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Reproduced with permission of Camilla B. Andersen & Ulrich G. Schroeter eds., Sharing International Commercial Law across National Boundaries: Festschrift for Albert H. Kritzer on the Occasion of his Eightieth Birthday, Wildy, Simmonds & Hill Publishing (2008) 512-526

The Applicability and Non-Applicability of the CISG to Software Transactions

Hiroo Sono [*]

INTRODUCTION

The United Nations Convention on Contracts for the International Sale of Goods (CISG) applies to international sale of goods. Whether this includes computer software transactions was an issue that escaped the radar of the drafters who convened in Vienna in 1980 for the Diplomatic Conference which gave birth to the CISG .

This is no wonder, because it was not until later in that same year that IBM decided to opt for the open-architecture strategy which, for all practical commercial purposes, paved the way for the separation of 'hardware' and 'software'.[1] It was only after this decision that software became an independent subject-matter of trade. Prior to this development, software was either traded ancillary to hardware (resembling sale of smart goods today), or was made-to-order customized software.

However, the independence of software, accompanied by the rapid growth of information technology, has changed the landscape. The use of the term 'software' may be misleading depending on its contour. It includes not only those computer programs which run on traditional personal computers, such as operating system (OS) software, application software (eg word processors and spreadsheets), but also other 'digital information' such as music, movies, and games recorded on CDs, DVDs or those traded [page 512] online. This short essay takes up the question of whether the CISG applies to transactions in 'software' in this broad sense.

In the course of discussion throughout this essay, 'internationality' of the contract (ie the parties having their places of business in different states) and the fulfillment of the requirement of either Article 1(1)(a) or 1(1)(b) CISG will be assumed. It will also be assumed that exclusions under Article 2(a)-(c) CISG do not apply, and also that the parties have not opted out of the CISG (Article 6 CISG).

THE PREVAILING VIEW AND ITS PROBLEM

The Prevailing View in a Nutshell

There is general consensus among commentators that the CISG applies to contracts to supply 'standard software' on a tangible medium such as a disk.[2] [page 513] The same applies to software supplied online.[3]

As for 'customized software', although there is some support for the application of the CISG,[4] the majority denies it.[5] One German appellate court decision, although in obiter dicta, echoes this general sense:

"At the most, it is standard software that can be viewed as a movable object and therefore be considered to be 'goods' in the terms of the Convention [ ...]. Software can certainly not be viewed as tangible goods where the contract concerns the development of individual software; such a contract is a contract for services."[6]

As this case points out, since 'customized software' involve an element of 'service' provided by the supplier, there is also the question of which paragraph of Article 3 CISG should serve as the criteria in determining the exclusion. There is disagreement on this point as well (to be discussed later). [page 514]

The Tangible/Intangible Debate

Most of the commentators, in an attempt of 'autonomous interpretation' of the CISG (Article 7(2) CISG), concentrate on the question of whether 'software' is 'goods' under the CISG, and ask if intangibles may also qualify ; goods. Green and Saidov succinctly summarize that there is disagreement among the commentators on this issue, and that 'Finally, some commentators take a somewhat ambiguous position by stating that the CISG generally governs tangible objects, but also suggesting that the term "goods" should be interpreted broadly so as to include all kinds of software.'[7]

The following discussion will bypass this debate. In this author's opinion, it would be more productive to articulate what is meant by 'software' copyright? physical copy? digital information?) and to clarify the difference between 'sales' and 'licenses'. As we will see shortly, 'information' per se, cannot be sold.

The Many Meanings of 'Software'

The distinction between the following three aspects of 'software' is often overlooked.

      (1) Firstly, when one speaks of sale of software, it is possible that she is speaking of the sale of 'copyright' in the software.[8] Imagine a college student who wrote a computer program selling it (ie copyright) to a large software manufacturer. However, nobody has suggested that this should be covered by the CISG.[9]

      (2) Secondly, sale of software may mean sale of 'tangible media' (eg disk), in which the software is recorded. When this sale happens, the buyer obtains full property (ownership) of the 'physical copy', but its use, such as [page 515] making of duplicate copies, is subject to restrictions imposed by copyright law.

