UsedSoft v Oracle: a shake up for the software industry?

Photo: selfstoragesoftwareblog.com

It was a long time coming but last month the Court of Justice of the European Union (CJ) gave its judgment in Case C-128/11 UsedSoft GmbH v Oracle International Corp.

Oracle, when not involved in various IP disputes, develops and markets computer software, which is predominantly downloaded from its website. Users are granted the right to store the software permanently on a server and to allow a number of users to access that software by downloading it from the server to their workstation.  The user can also download updated versions of the software, patches and updates from the Oracle website by way of a maintenance agreement.

UsedSoft resells software licences and  back in 2005 it began reselling used Oracle licences. New users would buy the licence from UsedSoft at a heavily discounted price and download the software from Oracle. Existing Oracle users would simply buy licences from UsedSoft for additional users as they would of course already have the software downloaded on to their machines. The Munich Regional Court granted Oracle an injunction against UsedSoft, however, this was appealed and various questions referred to the CJ.

The CJ subsequently found that:

Article 4(2) of the Software Directive (2009/24/EC) provides that the right to distribute a copy of a computer program is exhausted if the rights holder permits the downloading of a copy from the internet (for consideration and for an unlimited period).

Where the right to use a copy of a computer program has been resold the purchaser of that right to use is to be regarded as a lawful acquirer of that copy of the program.

What does this all mean?

If you are a business and you have ‘spare’ licences for software (perhaps because staff have left or simply because that software is no longer useful) then, provided they were licences for an unlimited period, you can sell them on. Needless to say this has the potential of having a massive impact on software developers who previously have been able to prevent such sales and have relied upon their licence agreements to do so. Technology is however moving faster than the courts and as such it may well be that this ruling does not have the effect that many legal experts are predicting. The industry was already moving away from the unlimited period licence agreement and increasingly utilising subscription based licences and enterprise licences (basically a block licence). In addition,  there is that buzz word that we all hear every day and that is the ‘cloud’. Cloud based service arrangements will not fall within the tramlines of this case as they are unlikely to involve the requisite “transfer of ownership”. Software houses will however need to ensure that the terms of such cloud based services clarify that the service is effectively a rental of the software rather than the provision of permanent use.

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