Resale of downloaded software permitted in EU in certain circumstances

USEDSOFT v ORACLE [2011]

The European Court of Justice (ECJ) has recently ruled that perpetual software licences granted for a single up-front payment are treated as ‘sales’. This means licensees can now transfer the right to use the software to a third party despite any express contractual provisions to the contrary. There are several important ramifications for software owners whilst it possibly opens up opportunities for licensees.

Background:

It has been a long-established principle of the free market for goods and services in the European Union that once a product has been sold to a customer in the EU, the original owner’s rights to control further, onward distribution of that product are said to be ‘exhausted’. Historically that concept has been thought not to apply to software because it was not regarded as ‘goods’ which had been ‘sold’.

Under the Software Directive on the Legal Protection of Computer Programs (2009/24/EC), the owner of copyright in a computer program has the exclusive right to do or authorise any form of distribution to the public of the original or copies of the program (Article 4(1)(c)). However, under Article 4(2), the first sale of a copy of a program by the copyright holder in the EU (or with their consent) ‘exhausts’ the distribution right of that copy within the EU (except the right to control rental of the program).

Even so, software owners have tried to make sure that this exhaustion principle does not apply to computer programs. They have done this in two ways:

These days more and more software is downloaded via the internet and no tangible item on which the software is recorded is delivered by the supplier. Customers are subject to licence agreements which grant a non-exclusive licence in their favour. Often such a licence is without limit of time and it is typically subject to a prohibition or restriction upon assignment.

Facts:

Decision:

Points to Note:

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