In the digital age, software is the backbone of almost every enterprise. From graphic design tools to database management systems, businesses rely on a suite of applications to function efficiently. With the proliferation of “free” software available online, it is tempting for organisations to download and deploy tools without a thorough review of the licensing terms. However, “free to download” does not always mean “free to use in a business context”.
Many software titles are released under strictly “Non-Commercial” (NC) licences. While these tools are free for personal, educational, or hobbyist use, deploying them within a profit-generating organisation constitutes a breach of contract and an infringement of intellectual property rights. Under Dutch and EU law, the consequences of such oversight can be severe, ranging from immediate injunctions to substantial claims for damages.
This article explores the legal intricacies of using non-commercial software in a business environment, the liabilities for companies and directors, and the enforcement measures available to rights holders.
Understanding Non-Commercial Licences
Before examining the legal fallout, it is essential to understand what constitutes a “Non-Commercial” licence. These licences are designed to allow the free sharing of creativity and knowledge while reserving the right to monetise the work for the creator.
Defining ‘Non-Commercial’
The definition of “non-commercial” can vary between specific licences, but generally, it refers to use that is not primarily intended for or directed towards commercial advantage or monetary compensation.
- Creative Commons (CC BY-NC): Perhaps the most famous example. The Creative Commons organisation explicitly defines non-commercial as “not primarily intended for or directed towards commercial advantage or monetary compensation”.
- PolyForm Noncommercial: A newer standard which permits use for personal study, research, or charitable organisations, but strictly prohibits use by a commercial entity for business purposes.
It is a common misconception that “commercial use” only applies if you are reselling the software itself. In reality, using software to support any business activity—such as using a free PDF editor to draft client contracts or using a non-commercial image on a company blog—falls under commercial use.
The Distinction from Open Source
It is crucial to distinguish between “Open Source” software and “Source Available” software with NC restrictions. According to the Open Source Initiative (OSI), a true open source licence cannot discriminate against fields of endeavour; this means it must allow commercial use. Software with an NC clause is, by definition, not “Open Source” in the strict sense, even if the source code is viewable. It is proprietary software that is licensed conditionally.
The Legal Framework: Copyright Infringement
Under Dutch law, software is protected as a “work” under the Copyright Act (Auteurswet). The creator (or rights holder) has the exclusive right to decide how, where, and by whom their software is used.
Breach of Contract vs. Copyright Infringement
When a business uses software in violation of its licence terms (e.g., using a Personal Edition for professional work), they are not merely breaking a contract; they are infringing upon the author’s copyright.
- Article 1 of the Copyright Act: Grants the maker the exclusive right to control the reproduction and publication of the work.
- Article 26d of the Copyright Act: Allows the rights holder to enforce these rights against infringers.
When you download software, you typically agree to an End User Licence Agreement (EULA). If the EULA limits use to “non-commercial purposes”, any use outside that scope is unlicensed. Consequently, the user is no longer a “lawful acquirer” for that specific use, and the act of running the software becomes an act of copyright infringement.
Interpretation of Licence Terms (Haviltex)
Disputes often arise regarding whether a specific activity is “commercial”. In the Netherlands, contract interpretation is guided by the Haviltex standard. The court looks not only at the literal text of the licence but also at what the parties could reasonably expect from one another given the circumstances. However, for standard software licences between professional parties, the linguistic meaning of the text carries significant weight. If a licence states “no commercial use”, a court will generally interpret this strictly against a business user.
Civil Liability for the Organisation
If a company is found to be using non-commercial software, the rights holder has a potent arsenal of legal remedies available under the Dutch Civil Code (Burgerlijk Wetboek or BW) and the Copyright Act.
1. Cessation of Use (Injunctions)
The most immediate threat to a business is a court order to stop using the software. Under Article 26d of the Copyright Act, a rights holder can demand the court to prohibit the infringement. This can be disastrous if the software is integral to the company’s daily operations. The court may also impose a penalty payment (dwangsom) for every day the company continues to use the software after the verdict.
2. Damages and Compensation
The company is liable for the damage suffered by the rights holder (Article 6:162 BW, Tort). In intellectual property cases, damages are often calculated based on:
- Missed Licence Fees: The amount the company would have paid had they purchased the correct commercial licence.
- Price Uplift: Courts often award an additional percentage (an uplift) on top of the standard fee to account for the fact that the infringer enjoyed the use without paying and to discourage infringement.
- Investigation Costs: Unlike standard civil cases, IP law allows for the recovery of reasonable costs incurred to establish the infringement (Article 6:96 BW).
3. Surrender of Profits (Winstafdracht)
In addition to damages, Article 27a of the Copyright Act allows the rights holder to claim the surrender of profits derived from the use of the infringing software. While proving exactly how much profit is attributable to one specific piece of software can be complex, it remains a valid legal claim that businesses must defend against.
Personal Liability for Directors
A frequent question is whether the directors of a company can be held personally responsible for software piracy committed by the business. In principle, a limited liability company (BV) is a separate legal entity, and directors are not personally liable for the company’s debts or torts. However, there are exceptions.
The Criterion of Serious Personal Reproach
Dutch case law has established that a director can be held personally liable if they can be blamed for a “serious personal reproach” (ernstig persoonlijk verwijt). This threshold is met if:
- The director knew or should have known that the company was committing copyright infringement.
- The director actively facilitated the infringement or failed to intervene despite knowing the risks.