      (3) Lastly, software may mean the 'information' (ie the program expressed by codes) per se. There will be a copyright-holder to the information, and it is possible to own a 'physical copy' of the information, but nobody (not even the copyright-holder) owns the 'information' per se. Even when it appears that information is being transferred, in reality, it is not. It is only copied and duplicated.

This leads to the proposition that 'information' per se can only be licensed and cannot be sold. Spies may 'sell information', but that is not a sale in the legal sense. Taking the CISG as an example, sales involve the transfer of property (Article 30 CISG) and payment of price (Article 53 CISG). To sell information is simply to disclose information in exchange of payment. The next section explores this point further.

License Contracts: The Structure of Transactions in Information

License Contracts [10]

Contrary to what some commentators suggest, information is very different from typewriters, tractors, and micro-wave ovens.[11] 'Information' can easily be copied and duplicated. This applies the most to information in digital form which can be copied virtually without any cost and without any deterioration in quality. In other words, information lacks 'scarcity' and the use of information is 'non-exclusive' in a state of nature.

Therefore, in order to engage in transaction in 'information', it is necessary to devise a scheme which creates 'scarcity' and 'exclusiveness'. Otherwise, once information is disseminated, it is susceptible to copying and duplication. Resorting to secrecy (eg 'trade secrets', 'know-how') or to various copy-protection technology would be one way to create scarcity. Intellectual property rights also create scarcity. For example, the copyright-holder [page 516] has the exclusive right to make a copy. Secrets, technology, and IP rights function as a restriction on others to use the information.

License is a contract to lift these restrictions (eg copyright law prohibits publisher A from making copies of a novel written by B, but B may lift that prohibition by licensing A to publish his novel).

Copyright-holders'' Preference for License over Sales

Even when transfer of physical copies takes place, copyright-holders may prefer the licensing-construct over the sales-construct. This is because 'license' permits the copyright-holder to circumvent the 'first sales' or 'exhaustion' rules under copyright law.[12] These rules allow the 'buyer' of a physical copy to resell the copy. This is bad news for the 'seller' because the 'seller' loses an opportunity to 'sell' another copy. In order to avoid this consequence, the copyright-holder prefers a license contract.

Since not only transactions in 'information' but also transactions of 'physical copies' may be licenses, a hard-and-fast rule which states that supply of physical copies of standard software are 'sales' is not tenable. The applicability of the CISG will have to be determined on a case-by-case basis.[13] With this in mind, the following sections examine the applicability of the CISG to various types of software transactions.

STANDARD SOFTWARE TRANSFERED BY PHYSICAL COPY

Sale

A buyer may import volumes of tangible software packages for resale purposes, or a physical copy for her own professional use. The seller is the owner of the copy, but not necessarily the copyright-holder. This is similar to the situation where a book or a music CD is sold. It is important to note [page 517] that although the buyer becomes the full owner of the book or CD, her right to use the information recorded in them is restricted by copyright law. To be more succinct, the buyer is free to read the book, listen to the CD, resell the book/CD, but copying the information is restricted. The same applies to the sale of a physical copy of a computer program. (However, the so-called shrink-wrap licenses/click-wrap licenses raise different issues, and will be considered separately below.) The buyer becomes the full owner of the disk, but her use of the software in the disk is restricted by copyright law.[14]

This contract would be clearly governed by the CISG. Incidentally, most of the case law concerns sales of standard software.[15] This should also be the case for the import of computer chips [16], or cases where hardware together with software to operate it is sold.[17] The sale of so-called 'smart goods', such as automobiles containing a computer program which controls its braking system, would be treated the same. [page 518]

License

On the other hand, where the seller is also the copyright-holder, she may contractually impose restrictions, beyond those imposed by copyright law, on the use of the software. This would be a 'license' even when the property (ownership) of the physical copy passes from the 'licensor' to the 'licensee'. In this case, the CISG should not apply.

