Software Makers Can’t Oppose License Resales

(CN) - Oracle and other software makers cannot oppose the resale of licenses that allow the use of downloaded programs, the EU Court of Justice ruled.

Oracle sued UsedSoft in a German court for violating copyright and licensing agreements by reselling licenses for its software products. The German court referred questions regarding EU copyright law to the Court of Justice, and in April its adviser found that while copyrights protect an author's work from unauthorized reproduction, the right of distribution is exhausted with the first sale of the author's work.

The Luxembourg court agreed.

"A customer of Oracle who downloads the copy of the program and concludes with that company a user license agreement relating to that copy receives, in return for payment of a fee, a right to use that copy for an unlimited period," the court wrote. "The making available by Oracle of a copy of its computer program and the conclusion of a user license agreement for that copy are thus intended to make the copy usable by the customer, permanently, in return for payment of a fee designed to enable the copyright holder to obtain a remuneration corresponding to the economic value of the copy of the work of which it is the proprietor."

The principle of exhaustion applies to both tangible copies of software and downloads of programs from the internet, the court added.

"The on-line transmission method is the functional equivalent of the supply of a material medium. Interpreting [EU copyright law] in the light of the principle of equal treatment confirms that the exhaustion of the distribution right under that provision takes effect after the first sale in the European Union of a copy of a computer program by the copyright holder or with his consent, regardless of whether the sale relates to a tangible or an intangible copy of the program," the high court wrote.

"[T]he right of distribution of a copy of a computer program is exhausted if the copyright holder who has authorized, even free of charge, the downloading of that copy from the internet onto a data carrier has also conferred, in return for payment of a fee intended to enable him to obtain a remuneration corresponding to the economic value of the copy of the work of which he is the proprietor, a right to use that copy for an unlimited period," the court wrote.

Having established that Oracle's distribution rights terminate at time of sale, the high court also took on the German court's question whether UsedSoft can then acquire used licenses and resell them without violating Oracle's copyright. While the court maintained that in such an instance Oracle's right to distribution is exhausted, UsedSoft's reselling of a license is conditional.

"[T]he original acquirer of a tangible or intangible copy of a computer program for which the copyright holder's distribution right is exhausted ... who resells that copy must, in order to avoid infringing that rightholder's exclusive right of reproduction of his computer program under [copyright law], make the copy downloaded onto his computer unusable at the time of its resale," the court wrote.

And while the court agreed with Oracle's argument that verifying whether the first user has rendered a copy of the program unusable is difficult, the judges told the company to "make use of technical protective measures such as product keys" to solve the problem.

"Since the copyright holder cannot object to the resale of a copy of a computer program for which that rightholder's distribution right is exhausted ... it must be concluded that a second acquirer of that copy and any subsequent acquirer are 'lawful acquirers' of it," the court wrote.

"Consequently, in the event of a resale of the copy of the computer program by the first acquirer, the new acquirer will be able ... to download onto his computer the copy sold to him by the first acquirer. Such a download must be regarded as a reproduction of a computer program that is necessary to enable the new acquirer to use the program in accordance with its intended purpose," the judges concluded, returning the case to the German federal court for judgment.

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