Précis

The European Court of Justice (“ECJ”) held that it is copyright infringement to sell back-up copies of software. The court ruled that back-up copies may only be made by the person with the right to use the program, and solely for their own use. This is the case even if the purchaser of the back-up had previously bought a copy of the software that was later damaged, lost or destroyed.

What?

Two individuals illegally sold more than 3,000 copies of Microsoft software between 2001 and 2004. This resulted in Microsoft incurring material damage. Consequently, they were convicted of copyright infringement offences in the Latvian courts.

The conviction was overturned on appeal and the Latvian Supreme Court referred the case back for re-examination. In the course of that re-examination the Latvian Court requested a reference for a preliminary ruling from the ECJ.

The ECJ was asked to consider whether the rule of exhaustion allows someone who acquires a backup copy of a computer program, not stored on the original media, to resell the copy where the original purchaser has either stopped using the program or it has become damaged.

The individuals argued that the principle of exhaustion would apply in this instance. They submitted that in accordance with the UsedSoft[1] decision, the transfer of software back-ups stored on a non-original medium is permissible if the initial acquirer of the software has an unlimited licence and their copy becomes unusable.

The Legal Framework:

Principle of exhaustion

A copyright-holder’s right to control copies of their work ends when their work is first sold, or with their consent. The principle terminates the copyright-holder’s right of control at the point they receive reasonable remuneration for their work. It affords the purchaser control over their copy, giving them the right to resell.

In the UsedSoft case, the ECJ held that since the principle of exhaustion prevented copyright-holders from objecting to the resale of software, a perpetual licensee cannot be prohibited from selling their ‘used’ licence.

The “Software Directive”[2]

Article 4(1): the computer program rights holder has the exclusive right to do or authorise:

  1. the reproduction of the program;
  2. the translation or other alteration of the program; and
  3. any form of distribution to the public of the program.

Article 4(2): the first sale of a copy of a program by the rights holder or with their consent in the EU exhausts the distribution right of that copy within the EU

Article 5(1): unless the contract specifies otherwise, the acts of reproduction and translation, under aforementioned articles, do not require authorisation by the rights holder where they are necessary for the use of the computer program by a lawful acquirer.

Article 5(2) a back-up copy of a computer program can only be made

  1. if it is made by a person having the right to use the program and
  2. if the making of a back-up copy is necessary for that use.

The Decision

The ECJ rejected the individuals’ arguments and held that it is copyright infringement to sell physical back-up copies of software. It was noted that the exception in Article 5(2) of the Software Directive must be interpreted strictly. As such it only allows a person with the right to use the program to make a back-up copy. Where a back-up copy is made, it is strictly for their use only and must not be resold to any third party.

The court emphasised that this prohibition also applied in circumstances where the purchaser had previously bought a copy of the software that was later damaged, lost or destroyed.