Trends in technology disputes: a holistic view

July 2025 | SPOTLIGHT | LITIGATION & DISPUTE RESOLUTION

Financier Worldwide Magazine

July 2025 Issue

Against evolving regulatory demands and increasing cyber crime activity, digital transformation currently remains a high priority for many businesses. Organisations are looking to digitise customer interfaces, cut costs, maximise IT assets and generally increase efficiencies within their own business and service offerings – often in circumstances where existing legacy systems are not capable of meeting the demands of current artificial intelligence (AI) solutions.

With this heightened activity there is increased risk of disputes arising. Litigation and arbitration between technology suppliers and their corporate customers seem to be on the rise, particularly in circumstances where customers trying to utilise existing IT assets in new operating environments are replacing legacy systems and contracting cloud solutions.

Indeed, while many of these disputes are often resolved between parties through agreed dispute escalations procedures, or at least before trial, often as a result of alternative dispute resolution (ADR), a number of notable technology cases have made their way through the UK’s Technology and Construction Court since 2023.

These cases have concerned disputes arising out of a variety of technology contracts and have involved a number of different areas. In this article we take a holistic look at some of the common issues sitting behind disputes between customers and suppliers.

Maximising IT assets is not without risk

As part of their digital transformation journey, many organisations first look to maximise their existing IT assets, whether that be by consolidating their IT licences and contracts, deploying existing products in a new operating environment, integrating new systems into their existing IT infrastructure or utilising products in a way not previously contemplated.

While customers may be looking to maximise IT assets and make efficiencies within their own business and service offerings, suppliers often want to interrogate a customer’s use of software, particularly around licence renewal time, not least to ensure they are being adequately compensated and revenue targets are being hit.

The dichotomy of interests between a customer and supplier can cause a number of disputes, not only in relation to the exercise of audit rights as suppliers seek to interrogate customer systems for unauthorised use of products and services, but also in relation to the scope of licences granted, specifically whether the customer’s use of software is still correctly within the licensed scope.

If a customer has sought to maximise its current IT assets without close consideration of the terms of existing licences, it may be left exposed. Outlined below are some examples.

First, if a customer is licensed on a ‘per user’ basis, and the customer is, in its new operating environment, deploying robotic users, disputes can arise concerning the meaning of a ‘user’, with suppliers potentially arguing that a ‘user’ must be a person or that ‘permitted use’ was never intended to cover use by a robotic user.

Second, if a customer is licensed for server-hosted software, and the customer, in its new operating environment, is using virtualised servers, the supplier may argue that such use is outside the scope of the relevant licence and additional or a different licence structure is required.

Lastly, if a customer has connected systems to each other or has granted new remote access, or if a customer is using software to enhance its own service offering to customers, the supplier may again argue that such use is not within the scope of the relevant licence granted.

While ordinary principles of contractual interpretation apply to a consideration of the scope of a licence, and the critical issues are always what the specific language of the contract says and what the specific circumstances are, one theme we are seeing from the cases is a rise in the number of allegations including wrongful procurement of breach and unlawful means conspiracy, whether that be against the directors of the company in breach, or, in cases where the breach has been for the benefit of or involved another party, against the other party or directors of the other party.

In this respect, the principle in Said v Butt ought not to be forgotten as it provides that, although a director of a company may cause that company to breach a contract, so long as they were acting bona fide in the course of their duties as a director, they cannot be found to have committed the tort of inducing breach of a contract.

Although it is difficult to mitigate all litigation risk, suppliers are increasingly trying to head off some of the risk within their control by exploring the use of alternative licensing models, including imposing pricing based on processes run or volume of data transferred, rather than on the type or number of users, for example.

Replacement of legacy systems and the pitfalls of contracting cloud deliverables

Among other things, cloud products and services allow organisations to overcome limitations and risks associated with on-premise solutions by granting access to scalable and secure servers with increased data storage and greater processing capabilities, which are fundamental when it comes to preparing for the future and the use and deployment of AI solutions.

However, cloud products and services are often commoditised offerings. While some suppliers are willing to offer bespoke solutions tailored to a customer’s individual needs, cloud products and services are often purchased ‘off the shelf’.

Disputes can arise when there is a mismatch between what the supplier has offered and what the customer expects, which can be exacerbated when: (i) the product was sold to the customer as having certain functionality that it does not (or at least the customer believes that to be the case); (ii) the product was sold to the customer as being capable of being delivered by a certain date or within a certain time; or (iii) there has been no contractual promise included in the agreement that expressly states that the product must meet the customer’s actual business or technical needs.

Compounding the disputes risk on the customer side is, of course, the fact that scope to individually negotiate contractual terms for ‘off the shelf’ cloud solutions can sometimes be limited, leaving the customer with a very ‘supplier friendly’ contract to navigate.

Disputes can also arise once the products or services have been supplied or delivered, not only in respect of uptime and service level agreement requirements, but increasingly because of cyber crime. Cyber criminals are continuing to target business critical software, and the technology they can deploy is becoming more and more sophisticated. Suppliers should ensure that they are operating within the bounds of the ever-growing regulatory landscape, and that they have appropriate risk management and technical and organisational measures in place.

The key issues that arise in a dispute about the delivery or supply of a product or service can be wide ranging, and ultimately depend on key themes such as the parties’ intentions, what has passed between the parties in the pre-contract ‘sales’ period, the scope of any entire agreement clause or any clause that seeks to exclude or limit liability, and dispute escalation and termination provisions agreed in the contract.

More and more we are seeing parties purporting to rely on common law rights of termination in conjunction with contractual termination rights to bring agreements to an early end, and similarly, parties on the receiving end of a notice of termination counter-alleging repudiatory breach by the terminating party due to an alleged improper exercise of common law or contractual termination rights. These disputes are reminders of how vitally important it is for parties to correctly follow all contractual termination steps ‘to the letter’.

They also highlight the importance of having clearly drafted termination provisions, and, to some extent, the importance of having dispute resolution clauses drafted into contracts, which allow for disputes to be resolved quickly and in accordance with a streamlined and expediated procedure as and when they arise.

Conclusion

The pressures on businesses to embark on digital transformation projects remains higher than ever – in many cases these projects are business critical. However, in the rush to get projects underway, parties must be diligent. They must still apply proper governance and risk oversight and controls, not only in respect of the procurement of technology itself, but also in respect of ongoing contractual compliance. This is becoming an increasingly litigious field.

Jonathan Ball is a partner and Verity Quartermain is a counsel at Norton Rose Fulbright. Mr Ball can be contacted on +44 (0)20 7444 2983 or by email: jonathan.ball@nortonrosefulbright.com. Ms Quartermain can be contacted on +44 (0)20 7444 2003 or by email: verity.quartermain@nortonrosefulbright.com.

Jonathan Ball and Verity Quartermain

Norton Rose Fulbright