Copyright: Marketing of used licenses is permissible also through software downloads

Software licenses that give the purchaser an unlimited right of use of the program that he downloaded from the internet, are to be treated like software programs that are distributed on CD-Rom or DVD. This means that a selling-on of used licenses is permissible, if it is ensured that the license is sold consistently and has been rendered useless on the computer of the primary customer.

The European Court of Justice decided on the 03.07.2012 in favour of a right of selling-on used licenses, even if the software is to be downloaded from the internet. The case was based on a dispute between the company “Oracle” and the company “UsedSoft”. “Oracle” sells database software that is to be downloaded from the internet. A copy of the software is then stored on the purchaser’s computer (Client-Server-Software) and the purchaser simultaneously concludes a license agreement with “Oracle”, which entitled him to a permanent storage of the software. In addition, a software maintenance contract can be concluded for upgrading the software as well as a hotfix for a specific time period. The company “UsedSoft” had bought software licenses from “Oracle” customers, for whom the originally acquired licenses are no longer attractive, respectively exceeding licenses from a license package that the customer did not require. In the case of selling-on of used software, the second purchaser downloaded the software again directly from “Oracle’s” website.

The European Court of Justice (ECJ) in consequence thereof has dealt with the question, whether the granting of an unlimited right of use to the original purchaser - also in case of downloadable software from the internet - leads to a so called exhaustion. Exhaustion means that the proprietor of an intellectual property right, in this case the originator, can no longer invoke his intellectual property right with regard to a specific product that has been put on the market of the European Union with the originator’s consent and in that case the originator must not preclude third parties from a usage of his copyright.

The ECJ came to the conclusion that also in the case of the unlimited transfer of a right of use on a computer program, which is granted against payment, this is to be understood as sale in the general understanding within the European Union. The conclusion of the license agreement and the downloading of the software from the internet form one single life process, which - considered cumulatively - leads to a transfer of the right of ownership on the software. The court came to the further conclusion that it does not matter whether the copy of the software has been transferred to the purchaser by download from the internet or by sending physical media such as a CD-Rom or DVD to the purchaser. The court argued that this is already apparent from the regulations as well as the intent and purpose of the Directive 2009/24/EC on the legal protection of computer programs, since the Directive does not distinct between physical or non-physical forms of copies of computer software, but even clarifies that each form of a program shall be included even those that are to be integrated into the hardware. This is also coherent within an economic perspective, since the downloading of a computer program from the internet is economically to be treated like the transfer of a CD-Rom or DVD copy.

From this the European Court of Justice concluded that it has come to an exhaustion of the software license by the first purchaser. The originator can therefore not prohibit the original purchaser to resell the software license to a third party. This extents to upgrades and enhancements of the software program, if the original purchaser would still have been authorized to call upon those within the framework of the maintenance contract concluded by him. The right of use of the original purchaser thereby also includes that the originator must allow the subsequent purchaser to download the software from the originator’s website, if the transfer of the software from one Client-Server to another is not possible.

The only restriction that the ECJ made was that it must be ensured that the software program is rendered useless on the computer of the original purchaser and that – in so far as licenses are sold in a package- the entire license package is sold on. A splitting of the license package by the original purchaser is not permitted because this would lead to an inadmissible reproduction of the software.

In our opinion this decision is to be welcomed in particular with regard to the equalization of downloadable software and software on CD-Rom or DVD, since it is hardly understandable why a copyright should behave differently according to its embodiment form.

The law firm was established in 2003 by Dr. Artur Bunk, an Attorney-at-Law. Qualified in 1995, he was admitted to the Frankfurt Bar in 1997 after obtaining an LL.D. in European Law at the University Viadrina in Frankfurt (Oder). During his career he has worked with the German law firm Pünder, Volhard, Weber & Axster (now Clifford Chance), was Head of Office at Rödl & Partner in Poland, and Senior Legal Counsel at the Legal and Restructuring Department of KfW. In addition to German, he also speaks fluent English and Polish.

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This release was published on openPR.