The facts
The Usedsoft judgment concerns a dispute between Oracle and UsedSoft.
Oracle is the provider of a software that can be downloaded by customers on a CD or DVD. The software licenses offered by Oracle can be used by up to 25 users. The license agreement emphasizes that the software licenses include a 'free, non-exclusive and non-transferable right of use of unlimited duration'.
The opposite party, UsedSoft, is a company that deals in used software licenses. For example, if an organization uses 15 of the 25 software licenses, and has paid for the package of 25 software licenses, it may sell the remaining 10 to UsedSoft so that UsedSoft in turn resells them to other users. The person to whom UsedSoft resells the software license can download the software from Oracle's website and make use of it, without having to pay for the full package for 25 users, while not needing this amount at all.
Oracle opposes this action by UsedSoft. The case is submitted to the German Bundesgerichtshof, which is referring a preliminary question to the European Court of Justice, asking for more clarity regarding the concept of exhaustion.
A subdivision into three phases
In order to reach a decision in the Usedsoft case, the European Court of Justice comes to the following three judgments.
- Is there exhaustion when downloading software? Article 4 paragraph 2 of the Software Directive 2009/24 states that: "The first sale in the Community of a copy of a program by the rightholder or with his consent shall lead to the exhaustion of the right to control the distribution of that copy in the Community, with the exception of the right to control the further rental of the program or a copy thereof". Exhaustion means that after the software licence has been lawfully acquired by another party, the provider of a software licence has no control over whether or not to distribute the software licence. The European Court of Justice ruled that software downloaded can be equated with software obtained via a CD or DVD. Both the downloading by the recipient of the license and the acquisition of the software via a CD or DVD can, according to the European Court of Justice, be regarded as 'exhaustion'. In this respect, it is particularly important that the license includes a perpetual software license with a one-off payment.
- When acquiring a license that has already been used, can the 'new' acquirer be regarded as a lawful acquirer within the meaning of Article 5(1) of the Software Directive 2009/24? The European Court of Justice has ruled that, since Oracle has granted a perpetual software license to the first lawful acquirer of this license, the first lawful acquirer has been paid for it and as a result of this there is exhaustion, the new acquirer can also be regarded as a lawful acquirer when reselling this used license. It considers in this respect that not allowing resale without obtaining a new licence for this purpose would mean that Oracle would again receive remuneration for the licence already sold on the resale. In relation to the restriction on the free movement of the product which this practice will result in, the Court thus reaches its judgment. It is important, however, that the 'old' or initial acquirer of the software licence renders the copy he or she used unusable at the moment when he or she resells the software licence. Otherwise there would be a prohibited reproduction of the software.
- Finally, the European Court of Justice ruled that the distribution of a used license is only allowed if it concerns the entire software license. Selling only 15 of the 25 software licenses is prohibited.
What are the consequences of this ruling?
What emerges from this case is that the use of a used software license does not result in copyright infringement. In short, the case can be summarized as follows: when the acquirer of a software license downloads the software, there is exhaustion; if this initial acquirer distributes the software license, the next acquirer is also a rightful acquirer; and this is only the case if there is no splitting of the originally purchased software licenses. Very important in this assessment was the perpetual nature of the software licenses.