Recent jurisprudence (e.g., ECLI:NL:RBDHA:2023:18697) confirms that if a director knowingly structures the business to rely on illegal software to cut costs, they may face personal liability. Furthermore, in the event of bankruptcy, a curator may hold a director liable if the mismanagement (including IP infringement leading to massive claims) was a dominant cause of the insolvency (Article 2:248 BW).
The “Good Faith” Defence: Does Ignorance Help?
Organisations often argue that the infringement was accidental or that they misunderstood the licence terms. Can a company rely on “error of law” (rechtsdwaling) or good faith?
Professional Duty of Care
In short: No. The Dutch courts are stringent regarding professional parties. A company is expected to know the laws and regulations that apply to its operations, including intellectual property rights.
- Rechtsdwaling: Relying on a misunderstanding of the law is generally at the infringer’s own risk. Unless the rights holder actively misled the user, a professional entity cannot claim they “didn’t know” the licence excluded commercial use.
- Duty to Investigate: When onboarding software, a company has an obligation to verify the licensing terms. Failing to read the EULA is not a valid legal defence (ECLI:NL:RBOVE:2023:3506).
While the court has the power to mitigate damages if full compensation would be unacceptable (Article 6:109 BW), this is applied very restrictively. Mere oversight or administrative error is rarely sufficient to reduce the damages owed.
Enforcement Measures: The Ex Parte Injunction
One of the most aggressive tools available to rights holders is the ex parte injunction (ex parte verbod). This is a court order granted without hearing the defendant (the infringing company) first.
How It Works
If a rights holder can demonstrate a high degree of urgency and clear infringement (Article 1019e Rv), they can petition the summary judge for an immediate ban on the use of the software.
- Surprise Element: Because the defendant is not notified, they cannot hide evidence or delete the software before the bailiff arrives.
- Immediate Effect: The judge grants the order, and a bailiff serves it on the company premises. The company must cease use immediately or forfeit substantial penalty payments.
- Cost Recovery: If the injunction is upheld, the infringer is typically ordered to pay the full legal costs of the rights holder (Article 1019h Rv), which in IP matters can amount to tens of thousands of euros.
Seizure of Evidence
To prove the extent of the infringement, rights holders may also request leave to seize evidence (bewijsbeslag). A bailiff, accompanied by IT experts, may enter the business premises to copy hard drives, server logs, and administration records. This serves to prove how long the software was used and on how many devices, forming the basis for the damage calculation.
Mitigating Risks: Best Practices for Compliance
To avoid the severe legal and financial repercussions outlined above, organisations must implement robust Software Asset Management (SAM) protocols.
- Centralised Procurement: Do not allow individual employees to download and install software. All software requests should go through IT or procurement.
- Licence Audits: Regularly audit all installed software against the company’s purchase records.
- Clear Policies: Include clauses in employee handbooks strictly forbidding the installation of unauthorised software.
- Understand “Free”: Train staff to understand that “free for personal use” means “paid for business use”.
Frequently Asked Questions (FAQ)
1. What defines “commercial use” in software licensing?
Commercial use typically encompasses any activity primarily intended for commercial advantage or monetary compensation. This includes internal business operations, production of goods or services for sale, and promotional activities. Even if you do not sell the software itself, using it to run a business is commercial use.
2. Can I use non-commercial software for internal training or evaluation?
This depends strictly on the specific EULA. Some vendors allow a “trial period” for evaluation. However, using NC software for ongoing internal training of staff usually contributes to the business’s efficiency and profit, rendering it a commercial use.
3. What if I genuinely didn’t know the software was restricted?
Ignorance is rarely a valid defence in Dutch copyright law. Professional parties are expected to perform due diligence. While it might prevent a finding of “intent” (important for criminal liability), you will still remain liable for civil damages and copyright infringement.
4. Can directors be held personally liable for the company’s infringement?
Yes, but the bar is high. A director must be personally to blame (serious personal reproach). This usually requires evidence that the director knew of the infringement and failed to act, or actively directed the company to use illegal software to save money.
5. What are the typical financial penalties for infringement?
Courts typically award the rights holder the licence fees they missed out on, often plus an uplift (punitive element) to discourage infringement. Additionally, you may be liable for the rights holder’s full legal fees and investigation costs.
6. Can the software author shut us down immediately?
Yes. Through an ex parte injunction, a rights holder can obtain a court order forbidding you from using the software effective immediately, without a prior hearing. Violation of this order results in substantial penalty payments.
7. Is all “open source” software non-commercial?
No. In fact, true open source licences (like MIT, Apache, or GNU GPL) allow for commercial use. The restriction to “non-commercial use only” usually indicates the software is proprietary or “source available,” not open source according to the Open Source Initiative definition.
Conclusion
The use of non-commercial software within a business environment is a high-risk strategy that can lead to significant legal exposure. Under Dutch law, such usage constitutes copyright infringement, allowing rights holders to claim full damages, profit surrender, and immediate cessation of business processes relying on that software. The defence of ignorance is virtually ineffective for commercial entities.
Organisations must treat software licensing with the same rigour as any other procurement contract. A proactive audit of your software assets can prevent costly litigation and reputational damage.
If your organisation is facing a software audit, a claim regarding licence infringement, or if you wish to ensure your software usage is legally compliant, expert legal advice is indispensable.
Do you have questions about software licensing or are you facing an enforcement action? Contact the experts at Law & More via info@lawandmore.nl for specialized assistance.
