Selling Used Downloaded Software Declared Legal in Europe

European consumers have won an important victory over software copyright holders, who are increasingly restricting what their customers can do with their software. In short, software companies really don't like customers selling on used software, since they pretend that the first sale doctrine doesn't apply to them and therefore feel a sense of entitlement for every sale of that same piece of software. They're also miffed that customers aren't paying full price for new copies of the software, which makes them maximum profit, of course.

Over recent years, we have seen the increasing use of online software distribution models, with Steam being the largest and most well-known one for games, including triple A titles. While these distribution models can bring benefits in terms of flexibility and not having to store a physical disc and box, they are also seen as being very anticompetitive, since they deny the customer the ability to sell their used software, which is something that they could previously do with physical discs. The Steam online gaming platform created by Valve Software is an excellent example of this annoying restriction in action, since it's not possible to transfer a copy of a game between accounts, meaning that the gamer is stuck with every game that they have bought on this platform, even if they no longer have any use for it and would like to sell it, or just gift it to someone who would enjoy it. This limitation however, is by design, since the functionality is already present in the Steam platform and is purely there to force people to buy "new" software, in the name of greed by copyright holders.

The victory is to do with allowing just this kind of resale and was won in a somewhat ironic way, with Oracle suing UsedSoft for selling used Oracle software, in Europe. They then lost the case, setting a precedent against them. The highest court in Europe, based in Luxembourg, the Court of Justice of the European Union has now declared that UsedSoft can indeed sell on used Oracle software, whether in physical form ie discs, or virtual, downloaded form. There are a couple of restrictions however, which seem somewhat reasonable: the user must remove their own ability to use the software once sold - deleting the installation files and licence key, plus uninstalling it will satisfy this requirement. The second one, is that if the software is sold with a multi-part licence, the whole lot must be sold together and not separated out.



The court has now published a press release explaining its ruling, which goes into quite some detail. However, the core logic of their arguments can be summed up with the following two quotes:

An author of software cannot oppose the resale of his ‘used’ licences allowing the use of his programs downloaded from the internet. The exclusive right of distribution of a copy of a computer program covered by such a licence is exhausted on its first sale.

So, no double-dipping by the software companies allowed there, even if the software is in its pure, virtual form.

And the second quote is even juicier:

...the principle of exhaustion of the distribution right applies not only where the copyright holder markets copies of his software on a material medium (CD-ROM or DVD) but also where he distributes them by means of downloads from his website. Where the copyright holder makes available to his customer a copy – tangible or intangible – and at the same time concludes, in return form payment of a fee, a licence agreement granting the customer the right to use that copy for an unlimited period, that rightholder sells the copy to the customer and thus exhausts his exclusive distribution right. Such a transaction involves a transfer of the right of ownership of the copy. Therefore, even if the licence agreement prohibits a further transfer, the rightholder can no longer oppose the resale of that copy.

Got that? Companies such as Microsoft love to make a big deal that they licence the software to you, not sell it and they impose heavy restrictions on what the customer can do with it - yet they demand a handsome price for the privilege. This ruling sets the record straight and correctly asserts that the software company can't have it both ways: yes, the software is owned by the customer and they can do whatever they damned well please with it and no licence restriction can prevent them from doing so.

Also, somewhat crucially, this ruling extends to the original software and its latest patches and updates. This prevents software companies from deliberately releasing near-useless broken first versions, only to exclude the updated fixed versions from resale. Using this dodgy tactic, they would effectively have been able to carry on preventing the sale of used software by making it useless, but this avenue has been blocked:

In this context, the Court’s answer is that any subsequent acquirer of a copy for which the copyright holder’s distribution right is exhausted constitutes such a lawful acquirer. He can therefore download onto his computer the copy sold to him by the first acquirer. Such a download must be regarded as a reproduction of a computer program that is necessary to enable the new acquirer to use the program in accordance with its intended purpose.

Therefore the new acquirer of the user licence, such as a customer of UsedSoft, may, as a lawful acquirer of the corrected and updated copy of the computer program concerned, download that copy from the copyright holder’s website.

This ruling is great news - for customers living in one of the 27 European Union countries at least. With any luck a similar ruling will spread to other parts of the world, including America. Valve will likely now be forced to switch on the ability to transfer the software from one Steam user account to another. We can't wait.

It's refreshing to see that for once, reason and logic have prevailed over corruption and greed, without important government officials being in the pockets of the wealthy and powerful content industry.

The Court of Justice of the European Union's ruling can be downloaded here. (42KB PDF)