Strike That, You Can Resell Your Licensed Software: E.U. High Court Rewrites Software Licenses

Published On July 5, 2012 | By Jake Sommer | Intellectual Property, International

In a decision today, Europe’s highest court ruled that software makers do not have copyright claims against resellers of their copyrighted programs, even when such resales entail the copying of programs.

Oracle had brought suit against the website usedSoft, a reseller of software licenses, alleging that the resale of Oracle software violated Oracle’s exclusive right to control the distribution of its copyrighted works.   The software at issue was distributed via digital download, and each purchaser had the right to download and use twenty-five copies of the software.

Oracle’s software licenses provide that the right to use purchased software is non-transferable. This case did not involve the validity of the licenses or whether they were breached by resellers. Instead, the European Court of Justice (“ECJ”) considered whether a copyright holder has a right to control the distribution of software pursuant to a software license and, relatedly, whether selling licensed software that involves the copying of software constitutes infringement.

The ECJ ruled that software owners have no right to control downstream sales of their products, even if the first sale was pursuant to a software license agreement. Therefore, the court held, the first purchaser may resell the licensed software to others, and may create electronic copies of the software for the purpose of completing the sale, but must then delete any copies within their own possession. Nonetheless, the Court held that the purchasers here could not sell the twenty-five downloads they purchased individually, and instead must sell those licenses in the original blocks and may not break up the licenses to resell in subsets.

The ECJ also ruled that, even if purchasers of “used” licenses have not violated software makers’ copyrights, copyright holders can make use of “all technical means at [their] disposal” to ensure that resold software is unusable.

Despite ruling in the defendant’s favor, the ruling has some limitations:: (1) the ECJ has signaled that the use of encryption keys and other technical measures to render resold software unusable may be permissible; (2) today’s decision only applies to licenses of unlimited duration, not time-limited ones; and (3) the ruling applies only to distribution of copies of software, not to cloud-based “software as a service.”

About The Author

Jacob Sommer's practice focuses on legal issues related to Internet-based services and social networking, with a focus on protecting client's rights in litigation or government investigations involving the Copyright Act, Lanham Act, Digital Millennium Copyright Act ("DMCA"), Electronic Communications Privacy Act (“ECPA”), the Wiretap and Communication Acts, CAN-SPAM, FISA and federal and state laws governing Internet gambling. He also helps social networks, search engines, e-mail providers, ISPs and other clients fulfill their compliance obligations pertaining to the discovery and disclosure of customer and subscriber information.

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