Introduction
In today’s digital age, data has emerged as a very important asset, often times referred to as the new oil. Data has been driving innovation and shaping global commerce. Yet, uncertainty persists pertaining to the legal status of such data in the international trade law regime. For instance, questions arise as to whether the business firms that are fundamentally transacting for data – are they transacting for goods? Owing to such uncertainty, the transactions are further unreliable as data has not been recognised to be a commodity as of yet. In the recent times, however, the concept of what constitutes ‘goods’ has evolved beyond traditional physical commodities in this highly globalised market. With data becoming an invaluable asset in global commerce, the question arises: Can data be classified as goods under international trade frameworks like the United Nations Convention on Contracts for the International Sale of Goods (“CISG” or “Convention”)? Even though the CISG provides an extensive legal framework for governing the international sales, it does not explicitly define ‘goods,’ leaving an air of confusion and dubiousness, especially when it comes to its interpretation. This blog delves into the intricate legal landscape, exploring whether data meets the criteria for ‘goods’ under the CISG, and what this means for modern commercial transactions.
The current framework of law defining goods under CISG
Within CISG, Art. 1(1) sets forth the applicability requirements. According to the said provision, the CISG only applies to the contracts concluding a sales transaction between the parties who are located within the Contracting States and are transacting for goods. Among these criteria, classifying something as ‘goods’ remains a challenging task in the international regime. This is largely due to the absence of fixed standards that define what qualifies as goods under the scope of the CISG. Moreover, the Convention does not by itself define the term ‘goods.’ Therefore, while interpreting the meaning of certain terms in CISG, one cannot infer it as goods from a single system of laws or legal terminology. To solve this issue, it becomes imperative that we follow an autonomous interpretation while deciding whether certain commodities qualify to be goods. Such interpretation must be independent of the domestic law, as CISG promotes uniformity and consistency in the international trade regime as its goals. The interpretation of ‘goods’ lies in determining whether the rules of CISG are capable of being applied.
In a traditional and strict commercial context, goods have typically been required to meet two criteria – moveability & tangibility; first, goods must be moveable, and second, they must be tangible. Even within the Indian jurisdiction, when determining whether something can be classified as goods, its inherent characteristics are examined first and foremost. Merchantability and market value are considered secondary factors in assessing whether items so sold in the market are goods or not. This legal issue was highlighted in the landmark case of Tata Consultancy Services v. State of Andhra Pradesh, where the Supreme Court ruled that both canned and un-canned software were subject to sales tax, despite lacking the conventional characteristics of goods. This illustrates that the requirements of moveability and tangibility should not be interpreted too rigidly. Furthermore, these criteria can be satisfied in instances where the application of the CISG is intended to enhance international commercial transactions.
Data, in itself, is an independent entity that formulates a database. Such a database is a compilation of innumerable information which has been arranged in a manner such that it offers results and output electronically. Traditionally, the common man has referred to anything that can be stored electronically as software, encompassing both the information and materials necessary for the operation of a system. When a broader definition of moveability is considered, it refers to something that can be displaced or is not permanently attached to the land, indicating a lack of permanence. As far as the characteristics of moveability are concerned in the matter of software being goods, the same are considered to be present in a three-pillar dimension; firstly, that it is possible to move a software from one hardware to another; secondly, the possibility of deleting it from its source; and thirdly, the absence of any damage to the host object when the software is moving from one piece of hardware to another. The French version of the CISG refers to a term, ‘marchandises’, which specifically leaves out the element of mobility as a characteristic, further giving a holistic understanding when we interpret goods.
Moreover, in the landmark cases like that of Genpharm v. Pliva-Lachema, the US District Court considered ‘warfarin’, a chemical compound, to be a ‘good’, therefore drawing the CISG. The court said that this component satisfied the requirement of movability as it could be moved from one place to another, without damaging the host location. Therefore, when there is a business of supplying data, as the companies and firms nowadays have been engaging in, the applicability of CISG can be made as rather plausible.
As far as the requirement of ‘tangibility’ is considered, it is defined as something which is capable of being possessed or realized; something which is capable of being understood by the mind. It is imperative to realise that a fluid object, having no fixed share is also considered as goods. Data is like a blueprint – while the design on paper is intangible, the blueprint itself is a valuable product that can be bought, sold, and used to create something real. Just as a blueprint contains the necessary instructions for constructing a building, data holds value as an essential tool for operations. Hence, much like blueprints are goods exchanged in business, data should also qualify as ‘goods’ under the CISG. Therefore, a compilation of databases is considered to be goods, because in case of an electronic download, it shall comprise a corporeal form, where it exists as a series of electrical pulses. To elaborate, we can turn to the Software case, where the court classified software or other intangible data as a tangible commodity.
Essentially, the aspect of tangibility of goods in itself requires the satisfaction of three integral elements of being ‘seen’, ‘weighed’, and ‘measured’. The aspect of ‘seen’ is something which is not just limited to the naked eye, and it includes even the dimensions and things that are beyond the range of visibility to humanity; ‘weighed’ expands to aspects which are not limited to the range of a butcher’s scale or perhaps even a bathroom scale, something that has weight without the physical nodules; and ‘measured’ is not limited to a particular gauge or a paradigm, for it expands even to include the minutest of measuring units, including microwaves. Further, the definition of goods under CISG considers the deliverable nature of the objects as an important characteristic of goods as well. When the data is supplied from one system to another, in the form of hyperlinks or any other format, it has its own respective weight, which is seen when the file is downloaded. The electric pulses generated when the command to download file is given can be measured as well. Hence, data fulfils this criterion of being tangible to be called as goods as well, drawing the applicability of the Convention.
The need for change in the traditional framework
Having seen that data qualifies its conventional standards of moveability and tangibility, attention must further be drawn to some other relevant requirements. CISG, in itself, is a Convention that ensures that there is uniformity maintained within the commercial regime. In light of this, it is imperative that we divert our attention to Art. 7(1) of the CISG. According to this provision, when the very Convention is being interpreted, regard must be paid to the character of the Convention – it supports and promotes international sales transactions – since it specifically functions to govern contracts between parties of different countries. Moreover, the ‘pro – convention’ principle states that preference must be given to have CISG as the governing law of the contract between the parties as it will promote uniformity within the trade regime. This also follows from the idea that parties transact and create contracts in good faith and have the intention to fulfil their obligations. Further, if we refer to Art. 8, it poses a three – step mechanism of ensuring that any statements made by either of the parties is interpreted in accordance with their intention or from the perspective of a reasonable man within the same circumstance or in accordance with the previous or subsequent conduct between the parties and the practices or usages, if any. These additional provisions demonstrate that the CISG is an intuitive law that operates in a manner aligned with the interests of the public.
Therefore, by bridging the three arenas – of moveability requirements, tangibility characteristics, and the nature of the Convention – it can be deduced that data does qualify to be goods within the CISG, drawing its applicability. In conclusion, as we move deeper into the digital age, the definition of ‘goods’ under the CISG has to evolve to accommodate intangible assets like data. By recognizing data as goods, we not only align with the realities of modern commerce but also ensure that the legal framework governing international transactions remains relevant and adaptable in an increasingly digital world. The CISG, with its focus on flexibility and harmonization, provides the perfect platform to bridge this gap, making it a vital tool in shaping the future of global trade.
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