EU Court: When You Buy Software You Own It

This is still controversial here in the US.

In the physical world something called the “first sale doctrine” is key to maintaining the free flow of goods.  Simply put, the first sale doctrine means that once you sell something you do not get to control it anymore—you have “exhausted” your rights to control distribution.  It is why there are important things like libraries and used record stores, and why you can buy art at garage sales.

The transition from physical to digital has introduced some ambiguity into the first sale doctrine.  Believe it or not, courts spend a lot of time considering the difference between software that was purchased as a download and software that was purchased on a CD or DVD.  A recent ruling by the European Court of Justice cuts through “how is it delivered” questions and focuses on what is important: was the software sold?

The Players

Oracle provides computer programming licenses for client server software for up to 25 users.  The license agreement has a clause that the license is nontransferable.

UsedSoft is a German company that markets used Oracle program licenses when they fall out of use because of mergers or insolvencies, or just because they are unused.  The parties selling used programs are able to release unutilized resources and buyers of the used programs are able to save money.  UsedSoft’s customers can download a copy of the used software or purchase licenses for additional users if the customers already have the software license.   Customers (both sellers and buyers) receive a notarized document confirming the license transfer.

EU Court Finds EU Law is Consumer Friendly

The Court of Justice of the European Union found that a copyright owner exhausts the right of distribution to a copy of a computer program once he sells, or authorizes the sale of, the copy.  This means that whoever purchased the computer program can resell it and the copyright holder cannot control the resale of the copy.  The Court found that this exhaustion principle applies whether the copy is on a tangible medium like a CD-ROM or DVD or an intangible download from the Internet, and it also applies to corrected and updated programs that the copyright owner sells.  Furthermore, the Court made clear that contract clauses that deny the customer the right to transfer his copy of the computer program are void.

When a copyright owner sells a copy of his copyrighted computer program to a customer, ownership of the copy transfers to that customer.  The Court’s policy behind first sale is that it prevents the copyright owner from receiving a windfall by being able to control and demand payments each time the copy changes hands.  The customer who purchases the used computer program is authorized to download a copy of the program from the copyright holder’s website.  But the Court points out that the copyright owner is still protected from copyright infringement because the customer who sells his copy of a computer program must make his copy unusable at the time of sale.  This keeps the copyright owner’s right to reproduction intact.

Bottom Line Rule (in the EU): If you buy software to use for an unlimited time in return for a one-off fee you own it.

Why This Matters 

Take a moment to reflect on how nice it is to be able to give a book you purchased to a friend—hassle free.  If the German court handling the case between Oracle and UsedSoft upholds the Court of Justice’s interpretation of law, then many Europeans will be owners, and not mere licensees, of computer programs, and they will be able to resell or give away the programs just like the books and artwork that they own.  For years, consumers around the world have been able to sell or give away copyrighted works they owned and the system continued to function.  This decision paves the way for that to continue to be the case long after people forget that software was ever distributed on shiny plastic disks.

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