This exclusion of the CISG can be justified on the basis of Article 3(2) CISG which provides that the CISG 'does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services.' In software licenses, even when it involve passing of property in a physical copy, the 'preponderant part of the obligations' of the licensor is not in the supply of the physical copy (the economic value of the tangible copy is minimal). It is in the granting of license with regard to the use of the software. Admittedly, there may be doubts about classifying licenses as a 'supply of labour or other services'. Even then, however, it is submitted that the gist of Article 3(2) CISG is in excluding from the CISG, contracts of which the preponderant part of the obligations of the party furnishing the goods consists in the non-sales aspect.

Shrink-wrap licenses/Click-on licenses

Shrink-wrap licenses and click-on licenses are curious creatures. In shrink-wrap licenses, it is maintained that end-users of software enter a licensing agreement with the licensor (in most cases the copyright-holder) by breaking the shrink-wrap. In click-on licenses, the end-users must, after copying the software on the hard disk, click through several steps (eg clicking on 'I Agree' to a licensing contract) in order to use the software. It is maintained that taking these steps concludes a licensing agreement.

In analyzing these transactions, it is important to remember that three parties are involved in the contracting process. There is the seller of the physical copy (eg box containing disks), the buyer of the box, and then the licensor who claims that the buyer becomes the licensor by breaking the shrink-wrap or by clicking on 'I Agree'. This means that there is a dual contractual relationship consisting of independent legs: first, the sales contract of the physical copy, and second, the license contract. [page 519]

The CISG should apply to the sales contract leg. On the other hand, the licensing leg should not be governed by the CISG, but by the applicable domestic law. In the author's opinion the first issue to be dealt with by domestic law is whether a binding contract can be concluded by such a mode of contract formation. In any event, this is a question that should be addressed by domestic law and not by the CISG.

Against this analysis, it may be argued that the sales leg is not really a sale of goods, but it may be a sale of 'a right to conclude a license agreement with the licensor'.[18] If this is the case, neither of the dual relationship will be governed by the CISG. Article 3(2) CISG would exclude such transaction from the CISG because the preponderant part of the obligation of the seller would be in the furnishing of the right to conclude a license agreement, not in the furnishing of the physical copy. However, in reality, it is this author's view that only in exceptional cases would this interpretation conform to the intentions of the parties to the sales leg.[19]

In sum, the CISG would be applicable to the sales aspect of the shrink-wrap licensing scheme, but the licensing leg would be governed by domestic law.

ONLINE SOFTWARE

The majority view is that the CISG applies to online software.[20] Proponents of this position advocate equal treatment for software delivered on a disk [page 520] and those delivered online. In their understanding, since the sale of physical copy of standard software and online software transactions are contracts for the same purpose, the law should be blind to the mode of delivery.[21] One commentator goes as far as to analogize from the equal treatment of beer sold in a bottle and beer sold from the tap, and suggests that 'The container or medium is irrelevant in which the goods are being transferred to the buyer.'[22] This is a false analogy because beer itself is clearly tangible.[23]

More importantly, software supplied online is a transaction of 'information' per se and thus can only be a 'license', whereas software supplied by physical copies can be a 'sale' or a 'license'. The majority opinion is right that software traded on a physical copy and those traded online should receive the same treatment, but that apples only when both are 'licenses'. In that case the CISG should not apply.

Other commentators seem to suggest that since information can be recorded on a tangible media, online software transactions are no different from transactions using physical copies.[24] This view not only confuses the tangible media with intangible information, it also overlooks the most crucial point that the media is not transferred from one party to the other in online transactions.[25] Neither is the information transferred from one party to the other. It is only 'copied', and no property (ownership) passes from the seller to the buyer. It seems that there is no room to apply the CISG.

