The case of Usedsoft v Oracle, originally filed in the German Federal Court of Justice in 2011 and concluded via the European Court of Justice in the past year, is important for computer sellers, resellers, other IT providers and software developers.
As a consequence of this case, they may no longer be able to prevent their customers selling software on to a third party as “used software” or otherwise restrict third-party resales.
Like most software houses, Oracle makes its software available for download electronically under perpetual, non-transferable licences for a one-off licence fee.
Usedsoft had established a business in Germany buying and selling used software, including Oracle software. Oracle argued that by buying used Oracle software from Oracle’s customers and then selling that software on to third parties, Usedsoft, together with Oracle’s customers, had breached the terms of Oracle’s software licence.
As reported on Channelweb.co.uk last year, Oracle argued that its software was not sold but instead licenced to its customers, who did not then have the right to resell Oracle’s software on to Usedsoft.
However, the European Court of Justice moved to decide that a perpetual licence which is made available in consideration of a one-off payment is equivalent to a sale – not a licence – regardless of the medium by which the software is supplied.
In the Court’s view, Oracle’s rights were exhausted by the first sale of the software to Oracle’s customer, in the same way as the rights of publishers of books and DVDs are exhausted.
The Court also held that updates and upgrades to software which the original customer may have received under a maintenance agreement with Oracle could be included in the customer’s sale of the software to Usedsoft.
If you are in the business of reselling technology, which may include software that is licenced on a perpetual basis for a one-off licence fee, you may like to review the terms of your software licence or licences.
Retaining non-transfer provisions in those agreements may be unenforceable and may breach European Union competition law.
Grant Esterhuizen is a lawyer for commercial and corporate credit services and partner at Lester Aldridge
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