My Lords, in moving Amendment 43 I shall speak also to Amendment 44. Very significantly, the effect of Clause 47 is that liability under most of the provisions of Chapter 3 cannot be excluded or restricted. Broadly, the clause in its present form prohibits any exclusion or restriction of liability whatever, however reasonable it may be to exclude or restrict such liability. The intention of these amendments is to allow such exclusion or restriction of liability if it is reasonable. This is particularly important because, as we discussed earlier, software often contains defects and is known to do so. Increasingly, software is installed and runs alongside or on other applications or platforms. These are often refined and altered as new versions are released and indeed may have incidental defects as well. The performance of one software program may therefore often depend on other applications, interfaces and programs, and it is the resulting interplay that can expose unexpected defects, but these may not be evident or even exist when running the same program in another manner or configuration.
The appearance of a defect might lead to the conclusion that a software program is defective as an absolute and verifiable characteristic of that software, but many such defects may exist only in certain circumstances or in specific configurations. This is very different from a single consumer good which, operating alone, either functions in accordance with the marketed description or is defective. It may well be reasonable to allow the supplier to exclude liability for defects. It is important to stress that the amendment would permit the supplier to exclude or restrict liability only if a court thought it reasonable to do so.
The fact of the matter is that virtually all software contains defects. There are limited exceptions but they are highly specialised and tend to be found in application
areas where the consequences of failure are so grave as to demand ultra-resilient and dependable software—for example, aircraft and automotive control systems, software for nuclear installations, software in surgical scenarios, or software to guide or launch weapons. To the extent that defect-free software exists, it will tend to be infinitely expensive.
Cheap consumer software is wholly different. It cannot be polished for ever and, if so, would be very expensive to buy a licence for. Apps are being developed all the time for the consumer at the cost of, for example, around 69p or free. Without the ability to limit such liability, this law could chill software development by micro-business and SMEs. Costs will be pushed up for such small developers as they will need to seek to mitigate or insure against such legal risks. It could end up by stifling innovation. It could make the developer think, “Why supply software under such a law to consumers at all? It’s too risky”.
In any event, this law is unnecessary as in practical terms the software industry will always find a workaround or fix to a problem. Such solutions happen each day and often very quickly. The rule will be divorced from reality. The remedy is not proportionate and, in the view of many in the software industry, is somewhat draconian. It is out of step with the way in which the industry works and looks after its customers, who are its lifeblood. A solution could be that such a rule under Clause 47 applies only if a workaround or fix is not implemented. Thus, unlimited exposure kicks in only if a fix fails.
The clause is too much of a blunt weapon to cure, at best, only a technical legal problem. Have the consequences been properly considered on developers? The effect of such potential unlimited or excludable liability can be foreseen as the near certainty of choking back innovation and the further distribution and take-up by consumers of advanced technologies in application areas where it is not reasonable for them to expect a perfect product—especially where the product is at zero or very low cost. In any event, it is reasonable to take into account any fix offered, together with a number of factors, in order to determine reasonableness.
In conclusion, as the Federation Against Software Theft suggests, a more equitable approach would be to permit the exclusion or restriction of liability to the extent that it is reasonable to do so, taking into account factors analogous to those under the Unfair Terms in Consumer Contracts Regulations 1999—SI 1999, No. 2083. That would enable the courts to develop a fair and equitable system on a case-by-case basis. I beg to move.