In the landmark Case UsedSoft v Oracle, on 3 July 2012, the European Court of Justice held that the author of digitally-sold software cannot oppose the resale of ‘used’ licences by other companies. This much-anticipated ruling could have wide repercussions on the emerging market for used software, which generates no revenue for software developers.
The dispute at issue in the main proceedings arose from the acquisition and resale, by UsedSoft, of user licences for Oracle computer programs. Oracle brought proceedings before a German court, seeking an order that UsedSoft cease these practices. It claimed that the right to use its programs is ‘non-transferable’, and that such practices infringe its exclusive right of reproduction of its software under Article 4(1)(a) of Directive 2009/24. Under Article 4(2) of that directive, the first sale of a copy of a program with the rightholder’s consent exhausts its distribution right within the European Union.
The Bundesgerichtshof referred two questions to the Court of Justice: is the right to distribute a copy of a computer program exhausted, in accordance with Article 4(2) of the directive, when the acquirer has made the copy with the rightholder’s consent by downloading the program from the internet onto a data carrier; and whether, and under what conditions, an acquirer of used licences may, as a result of such an exhaustion, be regarded as a ‘lawful acquirer’ within the meaning of Article 5(1) of the directive, who enjoys the right of reproduction of the program in order to use it in accordance with its intended purpose.
Regarding the first question, Oracle claimed that the principle of exhaustion did not apply to user licences downloaded from the internet, which did not involve a transfer of the right of ownership of a copy of the program, but simply allowed the customer to download a copy made available, free of charge, on its website. The Court of Justice rejected this distinction between the sale of software and of user licences: it held that the downloading of a copy of a computer program, and the conclusion of a user license agreement for that copy, form an indivisible whole, since one is pointless without the other, and should be understood as a sale under the provisions of Directive 2009/24 (§40-44). The principle of exhaustion should therefore apply, not only to the sale of copies of programs on a material medium (CD-ROM or DVD), but also to their distribution by means of downloads from the rightholder’s website, which are intended to make the copy usable by the customer, permanently, in return for payment of a fee designed to enable the copyright holder to obtain a remuneration corresponding to the economic value of the copy (§45-48).
The Court followed the Advocate General in stating that a more restrictive interpretation of the term ‘sale’ would allow suppliers to circumvent the principle of exhaustion by calling the contract a ‘licence’ (§49). According to the Court, and contrary to the Commission’s arguments, the assimilation of tangible and intangible copies of computer programs is justified by the fact that their sales are similar from an economic point of view, and by the aim of the principle of exhaustion, which is precisely to limit restrictions of the distribution of such works, and would not be met if copyright holders were able to demand further remuneration on the occasion of each new sale (§58-63). The exhaustion of the distribution right extends to the corrections and updates provided by the copyright holder. However, an acquirer having bought a licence relating to several users is not permitted to divide the licence, and must always make his own copy unusable at the time of its resale (§67-70).
On the second question, the Court held that the new acquirer of a copy for which the rightholder’s distribution right is exhausted is a lawful acquirer within the meaning of Article 5(1) of Directive 2009/24, and thus benefits from the right of reproduction necessary to use the program in accordance with its intended purpose (§80). The acquirers of used licences will therefore be able to download copies sold to them by previous acquirers, from the copyright holders’ websites (§84-85).
This Grand Chamber ruling is a very interesting development in EU intellectual property law. It could have major implications for lucrative sectors such as that of video games, in which copyright holders and download platforms have relied on non-transferrable user licences to prevent customers from reselling copies of computer software or media. Future rulings will be necessary in order to determine the scope of this judgment.
Reproduction autorisée avec l’indication: Turmo Araceli, "The ECJ Upholds the Right to Sell Used Software Licences", www.ceje.ch, actualité du 4 juillet 2012.