CUSTOMIZED SOFTWARE

Customized software may or may not involve transfers of physical copies. It follows from the analysis above that when transfers of physical copies are not involved (ie supplied online), there is no room for the CISG to apply, since such contract cannot be a sale of goods. Even when physical copies [page 521] are involved, if the contract is one of license, then the CISG does not apply (Article 3(2) CISG). What must be considered here, therefore, are contracts for the supply of customized software in which the property (ownership) of the physical copy is transferred from one party to the other. The difference between customized software and standard software lies in the involvement of 'service' to develop the software, and this raises the possibility of exclusion based on Article 3 CISG.

Customized software which transfers physical copies should be governed by the CISG. In reaching this conclusion, reference should be made to Article 3(1) CISG [26] which provides the criteria to decide when 'contracts for the supply of goods to be manufactured or produced. are excluded from the CISG. According to this view, since the buyer does not undertake to supply a substantial part of the materials necessary for the development of the software. Article 3(1) CISG does not exclude the applicability of the CISG.

To the contrary, one commentator suggests that under Article 3(1) CISG. the material provided by the buyer need not be a tangible, and since the instructions or data provided by the buyer may constitute the 'substantial part, of the material, the CISG should be excluded.[27] However. the criterion employed by Article 3(1) CISG is 'property based'. If the buyer supplies a substantial part of the material, then the buyer owned the substantial part of final product to begin with, in which case the application of the CISG is not justified.[28] This rationale does not apply to cases where the buyer provides data. [page 522]

Although the majority of commentators [29] and cases [30] seem to apply Article 3(2) CISG, 'services' which go into the manufacturing or producing of the goods should not be counted in Article 3(2) CISG[31] However, it is important to remember that we are concerned here only with the 'sale' of a physical copy of customized software. If we are concerned with 'licenses' involving the transfer of 'physical copy', then Article 3(2) CISG would come into play. In that case, the 'preponderant part of the obligations' would not be the transfer of the physical copy but the development of the software and the licensing. This is the same as the license of standard software involving physical copies, discussed above, and the CISG should not apply.

CONCLUSION: BY WAY OF POLICY RE-CONSIDERATION

In comparison to the prevailing view, the analysis above restricts the applicability of the CISG to software transactions by excluding 'license contracts'. From the viewpoint of policy, could this be justified? Presumably, the pro-Convention tendency of the prevailing view is supported by two policy considerations. One obviously is the high value placed on the promotion of uniformity of laws. The other possibility is the 'anti-License' policy influenced by a domestic controversy that took place in the USA. [page 523] The remaining part of this essay reconsiders these policy considerations in reverse order.

Anti-License?

The prevailing view above was shaped during the time when the controversial Uniform Computer Information Transactions Act (UCITA) which covers software licenses was being drafted in the USA. Its drafting process was highly politicized and UCITA has been accused of as being overly tilted in favor of the software industry.[32] Although UCITA was promulgated by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1999, only two states (Virginia and Maryland) has adopted it, and NCCUSL has abandoned its efforts to promote adoption of UCITA in other states. The antagonism created against UCITA may have affected the discourse of whether the CISG applies to software transactions. Among those trained in contract law, as opposed to intellectual property law, the Zeitgeist was anti-UCITA or anti-Incensing law. In the context of the CISG, this is the most apparent in the writings of Joseph Lookofsky, where he states that 'the CISG should be applied to international sales of computer software, including transactions which program-sellers often inappropriately dub' licenses" [33] and speaks disapprovingly that the 'manufacturing lobby continues its crusade in favor of legislation which would transform sales of goods into (reduced warranty) 'licenses'.'[34]

However, reduced warranty or one-sidedness may have been a problem of UCITA, but that is nothing inherent in licensing contracts as such. Licensing is a totally new breed of commerce, especially when one recognizes the [page 524] unique character of information. It is a new territory, different from goods-based commerce.[35]

