What the CJEU’s UsedSoft decision means for software resales
The Court of Justice of the EU has ruled in favour of software resellers in a dispute between Oracle and UsedSoft. Flemming Moos and Marian Alexander Arning of Norton Rose explain what the decision means in practice
In its landmark decisions on software resale in the UsedSoft case, the CJEU provided valuable guidelines on how to organise the resale of software in compliance with copyright law.
The Court considered it a “sale” of software under the directive on the legal protection of computer programs if a user downloads software from the manufacturer within the EU on the basis of a licence agreement with the copyright owner that permits the permanent use of that software. As a consequence of that, the exclusive right of distribution of the copyright owner is exhausted on first sale, which means that a resale of electronically distributed software is generally permissible. The Court also stated, however, that a buyer may not split its licences. For example:
• If a buyer has acquired 20 software licences by way of downloading it from the internet, he is generally not allowed to resell only 10 licences and continue using 10 licences as this would normally require the production of a copy of the respective software program. According to the Court, the user is only allowed to resell the software if he himself stops using it and deletes his own copy.
• This is especially important with regard to Client Access Licences (CALs): If a user has bought, for example, one server licence of a software program and 10 CALs, he would not be allowed to resell five CALs and use the others himself together with the server licence.
• On the other hand, it is our view that the Court will allow a buyer to resell the licence for a certain software program that is part of a software bundle downloaded from the internet, as long as it can be separated from the other programs and the reseller does not keep a copy of this program.
Even though the Court generally approved resales of downloaded software, buyers of used software must still be careful: if the reseller does not comply with the provisions set out by the Court and keeps a copy of the software he resells, the buyer would not be allowed to use this software because he cannot obtain a valid licence from the reseller. It is therefore very important that the buyer of used software verifies that the reseller complies with the requirements laid down by the Court. This will be even more important if real distribution chains for software are introduced as a result of this decision.
We suggest that the buyer verifies the reseller’s compliance by the following means:
• Viewing complete documentation of the use and distribution of the software starting from the manufacturer/copyright owner to the last reseller including statements from each software user that he has obtained the software legally and has not kept a copy of the software to which the respective licences apply.
• Utilising technical measures used by the respective software manufacturer (which are likely to be introduced more often as a result of the Court’s decision) that enable the respective manufacturer to control whether resellers have made (illegal) copies of the software or have indeed just resold the software.
It will be interesting to see how software manufacturers react. In Germany, for example, the Federal Court of Justice has decided that software manufacturers may protect their software by technical means such as product activation mechanisms that link a software program to a certain user, so that the software can only be used by the respective user and resales are hindered by technical means. If this decision is upheld, the CJEU’s ruling on used software might only be a Pyrrhic victory because software manufacturers could enforce their interests using technical measures: “code as code” in another sense.
Flemming Moos is a partner and Marian Alexander Arning is a lawyer in Norton Rose’s Hamburg office.