European Court of Justice (ECJ) ruling on "UsedSoft" case


ECJ has broadly permitted the sale of "second hand software", ruling that the principle of "exhaustion" does also apply to software distribution via download from the internet.

Following a request for a preliminary ruling by the German Federal Supreme Court ("BGH"), the ECJ has issued a landmark decision on the sale of "second hand" software (C-128/11, "UsedSoft v. Oracle"). The decision is likely to have a fundamental impact on distribution, license and maintenance models and how software vendors position themselves in regard to non-transfer restrictions.

Based on this decision, reselling "used" software programs originally distributed via download does not infringe the copyright holder's distribution right, provided that the originally downloaded copy is deleted or rendered unusable.  

In essence, the ECJ has ruled the following:

  1. The principle of exhaustion, as laid down in Article 4 (2) of Directive 2009/24/EC (Computer Program Directive), applies equally to tangible and intangible copies of software programs, as the wording of the Computer Program Directive does not differentiate between tangible and intangible software copies. Accordingly, software distribution by download triggers exhaustion of the distribution right in regard to the downloaded copy. The ECJ supports this finding by the rationale that online transmission is the "functional equivalent" of the supply of a tangible medium. The ECJ further states that the effect of exhaustion also extends to updates and patches provided by the copyright holder after the download (e.g., on the basis of a maintenance contract).  

  2. In order for a resale of "used" software not to infringe the copyright holder's right of reproduction, the original licensee must render his own copy unusable at the time of its resale. As a result, volume licenses covering a certain quantity of users can only be resold as a whole; the principle of exhaustion does not cover a division and partial resale of such multi-user licenses.

  3. Since a copyright holder cannot object to the resale of a software copy for which its distribution right is exhausted, the customer of the resale, i.e. the second acquirer, is regarded as a "lawful acquirer" within the meaning of Article 5 (1) of the Computer Program Directive. The same applies to all subsequent acquirers. As a result, the second and all subsequent acquirers are entitled to, inter alia, reproduce the software program as necessary to enable them to use it in accordance with its intended purpose. In addition to the rights to load, run and store the software, this includes the right to download the software program to the respective acquirer's computer. 

In applying the principle of exhaustion equally to tangible and intangible copies of software programs, rather than only to tangible copies, the ECJ ruling differs from what has lately been the prevailing view in Germany (and other European countries) in a highly controversial debate led over almost a decade. The background of the ECJ ruling is a dispute between software manufacturer Oracle and "second hand" software merchant UsedSoft, the business model of the latter being the purchase and resale of "used" software licenses. The dispute will now be referred back to the BGH for a decision.

Read the entire ECJ decision here 

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