Uniformity

The second and more important policy consideration behind the prevailing view is the promotion of uniformity of laws.[36] In the pursuit of uniformity, the prevailing view holds that the provisions of the CISG are flexible enough to accommodate software licensing with necessary adaptations.[37]

There is nothing strange that the CISG can be applied to software licenses.[38] The CISG is designed to govern sales contracts, which is the archetype of contracts. As a piece of circumstantial evidence on the general nature of sales law, the Japanese Civil Code provides:

Japanese Civil Code Article 559:

"The provisions of (this Section on Contracts for Sale] shall apply mutatis mutandis to contracts for value other than contracts for sale; provided, however that this shall not apply when it is not permitted by the nature of the contract for value."[39]

Similar provisions exist in the 1956 Korean Civil Code (Article 567) and the 1999 Chinese Contract Law (Article 174). Another piece of circumstantial evidence can be found in the UNIDROIT Principles of International Commercial Contracts. Although the UNIDROIT Principles [page 525] are heavily influenced by the CISG,[40] it is designed to apply not only to 'international sale of goods' but more generally to 'international commercial contracts' (Preamble, para 1).

Admittedly, the CISG is a promising platform that may govern licensing. However, applying the CISG to license contracts simply would be opening a Pandora's Box. Once this is done, there would be nothing to stop the temptation to apply the CISG to other types of contracts. For example, some commentators argue that the seller may deviate from its obligation to transfer property in the goods, and therefore software license can be covered by the CISG.[41] This reasoning would also allow, for example, leases to be covered by the CISG.

It is the suggestion of this essay that we should proceed with caution in weighing the value of uniformity by expanded application of the CISG against the cost of preempting new territories which may have commercial reality different from 'international sale of goods'. [page 526]


FOOTNOTES

* Counsellor, Civil Affairs Bureau, Ministry of Justice, Japan; Visiting Professor of Law, Hokkaido University. The views expressed herein do not represent the views of the Japanese government.

1. This is well known history, but for the readers who read Japanese, I refer to Aida, Yutaka and Ohgaki, Atsushi (1996) Shin Denshi Rikkoku [The New Founding of an Electronic State], Vol. 3, Tokyo: Nihonhososhuppankyokai.

2. Commentaries and treatises taking this position include Herber, R (1998), Article I' in Schlechtriem, P (1998) Commentary on the UN Convention on the International Sale of Goods (CISG) (2nd ed; translated by Geoffrey Thomas} Oxford: Clarendon Press at 23; Honnold, JO (1999) Uniform Law for International Sales under the 1980 United Nations Convention (3rd ed) Kluwer Law International at 55; Lookofsky, J (2004), Understanding the CISG in the USA (2nd ed) Kluwer Law International at 21-22; Schlechtriem, P (2005), Article 1' in Schlechtriem, P and Schwenzer, I (2005) Commentary on the UN Convention on the International Sale of Goods (CISG) (2nd English Edition) Oxford University Press at 29; Bridge, M (2007) The International Sale of Goods: Law and Practice (2nd ed) Oxford University Press at 520. Other scholarly writings include Primak, S (1991) 'Computer Software: Should the U.N. Convention on Contracts for the International Sale of Goods Apply? A Contextual Approach to the Question' (11) Computer Law Journal 197 at 217; Ferrari, F(1995) 'Specific Topics of the CISG in the Light of Judicial Application and Scholarly Writing' (15) Journal of Law and Commerce 1 at 66; Diedrich, F (1996) 'Maintaining Uniformity in International Uniform Law via Autonomous Interpretation: Software Contracts and the CISG' (8) Pace International Law Review 303 at 336; Diedrich, F (2002) 'The CISG and Computer Software Revisited' (6) Vindobona Journal of International Commercial Law and Arbitration, Supplement 55 at 64-65; Cox, T (2000) 'Chaos versus Uniformity: The Divergent Views of Software in the International Community' (4) Vindobona Journal of International Commercial Law and Arbitration 3 at 6; Lookofsky, J (2003) 'In Dubio pro Conventione? Some Thoughts about Opt-outs, Computer Programs and Preemption under the 1980 Vienna Sales Convention (CISG)' (13) Duke Journal of Comparative and International Law 263 at 279; Mowbray, J (2003) 'The Application of the United Nations Convention on Contracts for the International Sale of Goods to E-Commerce Transactions: The Implications for Asia' (7) Vindobona Journal of International Commercial Law and Arbitration 121 at 127.

