Selling second hand software

It is usual for a perpetual software licence to be sold on the basis that the licence is non-transferable, ie that the purchaser (licensee) cannot resell or otherwise assign the licence to a third party.  And it was previously thought that the EU principle which prevents the owner of an article from controlling the downstream after-market in the article (the “exhaustion of rights” doctrine) did not apply to software licensed in this way.

But in the recent case of UsedSoft GmbH v Oracle International Corp., the European Court of Justice has made it clear that the exhaustion of rights doctrine does apply to perpetual software licences (whether supplied on a package basis or by download, and including any updates and upgrades), and any clause in a licence agreement which states that the licence is non-transferable, or which otherwise restricts the licensee’s right to resell the licence elsewhere in the EU, is unenforceable.

Whilst this judgement potentially has serious implications for software suppliers, it is worth noting the following:

1. The judgement does not apply to software licensed on a rental or subscription basis, e.g. SaaS (software as a service).  That said, it is likely to apply where a fixed licence term is longer than the expected useful lifetime of the software.
2. Where the licence allows the software to be used by a number of users, the licensee may not “split” the licence by reselling the licence for some of those users.
3. When a licensee resells their licence, they must delete the software from their systems or make it unavailable for further use.
4. The copyright owner may put in place technical measures to make the first licensee’s copy of the software unusable following its resale.

Tags: exhaustion of rights, resale of software, second hand software
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