EU ruling conceives the new digital market of resale of used li

| Published on 19 Sep 2013

Chetcuti Cauchi Lawyers

EU ruling conceives the new digital market of resale of used licences

The ruling which the Court of Justice of the European Union (CJEU) gave in the case of UsedSoft Gmbh v. Oracle International Corp. (Judgment of the Grand Chamber, 3rd July 2012, C-128-11) may have sparked the creation of a new digital market – the market of trading in used software licenses.
When one downloads software from a digital content platform, one obtains a licence for personal use which normally contains an end user licence agreement (EULA) which prevents the resale of such software. Therefore the ownership of software would not equate to ownership in the traditional sense as the licensee (the consumer who bought the software) may not transfer his property freely. Whether this practice is legal has been the focal point of the case above. 
Oracle is a software company which performs the bulk of its sales through the arrangement known as ‘’customer-server-software’’. The user is granted a right to use such program via a licence agreement and makes use of the program by downloading a copy of the software from Oracle’s website directly into the user’s workstation. Oracle’s licence agreements included a disposition preventing the resale of the software.
UsedSoft is in the business of trading in second hand licensed software and was sued by Oracle for having offered a bundle of Oracle licensed software products without Oracle’s permission. Moreover such programs were being marketed as still having the maintenance agreement concluded between the original licensee and Oracle still in force; and the lawfulness of such original sale was confirmed by a notarial deed. 
The Court ruled that the right of distribution held by the copyright owner is extinguished upon the first sale – effectively meaning that the subsequent resale of such product may not be prevented irrespective of any EULA, terms and conditions or any other contractual agreement in place between the parties. 
Therefore the Court’s ruling means that ownership of digital software in the EU has moved to a situation wherein it is the consumer which owns such digital content.
In the event of resale of a user licence downloaded from the copyright holder’s website, one can rely on such exhaustion of distribution rights, which means that copyright in digital and corporeal property has identical rights and limitations.
How the Court differentiated between an act of distribution and one of reproduction is one of the most attention-grabbing points raised by this case. In practice its effect will probably be that the Court will interpret that when one sends a copy of a computer program to another individual, without deleting his copy, such act will be deemed an act of reproduction and therefore protected by copyright. On the other hand if one was to send a copy to someone else, in the same act deleting his own copy, say through cut-and-paste, then such should be deemed an act of distribution and therefore one can rely on the exhaustion of the distribution rights. As a result, companies who wish to stop the resale of licenced software will have to have recourse to non-copyright solutions, such as designing a game with an online platform requiring a one-time-exhaustive password in order to work.
Even though this judgment may have raised as many questions as it has answered, at least the position in the EU as regards the legality of the sale of second-hand software licences seems to be unlike in the US where judgments such as the ReDigi and the Vernor v. Autodesk Inc. give conflicting answers.

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