British firm wins substantial damages over problematic software

A London hotel has won £111,000 in damages from supplier Red Sky IT Hounslow, in a case that could have strong implications for UK software licensing terms as well as sales pitches.

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A London hotel has won £111,000 in damages from supplier Red Sky IT Hounslow, in a case that could have strong implications for UK software licensing terms as well as sales pitches.

The Kingsway Hall Hotel alleged that the Entirety online booking software consistently underperformed and that it was forced to employ extra staff to cover the problems. It had hoped that the software would speed check-in and check-out, and improve reservation processing. In the end, the hotel bought a replacement product.

Lawyers called it an “important” judgement that highlighted to customers they could question licensing terms that were wighted against them. The damages were awarded for lost profits, the cost of the software, and the additional staffing costs.

During the case, the hotel successfully overcame a clause in Red Sky’s software licence that said if the software did not perform as advertised, customers would have to make use of maintenance and support functions – and effectively could not do anything else. Red Sky suggested in hearings at the Technology and Construction Court that the term protected it from lawsuits.

Judge Toulmin ruled that this liability clause was not “reasonable” and that Red Sky should have alerted the hotel to problems with the software during demonstrations. Red Sky did not immediately return calls for comment.

In a sales pitch that secured the licensing sale to the hotel, Red Sky had also shown examples of the software in use that were not closely related to the hotel’s needs, the judge said, meaning Red Sky could not exclude itself from liability.

Additionally, Toulmin wrote in the judgement that Red Sky should have known its software was “not fit for the purpose” of what the hotel needed, adding that the Entirety software “did not meet the standard that a reasonable person would regard as satisfactory”.

In a further problem, after signing the licence, the hotel was not supplied with full operating documents for using the software.

Tom Greenbank, solicitor at law firm Pinsent Masons, said the case meant it could become more difficult for software suppliers to place the blame on customers for choosing a system that is problematic or not right for the purpose intended.

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