On 3 July 2012, the European Court of Justice (ECJ) published a judgment in which it affirmed the right of licence holders to ‘resell’ their rights of use of computer programs, supporting intermediaries and end customers in the way.

In this case between Oracle International Corp. (Oracle) and UsedSoft GmbH (Usedsoft), the ECJ had to decide whether the right to distribute a copy of a software falls within the scope of the exhaustion rule laid down in the directive 2009/24 on the legal protection of computer programs (the Directive) which states that the first sale in the Community of a copy of a program by the right holder (or with his consent) exhaust the exclusive right to distribute that copy within the Community. Thus the central question was whether Oracle had proceeded with a ‘sale’ within that meaning. Oracle develops and distributes softwares mainly via its website. Oracle initiated proceedings against UsedSoft seeking an order that UsedSoft ceases sales of ‘second hand’ softwares licences acquired from existing Oracle’s clients. UsedSoft lost in first instance and then appealed the judgment. The Court of Appeal then asked the ECJ to clarify the content of the directive relating to the protection of softwares.

In this respect the ECJ found that the copy of a software and the licence to use it were to be considered ‘as a whole’ and that ‘the transfer by the copyright holder (Oracle) to a customer of a copy of a computer program, accompanied by the conclusion between the same parties of a user licence agreement, constitutes a ‘first sale’ of a copy of a program’ within the meaning of the Directive. As a result, the ECJ considered that Oracle had exhausted its distribution right, regardless of the medium used to copy the software on the computer (i.e. CD-ROM, DVD or directly downloaded from Oracle’s website). The ECJ also clearly stated that the exhaustion of the distribution right covers the software as initially downloaded but also the subsequent patches and updates issued by Oracle and relating to that software.

Moreover, the ECJ ruled that, in order to comply with the copyright holder’s exclusive right of reproduction, the original user – when selling its licence to UsedSoft – must render its copy unusable. The ECJ also stressed that in case the initial user has a licence for a larger amount of computers than he needs, the reseller (UsedSoft) is not authorised by the effect of the exhaustion of the distribution right to divide the licence and resell the licences in different parts.

Although software producers still have means to stop or control the resale of their products (e.g. serial number keys), the ECJ has issued a landmark decision which clearly opens the second-hand market for softwares. One could expect that this decision will pave the way to other industries such as ebooks and music tunes. Producers of non-tangible assets will surely wish to conduct an in-depth review of the terms and conditions of their contracts and licences granted to customers. (NVH)

The case can be found on

http://curia.europe.eu, case No. C-128/11