Software with a non-commercial licence in business: the consequences

Using software with a non-commercial licence inside a business is an infringement of copyright, not merely a breach of contract. A non-commercial (NC) licence permits use that is not primarily aimed at commercial advantage or payment; the moment the software supports a profit-making activity, the permission falls away and every copy that runs is an unauthorised reproduction. The rights holder can then obtain an injunction, claim damages and the surrender of profits, and recover its full legal costs, and in serious cases a director can be held personally liable alongside the company.

What a non-commercial licence actually permits

The label covers a family of licences rather than a single standard. Creative Commons uses the NC element to mean use that is not primarily intended for or directed towards commercial advantage or monetary compensation. The PolyForm Noncommercial licence takes a similar line, allowing personal study, research and use by charitable organisations while excluding use by a commercial entity for its own business purposes. Individual vendors add their own wording, often in the form of a Personal Edition, a Community Edition or a Home Use licence.

The common misconception is that commercial use means reselling the software. It does not. Using a free PDF editor to draft client contracts, a free image on a company website, or a free design tool to prepare a proposal all support a commercial activity, and all of them therefore fall outside an NC licence. The number of users is irrelevant, and so is the size of the organisation. A sole trader using one copy is in the same position as a company running a hundred.

It is also worth distinguishing an NC licence from genuine open source software. The Open Source Definition maintained by the Open Source Initiative does not allow a licence to discriminate against a field of endeavour, which means an open source licence must permit commercial use. Software carrying an NC restriction is therefore not open source, however freely its source code can be read. It is conditionally licensed proprietary software, and the condition is exactly the one a business breaches.

Why this is copyright infringement, not just breach of contract

Computer programs are protected as works under the Dutch Copyright Act (Auteurswet), which contains a separate regime for software implementing the EU Software Directive. The rights holder has the exclusive right to authorise reproduction and communication of the work. Because running a program necessarily involves loading and copying it, that use is only lawful if it is covered by a licence or by one of the statutory exceptions for the lawful acquirer of a copy.

This is the point businesses tend to miss. A licence with an NC restriction defines the scope of the permission granted. Use outside that scope is not a defective performance of a contract that can be settled with a payment; it is use without permission at all. The company is therefore not a lawful acquirer for that particular use, and each installation running in the business is an act of copyright infringement. That distinction matters in practice, because it opens the full set of intellectual property remedies rather than the ordinary contractual ones.

How the scope of a licence is interpreted

Disputes usually turn on whether a particular activity was commercial. Dutch courts interpret contracts, including licences, by the Haviltex standard: the meaning depends on what the parties could reasonably attribute to the wording and what they could reasonably expect from one another in the circumstances. Between professional parties, and where the licence is a standard text the user simply accepted, the ordinary linguistic meaning carries considerable weight, because there were no negotiations that could have given the words a different colour.

That works against the business user. A licence that says the software may not be used for commercial purposes will be read as meaning what it says, and the burden of showing that a use fell inside the free scope rests on the party relying on it. Where a vendor offers both a free non-commercial edition and a paid commercial one, the existence of the paid edition is itself strong evidence of where the line was meant to run.

What a rights holder can claim

The first and most disruptive remedy is an order to stop using the software, usually reinforced by a penalty payment (dwangsom) for each day or each breach that follows. Where the software is embedded in a production process or a client-facing service, complying with such an order at short notice can be more damaging than the financial claim. The Copyright Act also allows a rights holder to seek an order against an intermediary whose services are being used to infringe, which is how hosting providers and platforms are brought into these disputes.

Financially, the rights holder can claim damages for the loss it suffered, and separately the surrender of the profits the infringer made from the infringement. Damages in software cases are commonly calculated on the licence fees that should have been paid for the period and the number of installations concerned, and courts may add an uplift to reflect that the infringer had the use of the software without paying and without running the risk of being asked. Reasonable costs incurred to establish the infringement can be recovered as well.