3. Herber, supra fn 2, at 23; Lookofsky Understanding supra fn 2 at 21; Schlechtriem in Schlechtriem & Schwenzer Commentary supra fn 2 at 29; Bridge The International Sale of Goods supra fn 2 at 520; Diedrich 'Maintaining Uniformity' supra fn 2 at 336; Diedrich 'Revisited' supra fn 2 at 64-65; Larson, M (1997), Applying Uniform Sales Law to International Software Transactions: The Use of the CISG, its Shortcomings, and a Comparative Look at How the Proposed U.C.C. Article 2B would Remedy Them' (5) Tulane Journal of International & Comparative Law 445 at 456-457; Cox 'Chaos versus Uniformity' supra fn 2 at 8-9; Lookofsky 'In Dubio' supra fn 2 at 279; Green, S and Saidov, D (2007) 'Software as Goods' Journal of Business Law 161 at 166-167. However, contra, Mowbray 'The Application' supra fn 2 at 130.

4. Lookofsky Understanding supra fn 2 at 22; Lookofsky 'In Dubio' supra fn 2 at 277; Schlechtriem in Schlechtriem & Schwenzer Commentary supra fn 2 at 29; Green and Saidov ' Software as Goods' supra fn 3 at 171.

5. Bridge The International Sale of Goods supra fn 2 at 520; Fakes, A (1990) 'The Application of the United Nations Convention on Contracts for the International Sale of Goods to Computer Software and Database Transactions' (3) Software Law Journal 559 at 582; Ferrari 'Specific Topics' supra fn 2 at 66; Larson 'Applying Uniform Sales Law' supra fn 3 at 464; Diedrich 'Revisited' supra fn 2 at 65; Cox 'Chaos versus Uniformity' supra fn 2 at 7; Mowbray 'The Application' supra fn 2 at 128.

6. Appellate Court Köln (Germany), 26 August 1994 (Market study case), translation available at: <http://cisgw3.law.pace.edu/cases/940826g1.html>.

7. Green and Saidov 'Software as Goods' supra fn 3 at 164-165. For a general overview of the debate, see id at 164-170.

8. Id at 176-177 analyzes this type of transaction.

9. Enderlein, F and Maskow, D (1992) International Sales Law Oceana Publications at 29; Honnold Uniform Law supra fn 2 at 52; Ferrari 'Specific Topics' supra fn 2 at 65-66.

10. See also generally Primak 'Computer Software' supra fn 2 at 218-219.

11. Lookofsky Understanding supra fn 2 at 20 n.66; Lookofsky 'In Dubio' supra fn 2 at 277.

12. Primak 'Computer Software' supra fn 3 at 220; Larson 'Applying Uniform Sales Law' supra fn 2 at 220-22 I

13. Fakes 'The Application' supra fn 5 at 584-585 (analyzing differently drafted contracts); Mowbray 'The Application' supra fn 2 at 123; Green and Saidov 'Software as Goods' supra fn 3 at 175-177 are conscious of this necessity.

14. Fakes 'The Application' supra fn 5 at 584-585 analyses three types of contracts labeled as 'licenses' which shall nonetheless be characterized as sales. It is argued, for example, that perpetuality of a 'license' lends itself to the characterization as 'sales'. )n this point, see also, Primak 'Computer Software' supra fn 2 at 221; Larson 'Applying Uniform Sales Law' supra fn 3 at 465-466; Mowbray 'The Application' supra fn 2 at 124; Schlechtriem in Schlechtriem & Schwenzer Commentary supra fn 2 at 29; Green and Saidov 'Software as Goods' supra fn 3 at 177.

