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EU Ruling: Software Publishers Can’t Oppose Resale of Used Licenses

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A recent ruling by European courts sets an important precedent for the growing software resale industry, affirming that the resale of used software is permissible within the European Union, and that software publishers have no grounds to bring charges against such resellers.

The defendant in this case, UsedSoft GmbH, is a German company that purchases and resells used Oracle client-server software, transferring license keys that allow customers to download the program directly from Oracle’s website.

Oracle originally brought proceedings against UsedSoft in the German courts, seeking an injunction to bring its business practices to a halt. The German courts referred the case to the European Court of Justice for a final ruling which ultimately stated that: “An author of software cannot oppose the resale of his ‘used’ licenses allowing the use of his programs downloaded to the internet.” As the fundamental premise for its judgment the court stipulated that exclusive rights to distribute software covered by a license is exhausted (or, in other words, transferred) at first sale.

This philosophy has certainly always held true in the hardware world, but until now, a great deal of ambiguity surrounded the sale of software, both “shrink-wrapped” and downloadable media. Also of importance, the ruling states that the new holder of the license has the right to any upgrades, patches or other changes made to the software under the terms of a service agreement, even if that agreement has since expired.

Oracle and other ISVs, however, did score points in one area: the ruling held that software licenses can’t be broken up prior to resale. In other words, if one customer has only fifteen users requiring access to the server software, and another only ten, UsedSoft can’t divide the software license into two pieces totaling 25; rather, each customer would need to purchase the full 25-user license.

It seems entirely possible that the next battleground for this debate will be here in the United States, where no such clarity exists. In the meantime, will some companies begin purchasing software abroad so they can take advantage of the new rules? Ironically, such a threat may cause US-based software publishers to capitulate on this issue so as not to drive enterprise sales revenue to their European competitors and/or overseas divisions. On the other hand, confidence in the legitimacy of a secondary market for software could result in fewer barriers to original sale, and discounted prices associated with used software could potentially have the effect of driving down the software piracy rate. Finally, I can’t resist pointing out that the development of a solid secondary market for used software would vastly increase the value of IT asset management solutions like our own that provides software usage tracking capabilities to end user companies.

It seems there are a myriad of unknown consequences/outcomes all around, and this development will certainly be one to watch as it plays out domestically.