Whether you are a computer software developer, user or are buying or selling software licences as part of a wider corporate transaction it may be worth taking note of a recent ruling by a US Court that reaches an interesting conclusion on the nature of computer software ownership.

The controversial judgement reached in this case is that a software vendor, Autodesk (A), could not prevent Mr Vernor (V) - who had acquired copies of A's design software from a third party by virtue of a business sale - then reselling the acquired products on eBay. Autodesk's end user licence agreement (EULA) contains industry–standard provisions expressly prohibiting the rent, lease or transfer of all or part of the software (or any of the rights granted under the EULA).

Key to the Washington District court's decision is the issue of whether a customer who purchases an item of software on a once and for all basis becomes the "owner" of that software product, as V was arguing, or if they are simply purchasing ownership of a licence and underlying ownership of the software remains with the developer/licensor, as Autodesk contended. Most software developers and licensors would argue that under a EULA, the purchaser is merely acquiring a permanent right to use the product not the product itself. The Washington court here decided that, since V took permanent possession of the software when he purchased it, he was entitled to be treated in the same was as any other property owner.

There are a number of cases where US courts have come to the opposite conclusion to rule in favour of the developer/vendor, so it looks likely that A will try and appeal the decision. In the meantime, the Autodesk judgement raises the question on how a UK court would deal with the same issue.

First, it's worth remembering that under US intellectual property law there is a 'doctrine of first sale' enshrined in federal statute. This doctrine sets out that the original licensor's right of control over a product incorporating their IP is effectively exhausted after that item is first sold on the market to the 'owner' of a legally purchased copy. That's why the question of who owns the licensed software is a fundamental issue.

There is no established doctrine of first sale in the UK. That said there is the EU law concept of 'exhaustion of rights', which was initially developed in the area of trademarks but has been extended to other IP rights. The principle here is that an intellectual property holder's rights in their product are considered exhausted (i.e. they can no longer exercise their rights against lawful acquirers) once that product has been put on the EU market by them or with their consent, whether express or implied.

There are no reported UK cases looking at this issue in the context of software sales but a couple of decisions in the German Federal courts involving Microsoft licences suggest that restrictions on a lawful acquirer reselling a software product (even in the same domestic market) may be struck down under the exhaustion of rights principle.

The media on which the program is sold may be a factor. Where the program is embodied on a physical product (e.g. DVD or CD-Rom), which is acquired by a purchaser, there is authority to suggest that the UK courts could regard the software as 'goods', which may be freely resold or transferred.

Contrast this with a situation where the software is provided in the form of a web-based application or a digitised product, where there may be no physical embodiment of the product but rather a licence or permission to use. In this type of situation, a restriction on resale is much more likely to be regarded as enforceable.

Another factor will be whether the licence is regarded as agreed or incorporated into a contract with the licensee. Where software has been purchased but the shrink-wrap or software seal not broken and the product is re-sold intact (as appears to have been the case in Autodesk, where V had never attempted to use the software himself) then the licensor may have a difficult time arguing that the licensee has accepted the EULA, including any prohibition on resale or transfer.