The case at hand originates in criminal proceedings brought against two Latvian nationals, Mr. Ranks and Mr. Vasiļevičs, before the Riga Regional CJEU. Both of them were charged with the unlawful sale of copyright-protected works and the intentional unlawful use of someone else’s trademark. More specifically, they were accused of having sold copies of Microsoft software (incl. Windows and Office) on an online marketplace in 2004. More than 3,000 of such copies were said to have been sold.
The Court of Justice of the European Union (CJEU) was asked by the Riga Regional Court whether the acquirer of a back-up copy of a computer program stored on a non-original medium may, based on the rule of exhaustion of the copyright holder’s distribution right, resell that copy if the original has been damaged, destroyed or lost and the original acquirer no longer possesses or uses the copy. The request for a preliminary ruling thus related to Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs (Directive), which establishes the so-called "rule of exhaustion" of the right holder’s distribution right.
Confirmation of UsedSoft v. Oracle
In its reasoning, the CJEU starts by emphasising that, according to the rule of exhaustion of the distribution right as contained in the Directive, the holder of a copyright in a computer program who sold a copy of said program on a tangible medium accompanied by an unlimited user licence cannot oppose the resale of that copy by the original or subsequent acquirer. This is a confirmation of the CJEU’s decision in the UsedSoft v. Oracle case (C-128/11), in which the CJEU ruled that the transfer by a copyright holder to an acquirer of a copy of a computer program, together with an unlimited user licence, comprises a ‘first sale’ and thus exhausts the exclusive distribution right of the copyright holder. This means that the copyright holder cannot oppose the resale of his ‘used’ licences accompanying programs downloaded from the internet. Subsequent acquirers are thus to be considered as lawful acquirers entitled to download the copy from the copyright holder’s website. The UsedSoft v. Oracle decision is known for having opened the door to what is commonly referred to as the resale of second-hand software. The CJEU decision in UsedSoft v. Oracle has already been applied by the Brussels Court of Appeal in a decision of 11 September 2015.
No right to resell non-original back-up copies
Although maintaining the principles contained in the UsedSoft v. Oracle case, the CJEU introduces an exception as to the resale of back-up copies of the original computer program. It notes that the circumstances of the present case differ from those of UsedSoft v. Oracle in that (i) it concerns the resale of used copies of a computer program on non-original media (back-up copies) and (ii) it did not appear from the facts that Mr. Ranks and Mr. Vasiļevičs had initially purchased and downloaded the copies from Microsoft’s website.
The CJEU then continues by arguing that, under the Directive, creating a back-up copy is only allowed if (i) the copy is made by a person entitled to use the software concerned and (ii) the copy is necessary for such use. It also stresses that the right to create back-up copies constitutes an exception to the exclusive reproduction right of the copyright holder and must therefore be interpreted strictly. The CJEU concludes its reasoning by stating that a back-up copy may only be made and used "to meet the sole needs of the person having the right to use that program". As a consequence, the initial acquirer may not use the back-up copy to resell the software concerned. The Directive must thus be understood in such a way that it does not allow the acquirer of a copy of a computer program – in a case where the original medium of the copy is damaged, destroyed or lost – to resell his back-up copy of that program to a third party without the authorisation of the initial right holder.
The CJEU confirms the principle that the licensee who acquired software on a tangible medium accompanied by an unlimited user license has the right to resell such tangible medium containing the software. The CJEU also clarified that the licensee who purchased a program (whether on tangible medium or via download) has the right to make back-up copies to the extent necessary for the use of that program. However, such back-up copies on non-original media cannot be resold without the copyright holder’s prior authorisation. It also follows from the CJEU’s case law that software publishers must allow lawful acquirers of a second-hand licence to download the software from the software publisher’s website.