Landmark ruling

EU Court rules that digitally-distributed software can be resold on: Oracle not happy

Chris Mayer
EU-Justice

Yesterday’s ruling at the EU’s highest court could have wider implications to the software world.

The European Court of Justice have made a landmark
decision in a case between Oracle and German company UsedSoft,
ruling that the trading of “used” software licenses is legal and
the author of such software cannot oppose any resale.

The embittered legal wrangle between the two arose in October
2005, after the German firm began
offering”pre-used”
Oracle software licenses online, much to the ire of the global
technology superpower.

The ruling
gives much more power to the
customer, allowing them to sell their software on

either in physical or
digital
form, without
contention from the original owner. Oracle are on somewhat of a
losing streak, with yet another in a long series of court battles
not going their way.

Oracle currently distribute their
software online, with the user signing a licensing agreement for
it. Once this has happened, the customer has a
right
to download as many copies of its database software from Oracle’s
website as they please, and to install as many copies of the
software as specified in its licensing agreement. UsedSoft acted as
a broker, giving users the opportunity to resell licenses to firms
who would have more use for them. This angered Oracle who said that
this was tantamount to piracy.

After the German Regional Court originally sided with Oracle,
UsedSoft took it up with the highest court in Europe, who
emphatically disagreed with that ruling saying :

An author of software cannot oppose the resale of his
‘used’ licences allowing the
use of his programs
downloaded from the internet. The exclusive right of distribution
of a copy of a computer program covered by such a licence is
exhausted on its first sale.

One slight saving grace for Oracle was the
court’s decision to put safeguards in place when the user splits up
a used software license, stopping them from breaking it up and
selling it on that way. Another decision that might aid Oracle is
that the court also said that after resale, the previous owner must
render his own copy of the software inoperable. How this could
possibly be implemented, we don’t know.

Whilst this isn’t the final ruling in the case,
which lies in the hands of the German federal
court
, it is expected that this ruling will provide
guidance
.

The implications from this case will be felt across the EU in
a number of industries, from ebooks to video games (think what it
could to Steam or
Xbox Live in Europe for
example), but what effect will it have on software vendors? The
nuances created in US and EU law could also create potential
stumbling blocks.

All in all, it’s a bit of a quagmire deciphering the wider
implications here, with so much still to be decided. But one thing
is clear
: vendors have just lost a lot of
power when wielding licenses.

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