Resale of software: 18 months after Usedsoft

By John Wilks
03 Feb 2014 View Comments
john-wilks

In July 2012 the Court of Justice of the EU delivered its controversial judgment in the Usedsoft case, concluding that that a software copyright owner does not have the right to prevent re-sale of an original copy of software, once it has been sold. 18 months on, as the European Commission consults on a review of EU copyright law, it is time to reconsider this judgment.

Further reading

Exhaustion of rights and Usedsoft

The principle of exhaustion of rights is well-established in European intellectual property law: if I buy a physical product in the EU which contains copyright-protected material, such as a book or a CD-Rom, the copyright owner cannot stop me re-selling the product to somebody else. In the Usedsoft case, the key question was whether this principle extends to a perpetual licence of downloaded software.

The Court ruled that downloaded software with a perpetual licence was the "functional equivalent" of a physical product. It held that a software licensor's distribution right will be exhausted where the transaction between licensor and customer amounts to a ‘sale of a copy' of the program. The effect of Usedsoft is that a ‘sale of a copy' includes all situations in which there is a grant of a right to use a copy of a computer program for an unlimited period in return for a fee. Further, even if the licence agreement prohibits further transfer, the licensor cannot oppose the resale of that copy.

Limitations

And yet software licensors do not seem to have been brought to their knees by the explosion of a second-hand software market. This can in part be attributed to the limitations to the scope of the decision:

  • First, and perhaps most importantly, the Usedsoft decision will not apply to contracts for services. Its application can therefore be avoided through making software available via the Cloud. In this respect, the Usedsoft decision, being concerned with downloaded software and seeking to equate that with software made available in a physical medium, can be seen as increasingly irrelevant in a world where more and more software is being made available as a service, and via the Cloud.
  • Secondly, the court emphasised that the licences in the Usedsoft case were not limited in time, which led to a conclusion that a "sale" had occurred. This leaves it open for licensors to adopt a rental model, and take the position that they have not exhausted their distribution rights as the licence is for a limited time only. This approach is not without some risk, however, as EU courts are unlikely to allow Usedsoft to be circumvented by mere formalities. This risk can be mitigated by ensuring that such time limits are enforced, and that the licence fee reflects rental not sale.
  • Thirdly, if the licensor grants a multiple-user licence, the licensee cannot split it up and sell on only some of those licences- it could only re-sell the entire block together.

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