Software comprises the instructions which cause hardware to work in a particular way, for example, to process a company's payroll. Looked at in this way, software is intangible, and difficult to classify in legal terms.

Although the disks or tapes on which a program is recorded certainly are goods, the program of itself is not.

 

The classification (and hence the legal rules that apply to the supply) should really depend on the circumstances in which the software is procured. The purchase of, say, a standard computer game should be regarded as a sale of goods irrespective of the medium by which the software is delivered, whereas a bespoke system written specially by the supplier for a particular customer necessarily entails the performance of work in terms of article 700 of the Civil code of the Republic of Armenia.

Equally important from the contractual point of view is the fact that software is protected by the law of copyright. So after the software is written and ready for use you can transmit all the exclusive rights of the ownership of the Intellectual property to the customer as well. 

But in the example above you can transmit to the customer only the right to use the software in a particular period of time and retain other exclusive rights.

So regardless of whether the software is developed on your own initiative or it is developed on the basis of contract on performance of work for specific customer, if you transmit to the customer only the right to use the software in a particular period of time by providing access to the software via API or by providing access to the software for particular period of time through license code irrespective of the medium by which the software is delivered, it entails the supply of services.

Classification of software as goods or services