The costs rule is the one that surprises businesses most. In intellectual property proceedings the losing party can be ordered to pay the reasonable and proportionate legal costs actually incurred by the winning party under Article 1019h of the Dutch Code of Civil Procedure, rather than the modest fixed scale that applies in ordinary civil cases. In a defended software case that difference is substantial and it frequently exceeds the licence fees in dispute.

Enforcement: the ex parte injunction and seizure of evidence

Rights holders in intellectual property matters have procedural tools that are unavailable in ordinary commercial disputes. Article 1019e of the Dutch Code of Civil Procedure allows the court, in cases of urgency, to impose an immediate prohibition on the alleged infringer without hearing that party first. The order is served by a bailiff, takes effect at once and is normally backed by a penalty payment. The party against whom it is granted can apply to have it reviewed, but until it does, it has to comply.

Alongside that, a rights holder can obtain leave to seize evidence (bewijsbeslag). A bailiff, usually accompanied by an IT expert, attends the premises and takes copies of hard drives, server logs and administrative records. The copies are held by an independent custodian, and access to them requires a separate court decision, so a seizure does not by itself hand the rights holder the contents. What it does is fix the evidence of how long the software was used, on how many devices and by how many users, which is the basis on which the eventual claim is calculated.

Because both measures can be obtained quickly and without warning, the practical advice when a letter of claim arrives is not to start uninstalling. Removing software after receiving a complaint tends to be read as destruction of evidence, and it makes the negotiating position markedly worse. Preserving the position and taking advice first is the better course.

When directors are personally liable

A private limited company is a separate legal entity, and its directors are not in principle liable for its debts or its torts. Dutch case law makes an exception where the director can be made a serious personal reproach (ernstig persoonlijk verwijt). In infringement cases that threshold is generally reached where the director knew the company was infringing and nevertheless promoted the infringement or failed to prevent it, or where the director personally carried out the infringing acts.

The District Court of The Hague applied that test to indirect managers of a company that sold counterfeit accessories: they had personally arranged the purchase, import and resale, had received repeated warnings from the rights holder over a period of years, and had put no safeguards in place, and were held jointly liable with the company under the general rule on tort (ECLI:NL:RBDHA:2023:18697). The reasoning transfers to software: a director who is told the licences do not cover business use and carries on regardless is in the same position. Our article on directors liability sets out the wider framework.

There is a second route in insolvency. If the company fails and the trustee can show that improper management was an important cause of the bankruptcy, the directors can be held liable for the deficit under Article 2:248 of the Dutch Civil Code. A large infringement claim that the company cannot meet, incurred knowingly, can form part of that picture.

Does not knowing help?

Almost never, for a business. Infringement of copyright does not require intent or fault: a company that uses a work without the necessary permission infringes, whatever it believed. Fault matters for the damages claim rather than for the infringement itself, and a professional party is expected to know the terms on which it acquires the tools it uses. Not having read the licence is an internal failure of procurement, not an answer to the rights holder.

A mistake about the legal position (rechtsdwaling) is in principle at the risk of the party that made it. The picture changes only where the rights holder itself created the misunderstanding, for instance by presenting the software as free for any use, or by tolerating a known business use for a long period without objection. The court does have a power under Article 6:109 of the Dutch Civil Code to reduce an award where full compensation would be plainly unacceptable, but it is used restrictively and an administrative oversight will rarely be enough.

Keeping your software estate compliant

The exposure is created by ordinary, well-meant behaviour: an employee needs a tool, finds a free version, installs it and moves on. Controlling that starts with routing every installation through a single point, so that someone with a mandate reads the licence before the software reaches a workstation. A periodic reconciliation of what is actually installed against what has actually been bought is the second element, and it is the one that turns an unknown risk into a manageable one.

Beyond that, the licence terms belong in the same file as the purchase records, so that the scope of the permission can be shown years later when it is questioned. Staff need to be told plainly that free for personal use means paid for business use, because that single sentence prevents most incidents. Where a non-commercial tool has become embedded in a process, the sensible step is to approach the vendor and buy the commercial licence before anyone else raises the question, since a voluntary regularisation is nearly always cheaper than a claim.

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