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UsedSoft GmbH v Oracle International Corp, Case
C-128/11
Oracle bought proceedings against UsedSoft which markets
second-hand software licences acquired from customers of Oracle.
Oracle's licence terms provide that its software is to be used
exclusively for internal business purposes and is non-transferable.
The software is obtained by download from the Oracle site. Under
UsedSoft's scheme, those customers who do not yet have the
software can download the software directly after acquiring a
"used" licence from UsedSoft. Customers who already have
the software can purchase from UsedSoft a further licence for
additional users.
On a reference from the German courts, the ECJ held, in broad
terms that:
A first sale in the EU of a computer program by the copyright
holder (or with his consent) "exhausts" his exclusive
right of distribution of that copy elsewhere in the EU.
This exhaustion principle applies as much to distribution by
download as by physical copy if a copyright holder makes available
a tangible or intangible copy of software to a customer in return
for a fee intended to represent the value of that copy and grants
to that customer a licence to use the copy for an unlimited period.
In these circumstances, the copyright holder is deemed to have
"sold" the copy of the software to the customer, thereby
exhausting his right of distribution in that copy.
This is the case even if the licence of the software states that
it is non-transferable.
This exhaustion principle applies not just to the software as
originally downloaded, but also to that software once it has been
patched and updated as a result of ongoing maintenance of the
software by the copyright holder. This is because these updates
form an integral part of the copy originally downloaded and can be
used by the first licensee as part of the software for an unlimited
period irrespective of whether any maintenance agreement with the
copyright holder continues.
If a purchaser of a second hand software licence downloads a
copy of the software from the copyright holder's website
without any additional consent from the copyright holder, this act
does not contravene the copyright holder's exclusive right of
reproduction because it is necessary for the use of the software by
the customer in accordance with its intended purpose (which is an
exception to the right of reproduction under Art 5(1) of the
Computer Programs Directive (91/250/EEC)).
To allow the copyright holder to restrict the resale of
downloaded copies licensed on these terms would go beyond what is
necessary to safeguard his IP in the software and would effectively
allow copyright holders to circumvent the exhaustion
principle.
However, the first licensee is not permitted to split a
multi-user licence and sell on licences for a number of users not
required by him; and he must, on re-selling the software, make his
own copies unusable. Copyright holders are entitled to put in place
technical means to ensure that the first licensee's copy of the
software becomes unusable on re-sale.
Comment
This ruling makes sure that there is no difference in resale
terms between software sold in hard copy or download form where
that software is made available to a customer for an unlimited
period for a single up front licensee fee. Possible consequences
are that licensors will make licences time limited or only
available in return for regular smaller payments (so as to be able
to argue that the distribution is not a "sale" for the
purposes of the exhaustion doctrine) and there may be an
acceleration towards making software available as a cloud service
(i.e. not a licence). The principles involved may well extend to
other products which can be sold digitally, such as films, music
and books.
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