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The European Court of Justice (ECJ) recently handed down a
judgment in the case C-128/11 UsedSoft v. Oracle. The judgment, a
preliminary ruling, dealt with the resale of "used"
licenses of downloaded software by a German company UsedSoft. In
short, the ECJ ruled that the resale of licenses of non-physical
copies of software in the secondary market was, in itself,
legal.
The judgment
The ECJ held that the principle of exhaustion applies equally to
tangible (such as CD-ROM) and non-tangible (downloaded) copies of
software. The principle of exhaustion dictates that once a copy of
a copyrighted work has been distributed within the European Union
with the consent of the right holder, he may no longer prevent
further distribution of that copy. To be applicable, the principle
of exhaustion requires that there be a "sale" of the
software to the customer, involving a transfer of ownership of the
copy to the customer in return for a payment.
In the case at hand, a copy of the computer program was made
available by Oracle, downloaded by a customer and a user license
agreement was concluded. When taken together, the Court held that
there indeed was a sale as the operations were intended to make the
downloaded copy usable by the customer (i) in a permanent basis and
(ii) in return for payment of a fee enabling the right holder to
obtain a remuneration corresponding to the economic value of the
copy.
Further, the Court ruled that the new, second acquirer of a
resold copy is a "lawful acquirer" of that copy, thus
allowing second acquirers to make what copies are necessary to
enable them to use the program in accordance with its intended
purpose.
Limitations set by the ECJ
Firstly, the Court required that in order for the original
acquirer of a copy of a computer program to avoid copyright
infringement, he must make his own copy unusable when the license
is resold. Secondly, if the license is a group license, the
original acquirer is not allowed to split the user licenses in
order to resell them separately.
Further, the Court pointed out that right holders are entitled
to ensure by all technical means at their disposal that when a copy
is resold the original acquirer's copies are indeed made
unusable.
Implications of the judgment
While a similar legal view had already been adopted in Finland
by the Supreme Court in 2003 (see case 2003:88) regarding tangible
copies, a unified European interpretation will go a long way
towards harmonising the legal framework for software business as
well as facilitating sales of business assets spanning several EU
member states.
It should be noted that the ECJ judgement related to an
arrangement where the customers received a perpetual license to the
software. Over the past years, many software developers have
already taken on to provide their software under monthly/annual
licensing models or as a cloud computing based service. In
practice, the concept of a "sale" mentioned in the ECJ
judgement does not apply to these time-limited models. In other
words, it is still possible to prohibit the resale of licenses by
offering licenses or subscriptions for a specific time.
further remains to be seen, if the ECJ ruling has impact in
other copyright-intensive fields of business, such as online
distribution of music files and e-books, as their licensing may in
some cases similarly be considered a "sale".
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