Clauses in General Terms and Conditions (GTC) Must Be Clear and Understandable
General Terms and Conditions (GTC) play an important role in structuring software license agreements. They must be clear and transparent. If they are not, the affected clauses may be invalid, as demonstrated by a ruling of the Higher Regional Court of Cologne (OLG Köln) on July 28, 2023 (Case No.: 6 U 19/23).
Licenses can be granted for the use of software, and the scope and nature of the usage are contractually agreed upon. The General Terms and Conditions play a crucial role here, as they set out the rights and obligations of the contracting parties. GTC are subject to content control, meaning they must be clearly and transparently formulated in practice. Non-transparent clauses may be ineffective, explains the law firm MTR Legal Rechtsanwälte, which advises on IT law and the drafting of software license agreements.
Violation of the Transparency Requirement
The transparency requirement is not merely theoretical, as highlighted by the ruling of the Higher Regional Court of Cologne. In the case at hand, the defendant marketed software for hospitals, which, with the help of an integrated database, collects data generated in the hospital and makes it available to employees. The defendant had acquired usage rights to the specialized database software, allowing them to distribute it as part of a hospital information system. For some time, the defendant used a clause in the GTC stating: “It is prohibited to use third-party applications that directly access the database used by the application package or have indirect access to the information stored in the database.”
A competitor, who also marketed management information systems for hospitals, saw this clause as an unreasonable disadvantage under § 307 of the German Civil Code (BGB). The competitor argued that they would be effectively driven out of the market if hospitals using this database could no longer use software from other providers without breaching their contract with the defendant.
Clause Unclear and Invalid
The Higher Regional Court of Cologne ruled in favor of the plaintiff. The contested clause was deemed invalid under § 307 BGB and its use was deemed unfair. It violated § 3a of the Act Against Unfair Competition (UWG) as it was likely to significantly impair the interests of consumers and other market participants or competitors.
Furthermore, the court found the clause to be unclear and therefore invalid under § 307, Paragraph 1, Sentence 2 BGB. The transparency requirement applies to all incorporated GTC. It obliges the user of the clause to present the rights and obligations of their contractual partner as clearly, simply, and precisely as possible. The individual provision must be clearly formulated on its own and also understandable in the context of the other clauses. Under the comprehensibility requirement, a clause must allow the contractual partner to recognize any resulting economic disadvantages to the extent required by the circumstances. The mere lack of clarity of a clause can lead to its invalidity, the court further emphasized. In this case, the transparency requirement was violated because the hospitals could not determine from the clause whether and to what extent they could still access their own data to use it in another provider’s program.
Clause Leaves Room for Interpretation
Additionally, the core statement of the clause was unclear and left room for different interpretations. Even with an unrestricted full-use license, hospitals could not determine whether they were allowed to access the database with another provider’s software, the Higher Regional Court of Cologne explained. For this reason, the clause was deemed invalid for violating the transparency requirement.
This ruling highlights the importance of drafting GTC carefully, transparently, and understandably, as otherwise, the clause may be deemed ineffective. This is something that should always be considered when licensing software.
MTR Legal Rechtsanwälte has extensive experience in drafting software license agreements and advises on other IT law topics.
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