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No. 26
September 2012
International Association for the Protection of Intellectual Property
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Resale of used software licenses
Karolina Schöler, HARTE-BAVENDAMM Rechtsanwälte, Hamburg, Germany

Oracle develops and distributes under license agreements software programmes, in particular, so called client-server software that can be downloaded from the Internet. According to the license agreement, the licensee has the non-transferable right to store a copy of the software program permanently on a server to use it for an unlimited period and to allow up to 25 users to download the program to the main memory of their work-station and to use it as well.

UsedSoft is a German company which markets licences acquired from customers of Oracle. Customers of UsedSoft who acquired such “used” license can download the software directly from Oracle's website. Customers who already have the Oracle software can buy a further (“used”) license for additional users.

Oracle opposed this resale of “used” licenses and started proceedings against UsedSoft with the German courts. The Bundesgerichtshof (Federal Court of Justice), the court of final instance in Germany, referred this case to the CJ and asked for an interpretation of the directive on the legal protection of computer programs (Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on legal protection of computer programs).

According to Article 4 (2) of this directive, the first sale in the EU of a copy of a computer program by the copyright holder or with his consent exhausts the exclusive right of distribution of that copy in the EU. The key question in the present case was whether the principle of exhaustion, as laid down in Article 4 (2), also applies to “used” licenses for computer programs that were downloaded from the Internet.

In its judgement, the CJ answered this question by stating that the principle of exhaustion of the distribution right applies not only where the copyright holder markets copies of his software on a physical data carrier, i.e., as CD-Rom or DVD, but also where he distributes them by enabling customers to download them from a website. The copyright holder, thus, exhausts his exclusive distribution right when selling a copy – tangible or intangible – to his customer by entering into a license agreement that entitles the customer to use that copy for an unlimited period in return for payment of licensing fees. Since such a sale of software products for an unlimited period in return for payment of a fee involves a transfer of the right of ownership of the copy, according to the CJ, the copyright holder can no longer oppose the resale of that copy, even if the terms of the license agreement prohibit such a further transfer.

However, the CJ held that the software program may not be sub-divided by the first acquirer in case the license includes a right to use the program for a greater number of users than he needs. Furthermore, the CJ pointed out that the original acquirer must make the copy downloaded onto his own computer unusable at the time of the resale since a continued use by the first acquirer after the resale would infringe the copyright holder's right of reproduction of his software program. According to the CJ, the exclusive right of reproduction is – in contrast to the right of distribution – not exhausted by the first sale of the software product. In this context, the CJ held that the copyright holder is entitled to take security measures to ensure that his software product is unusable by the first acquirer after resale.
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