The court reaffirmed that unauthorized use of software and non-payment of contractual fees constitute material breaches, justifying termination of the EULA and resulting in copyright infringement liabilities.

Tengku Maimun Tuan Mat J:

The Background

[1] The 1st plaintiff is a company incorporated under the Laws of Malaysia. The 2nd plaintiff is a company incorporated in Germany and is in the business of developing, marketing and licensing software programs. The 1st plaintiff is a wholly owned subsidiary of the 2nd plaintiff. The 1st and the 2nd defendants are both companies incorporated under the Laws of Malaysia. The 1st defendant was established on 5 April 2000 as Magnus HRM Net Sdn Bhd with the main shareholder being a Dutch company, Magnus Corporate Incubator BV while Iskandar Basha bin Abdul Kadir (Iskandar) and Deslorieux Roger Mauclair held one share each. Iskandar was also the Managing Director. In or around March 2001 the 2nd defendant which was wholly owned by Iskandar and his wife took over 40% of the shares in the 1st defendant. In or around February 2003, the 2nd defendant took over the 1st defendant completely and on 17 March 2003 the name of the 1st defendant was changed to its current name.

[2] The 2nd plaintiff created a business application, Enterprise Planning software package known as SAP R/3 software, subsequent versions and upgrades thereof which is the subject of copyright protection, which extends to Malaysia. The 2nd plaintiff owns the copyright in the said SAP R/3 software and the 1st plaintiff distributes the software in Malaysia.

[3] The 1st plaintiff entered into an individual End User License Agreement (EULA) with one Magnus Management Consultants Sdn Bhd (MMC) on 30 March 1999. The EULA was then assigned from MMC to the 1st defendant on 19 March 2001. The relevant provisions in the EULA are as follows. cl 2.1(a) of the EULA provides that "..This license does not permit the Licensee to (1) Use the Software and Third Party Database for a service bureau application except for Customers listed in Annex A: or (ii) sublicense or rent the Software System." Annexure A listed only one customer ie, Motorola Malaysia Sdn Bhd but under cl 1.5 of the EULA the list of customers may be amended by mutual agreement between the parties from time to time. cl 7.1 of EULA defines the maintenance services to be provided under the EULA whilst cl 7.3 provides that "Unless otherwise specified in Appendices hereto, Maintenance Fees shall be paid annually in advance in an amount calculated as the then current percentage factor multiplied by the ten current list price of the software licensed hereunder." Paragraph 6 of Appendix 1 of EULA provides that "Maintenance Services for the Software licensed hereunder, for the above-specified number of Users, shall commence on April 1, 1999 and shall be currently priced at 17% (or the then current factor) of DEM 473,620.00. This Maintenance Fee shall be payable annually by Licensee to SAP within 30 days of invoice date."

[4] It was an agreed statement of fact that the 1st defendant has used the SAP R/3 software to provide service bureau application services to other companies as follows:

a. Motorola Technology Sdn Bhd

b. Motorola South Asia Pvt Limited

c. Motorola Multimedia Sdn Bhd

d. SCG Industries Sdn Bhd (ON Semiconductors)

e. Philips Semiconductors Seremban Sdn Bhd

(hereinafter will collectively be referred to as the additional customers).

[5] The 1st plaintiff had issued invoices to the 1s