15. Supreme Court (Austria), 21 June 2005 (Standard software on disk), available at: <http://cisgw3.law.pace.edu/cases/050621a3.html>. Although the facts are a little ambiguous, the following cases most likely involve sales of physical copies of standard software as well: Supreme Court (Germany), 27 June 2007 (Software case), available at: <http://cisgw3.law.pace.edu/cases/070627g1.html>; District Court München Germany), 8 February 1995 (Standard software case), CLOUT no 131, translation available at: <http://cisgw3.law.pace.edu/cases/950208g4.html>; Appellate Court 's-Hertogenbosch (Netherlands), 19 November 1996 (ICT v. Princen Automatisiering Oss), available at: <http://cisgw3.law.pace.edu/cases/961119n1.html>; Regional Court Arnhem (Netherlands), 28 June 2006 (Silicon Biomedical Instruments B. V. v. Erich Jaeger GmbH), translation available at: <http://cisgw3.law.pace.edu/cases/060628n1.html; Commercial Court Zurich (Switzerland), 17 February 2000 (Software and hardware case), translation available at: <http://cisgw3.law.pace.edu/cases/000217s1.html>.

16. Appellate Court Koblenz (Germany), 17 September 1993 (Computer chip case), CLOUT no 122, translation available at: <http://cisgw3.law.pace.edu/cases/930917g1.html>.

17. Supreme Court (Germany), 4 December 1996 (Printing system and software case), translation available at <http://cisgw3.law.pace.edu/cases/961204g1.html>.

18. 'Denshishotorihiki oyobi Johozaitorihikito ni Kansuru Junsoku [Interpretive Guidelines on Electronic Commerce and Information Property Trading]' (March 2007) released by the Japanese Ministry of Economy, Trade and Industry (METI) distinguishes shrink-wrap licenses in which the sales aspect is a true sale, and those in which the seller furnishes 'a right to conclude a license agreement'. Regarding the latter, the guideline provides that the buyer should have the 'right to return the product and to demand refund' against the seller, if it turns out after the purchase that the buyer cannot agree to the licensing terms.

The 'Guideline' was first released in 2002, and has been revised almost annually. The English language translation of the 2007 version is available at: <http://www.meti.go.jp/english/information/data/IT-policy/interpretative_guidelines_on_ec070628.pdf>.

19. See also Fakes 'The Application' supra fn 5 at 585.

20. See supra fn 3.

21. Diedrich 'Maintaining Uniformity' supra fn 2 at 336; Diedrich 'Revisited' supra fn 2 at 64; Cox 'Chaos versus Uniformity' supra fn 2 at 9; Green and Saidov 'Software as Goods' supra fn 3 at 166-167.

22. Diedrich 'Revisited' supra fn 2 at 64.

23. Schwenzer, I and Fountoulakis, C (2007) International Sales Law Routledge-Cavendish at 27: 'goods may be solid or liquid. Generally, they can be gaseous.'

24. Green and Saidov 'Software as Goods' supra fn 3 at 166-169.

25. Mowbray 'The Application' supra fn 2 at 129-130.

26. CISG-AC Opinion no 4, Contracts for the Sale of Goods to Be Manufactured or Produced and Mixed Contracts (Article 3 CISG). 24 October 2004. Rapporteur: Professor Pilar Perales Viscasillas. Universidad Carlos III de Madrid, available at: <http://cisgw3.law.pace.edu/cisg/CISG-AC-op4.html>, paragraph 4.2; Schlechtriem in Schlechtriem & Schwenzer Commentary supra fn 2 at 29; Green and Saidov 'Software as Goods' supra fn 3 at 171. There are also cases to that effect: Regional Court Arnhem (Netherlands), 28 June 2006 (Silicon Biomedical Instruments B. V. v. Erich Jaeger GmbH), translation available at: <http://cisgw3.law.pace.edu/cases/060628n1.html>; Commercial Court Zürich (Switzerland), 17 February 2000 (Computer software and hardware case), translation available at: <http://cisgw3.law.pace.edu/cases/000217s1.html>.

