MHC Tech Law: When can you resell software?


14 Nov 201615 Shares

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Is it ever possible to resell software you acquired? Looking at a recent EU court case, Mason Hayes & Curran examine the limitations on resale of software programs.

The initial acquirer of a copy of software, in some circumstances, may resell that copy and his licence to a new acquirer. We examine a recent EU court decision on whether the right to resell extends to the resale of backup copies of software programs.

The law

The principle of exhaustion of rights is long established in IP law. The exhaustion principle is reflected in Article 4(2) of the Software Directive, which provides that:

“The first sale in the community of a copy of a program by the right holder, or with his consent, shall exhaust the distribution right within the community of that copy, with the exception of the right to control further rental of the program or a copy thereof.”

The UsedSoft case

The main authority in this area, as regard to software, was the decision of the Court of Justice of European Union (CJEU) in the UsedSoft case. This concerned a battle between a seller of second-hand software, UsedSoft and Oracle.

In the case, the CJEU found that the transfer of a computer program by a copyright holder to a customer of a copy, along with a user licence agreement, constituted a first sale within the meaning of Article 4(2). As a result, the rights were thereby exhausted.

After UsedSoft, selling used software was not viewed as infringing the owner’s right, provided that the originally downloaded copy (the first sale copy) was deleted or rendered unusable.

Ranks and Vasijevics

In the Ranks and Vasijevics case, the CJEU had a further opportunity to consider the doctrine of exhaustion in the context of software. Ranks and Vasijevics were Latvians charged with crimes for the resale of software copies. The software involved included Microsoft products, the Office suite, and Windows. The CJEU was asked to determine whether the resale of used copies of computer programs carried out by Ranks and Vasilevics was lawful.

The defendants argued that the principle of exhaustion of the distribution right permitted them to resell a copy of a program on a non-original material, such as a floppy disk. They argued that this was possible, provided the original material medium had been damaged, and so long as they complied with the conditions set out in the UsedSoft case.

The CJEU noted that, according to the Software Directive, lawfully making a backup copy of a computer program was subject to two conditions:

  1. the copy had to be made by a person having a right to use that program; and
  2. the copy had to be necessary for that use.

Therefore, a backup copy could lawfully be made and used only to meet the sole needs of the person having the right to use that program.

What did the CJEU decide?

The CJEU confirmed that the lawful initial acquirer of a copy of software, accompanied by an unlimited user licence, can resell that copy and his licence to a new licensee. However, this does not apply if the original material medium of the copy that was initially delivered to him has been damaged, destroyed or lost.

In other words, the initial acquirer cannot provide his backup copy of that program to a new licensee without the permission of the original right holder.

This ruling makes it clear that the CJEU was trying to go no further than to close an undesirable loophole, and the case is highly fact-specific. Otherwise, it might have been possible to resell used software on the pretence that they were backup copies, which could be difficult for right holders to prevent.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

Tech Law is a weekly series brought to you by Irish law firm Mason Hayes & Curran, whose legal tech team advises the world’s top social media organisations and emerging start-ups. Contact a member of the MHC Technology team or visit www.mhc.ie for more information.

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