Working document on the directive concerning contracts for the supply of digital content

Stakeholders and academia widely approve of the fact that the Digital Content Proposal covers supply of digital content regardless whether the contractual relation has been concluded online or offline and irrespective of the delivery mode of the digital content (digital content on a carrier or supplied by download, streaming or any other provision of access).

However, considerable criticism has been levelled at the Commission’s decision to exclude from the broad scope embedded software. This is particularly problematic in view of goods with embedded digital content which fall under the category of smart products like connected cars, mobile phones or Smart TVs etc.

Recital 11 of the Digital Content Proposal and Recital 13 of the Goods Proposal both state that the Goods Directive shall apply to digital content integrated in goods, such as household appliances or toys, where the digital content is embedded in such a way that its functions are subordinate to the main functionalities of the goods and it operates as an integral part of the good. In practice, this distinction would lead, for instance, to the consequence that embedded software of a hybrid product such as a connected car would fall under the regime and remedies of the Goods Proposal while the separately obtained connected car software would fall under the Digital Content Proposal regime.

It were considered (de) different ways how to clarify the scope of the proposal, including “location of the defect approach” and “”tangible versus intangible”. “Location of the defect” approach: the applicable remedies’ regime would depend on what is broken. If the defect is in the software, then the digital content regime applies; if the defect relates to hardware (including CDs), then the goods regime applies.

“Tangible versus intangible” approach: a single set of remedies applies, depending on whether one can touch the object of the contract, e.g. smartphones, CDs, etc. (goods remedies apply), or not, e.g. downloading apps (digital content remedies apply). This approach has the benefit of enhanced simplicity and would be easy to apply by consumers: only one set of remedies applies to one contract. No distinction is made between types of embedded digital content, because all embedded digital content would fall under the Goods Proposal, whether subordinate to the main functionalities of the good or not. CDs, DVDs would then be treated as goods, unlike the Commission’s proposal.

Experts have identified additional issues which have not been, but potentially could be, addressed by this Directive. These could include, for instance, consumers’ rights to multiple downloads, to make copies, to re-sell digital content and to receive essential updates and maintenance, as well as the issues of optional guarantees, immediate supply, joint liability and specific unfair contract terms in contracts for the supply of digital content.