27. Diedrich 'Revisited' supra fn 2 at 65.

28. Schlechtriem in Schlechtriem & Schwenzer Commentary supra fn 2 at 55 n.14 and 57. Furthermore, in any event it is unlikely that the data provided would amount to 'substantial part of materials'. Larson 'Applying Uniform Sales Law' supra fn 3 at 450 and Mowbray 'The Application' supra fn 2 at 129.

29. Bridge The International Sale of Goods supra fn 2 at 520; Fakes 'The Application' supra fn 5 at 582; Diedrich 'Revisited' supra fn 2 at 65; Larson 'Applying Uniform Sales Law' supra fn 3 at 464; Cox 'Chaos versus Uniformity' supra fn 2 at 7 note 19; Mowbray 'The Application' supra fn 2 at 129.

30. Eastern High Court (Denmark), 7 March 2002 (Internet website development case), available at <http://cisgw3.law.pace.edu/cases/020307d1.html> (treating website development contract as a service contract instead of sale of goods in which the CISG would have applied); Appellate Court Köln (Germany), 26 August 1994 (Market study case), supra fn 6 (however, obiter dicta); U.S. Court of Appeals [2nd Circuit], 27 May 1998 (Evolution Online Sys. v. Koninklijke Nederland), available at: <http://cisgw3.law.pace.edu/cases/980527u1.html> (not applying the CISG to customized software as explained in US Court of Appeals [91h Circuit], 5 May 2003 (Chateau des Charmes Wines Ltd. v. Sabaté USA. Sabaté S.A.), available at: <http://cisgw3.law.pace.edu/cases/030505u1 .html>).

31. CISG-AC Opinion no 4, supra fn 26, paragraph 4.2.

32. For a recent display of the continuing saga, compare, Nimmer, R (2006), An Essay on Article 2's Irrelevance to Licensing Agreements' (40) Loyola of Los Angeles Law Review 235 and Braucher, J (2006) 'Contracting Out of Article 2 Using a "License" Label: A Strategy That Should Not Work For Software Products' (40) Loyola of Los Angeles Law Review 261.

33. Lookofsky 'In Dubio' supra fn 2 at 278.

34. Id at 278, note 76. He even goes as far as to call computer programmers 'IT-nerds'! Id. at 276. However, I hasten to add that I am not questioning his evaluation of UCITA.

35.See eg Nimmer, R (1999) 'Images and Contract Law -- What Law Applies to Transactions in Information' (36) Houston Law Review 1.

36. Eg, see generally Primak 'Computer Software' supra fn 2; Diedrich 'Maintaining Uniformity' supra fn 2; Lookofsky 'In Dubio' supra fn 2.

37. Schlechtriem in Schlechtriem & Schwenzer Commentary supra fn 2 at 29; Cox 'Chaos versus Uniformity' supra fn 2 at 9; Green and Saidov 'Software as Goods' supra fn 3 at 178-180.

38. However, see Walt, S (2005) 'The CISG's Expansion Bias: A Comment on Franco Ferrari' (15) International Review of Law and Economics 342 at 348 expressing doubts.

39. English translation based on the unofficial translation made available by the government at: <http://www.cas.go.jp/jp/seisaku/hourei/data/CC1.pdf> .

40. Bonell, M (2005) An International Restatement of Contract Law (3rd ed) Transnational Publishers at 301 et seq.

41. Primak 'Computer Software' supra fn 2 at 223-224; Larson 'Applying Uniform Sales Law' supra fn 3 at 468; Mowbray 'The Application' supra fn 2 at 124; Green and Saidov 'Software as Goods' supra fn 3 at 177-178.

* * * *

The original ideographic script titles of the Japanese language materials cited in the footnotes [fn1 and fn 18] are not reproduced.


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