marks & Spencer had indicated that it would not renew maintenance but had not given notice complying with the Maintenance Schedule. The central issue was whether the later wording created an option not to purchase maintenance or merely referred to the existing contractual right to cancel it.

1. Construction of the agreement. The court applied the approach stated in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896: the meaning of the document was to be assessed as it would be understood by a reasonable person possessing the relevant background knowledge.
2. Effect of the Maintenance Schedule. The Maintenance Schedule made the fee payable annually from one year after the licence date. The licensee could avoid payment only by giving the required 30 days’ written cancellation notice before the fee became due. Payment was therefore automatic unless timely cancellation occurred.
3. Effect of Product Schedule 8. The reference to maintenance being provided at the customer’s option did not create a separate option to obtain or decline maintenance for only the licence extension. The software had to be supported either as a whole or not at all, and a partial maintenance regime was commercially unrealistic. Read with the reference to the Maintenance Schedule, the wording was properly understood as referring to the existing right to cancel maintenance.
4. The claimant’s construction did not create a conflict between the Maintenance Schedule and Product Schedule 8. It was therefore unnecessary to decide whether the later schedule’s conflict provision prevailed over the conflict provision in the Main Agreement.
5. The claimant’s construction was accepted. The maintenance charge under Product Schedule 8 was properly claimed. The parties were directed to agree an order giving effect to the judgment.