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Intellectual Property – Selling Second Hand Software

Wednesday, 14 November 2012

A recent case in the European Court of Justice has made it easier for buyers of software to sell it second hand much like they might sell on other assets. It is perhaps not something that many buyers of software have considered in the way they might consider selling on more tangible products such as their used car for example. However, there are numerous businesses that have been set up specifically to service the market in second-hand downloadable software. 

The legalities of the trade in used software were somewhat uncertain until the case of UsedSoft GmbH v Oracle International Corp was ruled upon by the European Court of Justice in July this year. 

Case Facts
Oracle develops and sells software, much of which can be downloaded via their website. The software is sold with a non transferable licence which runs for an unlimited period of time. 

UsedSoft acquired these licences from the original licensees when they no longer had a use for that software. It then sold these on to buyers who could use the licences to download the software from Oracle’s website. Oracle objected to this and sued the German company; it gained an injunction which prevented UsedSoft from selling the licences on the basis this breached Oracle’s reproduction rights. 

UsedSoft appealed the case to the European Court of Justice. 

The ECJ’s Decision
On appeal the ECJ found in favour of UsedSoft and cited the following reasons for its decision. Referring to the Exhaustion Rule, the ECJ stated that the provisions of Article 4(2) of the Software Directive meant that “the exclusive right of distribution of a copy of a computer programme covered by such a licence is exhausted on its first sale”. Where software is downloaded off the Internet on the basis of an unlimited licence period, this is sufficient to constitute a first sale. 

After a first sale, the original distributor, Oracle in this case, no longer has an exclusive right to sell the software covered by that unlimited licence. It cannot therefore attempt to restrict the onward trade of that software, just as it could not if the software had been sold by way of a disk. 

Original purchasers of downloadable software may sell their licence on once they have finished with that software. Companies such as UsedSoft can legitimately make a market in such software as long as the original purchasers remove the software before purporting to sell on their licences. 

If you have any questions about software licences or any other intellectual property matters, Rollingsons has experienced lawyers who can assist you. For more information please contact James Crighton via e-mail or by telephone on 0207 611 4848.