Sale of second-hand software

The sale of second-hand books goes without saying; you are allowed to resell a book to a third party without the author’s permission. But how does that translate to software? Can you sell software, which you purchased, to a third party without problem? It’s a tough question. The European Court of Justice even investigated this subject in a case between Oracle and UsedSoft.

That case was not really about the sale of second-hand software but about software licenses. After all, software is not a physical product that is sold like a book. Software is computer programming and is protected by intellectual property rights. The right holder can grant other parties permission to use the software. The usage right is called the user license.

In the UsedSoft verdict of 3 July 2012, the European Court of Justice ruled that the reselling of software licenses is permitted under the following conditions:

  1. It is a European license granted for use in the EU.
  2. It is a license for standard software distributed on media or by internet download.
  3. The license was granted for an indefinite period.
  4. The price paid for the license matches the economic value of the copy of the software. In practice this means paying a lump sum amount.
  5. The software license is resold as a whole and is not split. For example, if the original buyer bought 15 licenses at once, he may not resell them individually but as a bundle of 15 licenses.
  6. The seller must render any own copies of the software unusable after resale.

The UsedSoft verdict was based on the exhaustion principle, which states that once a copy of software has been released onto the market by sale with permission by the right holder (in this case Oracle), the right holder may not oppose further sales of it, just like in the example of the second-hand book which may be resold without permission by the author. The idea behind the exhaustion principle is that the right holder should be given an opportunity to charge a reasonable fee for marketing his software. After that, free movement of goods and services takes effect.

The UsedSoft verdict has caused a lot of commotion, and has led to some interesting discussions and questions:

  • What if not all six conditions have been met?
  • Is the resale of a software license also permitted if it was granted for a fixed period?
  • What about SaaS or software in the ‘cloud’, where no media is issued and the software is not downloaded from the internet?

Software suppliers are advised to inspect their license agreements and make adjustments where necessary in order to limit the risk of undesired resale as much as possible. It might be interesting for software users to look into saving costs by reselling excess licenses.

If you have any questions regarding the sale or resale of software licenses, please contact the International Desk for a referral to one of our IP-specialists!

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