On 20 May 2019, a new directive on certain aspects concerning the sale of goods was adopted, which, following its incorporation into national legal orders, may, in our opinion, have significant importance for the practice of internet traders. This legislation was adopted together with and in connection with the directive on certain aspects concerning contracts for the supply of digital content and digital services, which, as the title suggests, will more closely regulate the provision of digital content. However, in this legal circular we shall address in more detail only one of the innovations which the directive on certain aspects concerning the sale of goods should bring to the Czech legal order within approximately a two-year timeframe.

We consider the new regulation in the area of so-called goods with digital elements to be fundamental, according to which the trader should bear liability towards the buyer for these digital elements. Goods with digital elements means “movable items which contain digital content or a digital service or are interconnected with digital content or a digital service in such a way that the absence of the digital content or digital service would prevent the goods in question from performing their functions.” It is probably not necessary to emphasise that this definition will affect a relatively broad area of electronic goods. Further clarification of the concept in question is also contained in recital 14 of the directive, which states that: “the digital content which is incorporated in or interconnected with the goods may be any data which are produced and supplied in digital form, for example operating systems, applications or any other software. The digital content may be pre-installed at the time of conclusion of the sales contract or installed subsequently if so provided for in that contract. Digital services interconnected with the goods may include services which allow the creation, processing, storage of or access to data in digital form, such as software as a service offered in a cloud computing environment, continuous provision of traffic data in a navigation system or continuous provision of individually tailored training plans for smart watches.” According to the directive, these digital elements are considered to be part of the goods, and shall thus also form the subject matter of the sales contract, regardless of the fact that their use subsequently requires the conclusion of a further contract (a licence agreement with the provider of software or other information).

According to the provisions of Article 10(1) of the directive, the seller “shall be liable to the consumer for any lack of conformity which exists at the time of delivery of the goods and which becomes apparent within two years from the time of delivery.” This provision also applies to goods with digital elements, “irrespective of whether that digital content or that digital service is provided by… a third party.” What exactly is meant by lack of conformity with the sales contract will be addressed in one of our future legal circulars; however, it is already clear that following implementation of the directive into the Czech legal order, a trader may bear liability for a specified period also for “digital elements” (the operating system of hardware). This naturally opens up a whole range of possible consequences for practice.

Having regard also to this fact, APEK, within the legislative preparation of the directive, sought to raise arguments against this regulation in the area of goods with digital elements, as we consider it to be, at the very least, not fully thought through. Specifically, we submitted that “…it is necessary to take into account the entirely different regime of intangible assets which most commonly constitute this digital content, both from a legal and a factual perspective. Only in very limited cases is the seller in practice entitled to deal with these intangible assets in any legal manner or to ensure their conformity from a technical perspective (he does not have access to the source code of software, he does not have the necessary technical capabilities and equipment). The seller does not enter into a legal relationship with the buyer at all with regard to these intangible assets (for example, he is not entitled to provide licences to the operating system, to provide licences to the firmware of hardware devices, etc.). In our opinion, the draft directive unfortunately proceeds from a misunderstanding of the legal and factual limitations in the area of intellectual property rights.” However, this argumentation of our association was unfortunately not fully heard.

The directive on certain aspects concerning the sale of goods, however, also brings a number of other interesting innovations, which we shall certainly address in more detail in the future.

Josef Aujezdský, advocate

This text was originally prepared by the law firm Mašek, Kočí, Aujezdský in cooperation with the Association for Electronic Commerce (APEK) as legal circular No. 5/2019 intended for members of this association.

This text was translated from Czech to English using an AI translator.