## Facts

- Advent Systems Ltd., a U.K. company, developed an electronic document management system (EDMS) that converted engineering drawings and similar documents into a computerized database.
- Unisys Corp. decided to market the EDMS in the United States after information obtained through its wholly owned U.K. subsidiary.
- In June 1987, the parties executed a “Heads of Agreement” and a “Distribution Agreement” establishing a two-year relationship, with renewal or termination on notice.
- Advent agreed to supply the software and hardware for systems Unisys would sell in the United States and to provide marketing, training, and technical support for implementation.
- Unisys pursued at least one major sales opportunity (Arco) without success, while sales/training efforts and related negotiations otherwise proceeded.
- During corporate restructuring, Unisys decided to develop its own document system and in December 1987 notified Advent that the arrangement had ended.
- Unisys directed its U.K. subsidiary to end negotiations with Advent for a related contract, and those negotiations stopped.
- Advent sued for breach of contract, fraud, and tortious interference with prospective contractual relations, among other claims.

## Issues

1. Whether computer software is a “good” governed by UCC Article 2.
2. Whether the parties’ writings satisfied the UCC statute of frauds for a non-exclusive requirements-type arrangement despite no stated numeric quantity.
3. Whether a parent corporation is liable for tortious interference when it causes its wholly owned subsidiary to stop negotiating a prospective contract with a third party.
4. Whether expert testimony on future lost profits based on projections is reliable when actual market performance data exist.

## Decision

- The court held that computer software constitutes “goods” under UCC Article 2.
- The court held that, on these facts, the parties’ non-exclusive requirements-type arrangement could satisfy the UCC statute of frauds without a numeric quantity term.
- Because the district court erroneously refused to apply the UCC, the court ordered a new trial on the breach of contract claim under the proper UCC framework.
- The court affirmed judgment for Unisys on tortious interference, holding a parent corporation is privileged to disrupt a subsidiary’s prospective contractual negotiations when protecting legitimate corporate interests.
- The court cautioned that lost-profits expert opinions relying on projections are questionable when actual performance data are available and indicated the damages proof should be scrutinized on remand.

## Legal Principles

- Packaged or embodied computer software may be treated as “goods” under UCC § 2-105(1) when the transaction’s goods component predominates, even if services (training, marketing, technical support) are also contemplated.
- A requirements-type contract governed by UCC Article 2 may satisfy the statute of frauds without an explicit numeric quantity if the writings evidence a requirements relationship and the quantity is constrained by good-faith demand.
- A parent corporation has a justification privilege to influence or stop a wholly owned subsidiary’s prospective contracting when acting to protect legitimate business interests, defeating an “improper interference” element.
- Lost-profits proof must be tied to reliable data; where actual market performance exists, projections alone provide a weak basis for future-profit estimates and may warrant exclusion or reduced weight.

## Conclusion

The Third Circuit classified computer software as UCC “goods,” treated the distribution arrangement as subject to Article 2 (including statute-of-frauds principles applicable to requirements contracts), ordered a new trial on breach of contract because the wrong legal framework was used, and affirmed dismissal of tortious interference based on a parent-company privilege; it also warned against speculative lost-profits projections when actual performance evidence is available.


Advent Sys. Ltd. v. Unisys Corp., 925 F.2d 670 (3d Cir. 1991)