Landmark ruling

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

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.

Chris Mayer

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