EU Court Says, Yes, You Can Resell Your Software, Even If The Software Company Says You Can't

from the good-for-them dept

You may remember that a couple years ago, an appeals court in the US ruled that, when dealing with software, as long as the provider calls what it sells "a license" rather than a "sale" it can take away your first sale rights. As you hopefully know, first sale rights are what let you resell goods that have copyright-covered material in them -- such as books -- without asking for permission from the copyright holder. However, for reasons that still don't make any sense, the 9th Circuit seems to think that as long as something is purely digital, first sale no longer applies.

The Supreme Court refused to hear the appeal, so while technically the ruling still only applies in the 9th Circuit, it's what most consider to be the state of the law in the US (there is always the possibility a different circuit court could disagree and it could go back to the Supreme Court -- and one could argue that some other rulings in the 9th Circuit already conflict -- but for now, the Autodesk case is widely considered the standard). There is, also, the upcoming ReDigi case, of which there's a decent profile in the Boston Globe -- but that's focused on music, and it's not entirely clear how that one will come out either.

Over in Europe, however, it appears that the European Court of Justice (who has been pushing out some relatively insightful rulings on copyright issues lately) seems to recognize just how ridiculous the 9th Circuit's view on first sale and software really is. In a new ruling, it has upheld the right of first sale on software, basically saying that you are buying a license and that license is resellable.

The specific case involved a company, UsedSoft, that was trying to create a market in reselling used software. Oracle sued, claiming that its license agreement specifically stated that it could not be resold. However, the court found that the right of first sale applied. In the court's language, it talks about copyright "exhaustion" which is the idea that once you've sold something you've "exhausted" your right to control it.

It makes no difference, in a situation such as that at issue in the main proceedings, whether the copy of the computer program was made available to the customer by the rightholder concerned by means of a download from the rightholder’s website or by means of a material medium such as a CD-ROM or DVD. Even if, in the latter case too, the rightholder formally separates the customer’s right to use the copy of the program supplied from the operation of transferring the copy of the program to the customer on a material medium, the operation of downloading from that medium a copy of the computer program and that of concluding a licence agreement remain inseparable from the point of view of the acquirer, for the reasons set out in paragraph 44 above. Since an acquirer who downloads a copy of the program concerned by means of a material medium such as a CD-ROM or DVD and concludes a licence agreement for that copy receives the right to use the copy for an unlimited period in return for payment of a fee, it must be considered that those two operations likewise involve, in the case of the making available of a copy of the computer program concerned by means of a material medium such as a CD-ROM or DVD, the transfer of the right of ownership of that copy.

There are some interesting side notes on this. First, the court also rules that if Oracle promised free maintenance updates to the original licensee, it must continue to provide those to whomever purchased the "used" software. However, it also puts a couple of limitations on this. The first one is somewhat obvious: the seller of the used license can no longer be using the software. Oracle argued that this would be hard to track, but the court rightly points out that this is the same issue that those who sell software on CD-ROMs and DVDs face, but they figure out how to survive:

As Oracle rightly observes, ascertaining whether such a copy has been made unusable may prove difficult. However, a copyright holder who distributes copies of a computer program on a material medium such as a CD-ROM or DVD is faced with the same problem, since it is only with great difficulty that he can make sure that the original acquirer has not made copies of the program which he will continue to use after selling his material medium. To solve that problem, it is permissible for the distributor – whether ‘classic’ or ‘digital’ – to make use of technical protective measures such as product keys.

Separately, however, the court ruled that you cannot divvy up the number of seats in a license and sell them individually. That is, if you buy a 100 seat license to some software, and are only using 50, you can't then sell just those other 50 seats. This ruling says that the first sale only applies to the entire license agreement, basically.

There is some disagreement as to how "big" an impact this ruling will have. To be honest, I'm not convinced that the overall impact will be that large, but I think it is a good thing that the court appears to recognize that you cannot contract away certain rights granted to you under copyright. Copyright holders have long tried to remove the limitations and exceptions of copyright law through contracts and "licenses." Recognizing that those limitations and exceptions really do exist is important, and it's good to see the EU Court of Justice release a clear ruling on that issue.

Filed Under: europe, european court of justice, first sale, resale, scotus, software license
Companies: oracle, usedsoft