One careful owner

If you had the chance to download cut-price second-hand software instead of buying a new product at full price, would you do it?

Would your answer still be the same if the threat of legal proceedings from the original producer hung over you?

Following a recent ruling from the European Court of Justice (ECJ), that’s a choice that businesses may face in the future.

In a case brought by Oracle against a software reseller, the ECJ ruled that under European law, a software owner cannot prevent a lawful acquirer of software downloaded from the internet from selling a third party unwanted licences to use that program, even if that program was originally downloaded on terms specifying that the right to use is non-transferable.

The legal doctrine of “exhaustion of rights” was the principle that the court cited in order to give the green light to the sale of second-hand licences in downloaded software.

It’s a basic principle of European law that if you produce goods (whether jeans, cars or vodka) and sell them to someone, you can’t prevent the buyer then selling them on to someone else. Your rights to control further on-sales are said to be “exhausted”.

Downloaded software has typically been seen as outside the scope of this principle because software copyright owners have not “sold” their rights; rather, they have merely licensed others to use their software, and the terms of those licences have prevented further sublicensing or transfers.

The case arose after software reseller UsedSoft began reselling licences to use downloads of Oracle’s database software.

The software was still covered by a current licence but the original buyer no longer needed all the seat licences it had bought. UsedSoft argued that Oracle’s rights to prevent downstream sale had been exhausted. The ECJ agreed.

The ECJ did make it clear that, to be able to resell, software must be uninstalled from the original system on to which it had been loaded.

But the key point is that the original buyer of the software, once it has paid a one-off fee for the licence, does have the ability to sell unwanted licences to a third party.

The big software houses have been closely watching this case and will already be making plans either to challenge it or to amend their licensing practices to get around it.

But, for the moment, the case does appear to open up a genuine secondary market in second-hand downloaded software which, if the price is right, many businesses may see as a better alternative than paying full price for a download from the original producer.