Tuesday, 3 July 2012

The second-hand software market

The Court of Justice has decided in Case C‑128/11, UsedSoft GmbH v Oracle International Corp., that there can legitimately be a second-hand market for software licences, going in the opposite direction from that taken in the US (see my earlier posting about the Autodesk case, here). You can sell a licence for which you have no further use, but the one thing you can't do is sell excess user rights if you have paid for more users than you actually have working for you. The decision - a preliminary ruling on a reference from the Bundesgerichtshof - is based on the principle of exhaustion: the copyright owner's rights are exhausted once the software has been supplied on disk or downloaded from the Internet, so they cannot control subsequent sales.

No great surprise there, as the doctrine of exhaustion is central to the way intellectual property rights work in the European Union: but it seems at odds with the widely-used software distribution model that gives the end user only a licence. While it has been common practice to treat software as a good rather than a service (it doesn't fit happily into either category, does it?), assimilating software to audio CDs for certain purposes, the fact is that because "sales" of software are licensing transactions it isn't always appropriate to take this view. Of course, when a physical carrier is supplied there is a sale of goods involved too, but it's only an incidental part of the transaction, and focussing on that aspect gives a distorted idea of what the deal is all about. I think people take different views according to whether they are buying software or music: if I buy a CD I expect to be able to resell it, but if I buy a piece of software I'm not so sure about it - even if it's on disk, although clearly plenty of people do buy and sell software on disk. The Court directs us not to make such fine distinctions.

What is the software industry to do? There are technical solutions to part of the problem, of course, but it's not going to be possible to claw back those exhausted rights by technical means without getting into a whole new load of trouble. Perhaps more promising is the idea of granting licences for a limited time - most software licences, certainly the non-bespoke sort, are perpetual, which is only logical when a large sum of money is changing hands. But making licences expire and require renewal might be a good way forward - and can also assist customers along the upgrade path that software houses wish them to take rather faster than, left to their own devices, they would consider appropriate.

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