Cloud Computing: EU’s Top Court OKs Resale of Software Licenses

Grazed from Sys Con Media. Author: Maureen O’Gara.

The European Court of Justice (ECJ), the European Union’s version of America’s Supreme Court, told Oracle last week that it can’t stop the resale of its customers’ castoff software, specifically the stuff that’s downloaded from the Internet.

It held that the new owner can download the "used" software from Oracle’s site along with updates and patches covered by the original maintenance agreement.

Oracle tried to argue that downloaded software was different from software physically transmitted on a CD or DVD…

The decision, which isn’t specific to Oracle, has serious implications for just about every developer.

The Financial Times imagines it creating a "multimillion dollar market for second-hand enterprise software licenses" like Microsoft’s or Adobe’s – particularly given all the surplus perpetual licenses available because of layoffs. And, after talking to lawyers, the paper figures "it could also have broader ramifications for other digital products such as film, music and ebooks."

The decision could also goose the software-as-a-service market and the cloud.

Applying the principle of exhaustion of distribution rights, the court ruled that a developer’s rights end when software is sold, that the buyer then owns it lock, stock and barrel, and it can be resold no matter what the license says.

In the court’s words, "Even if the license agreement prohibits a further transfer, the rightholder can no longer oppose the resale of that copy."

Peter Schneider, managing director and owner of usedSoft, the Munich trader in second-hand software that Oracle was trying to stop, called the decision a "milestone for free trade in Europe." usedSoft advertises "previously owned" enterprise software for up to 50% off.

One restriction the court imposed is that client/server licenses can’t be carved up and resold piecemeal. The restriction does not apply to volume licenses in which several programs are sold together as a package and can be saved individually on workplace computers.

The original user can’t make copies of the software and has to erase it from his machines before selling it.

The German Federal Court of Justice, where the case originated, is now expected to model its decision on the ECJ’s non-binding ruling.