Resale ruling may change how software is sold

The EU case that ruled software could be sold second-hand could have far-reaching consequences for the software industry and lead to a shake-up in ebook, film and music distribution.

The European Court of Justice yesterday ruled that it was legal for downloaded Oracle software to be resold, providing the initial buyer deleted or disabled the copy on their machine, or companies sold all licences that were bought together.

“It clearly means that if they purchase software and download it then they can on-sell that as long as they delete their copy,” said Luke Scanlon, a lawyer at Pinsent Masons. “However the court based its judgement on the fact that the software sold by Oracle was sold as a perpetual license and so it wasn’t limited in time. And the reasoning was that the company has received adequate compensation regarding the value of the software itself. Basically, Oracle was saying you can have this software forever.”

Scanlon said the case could cause major disruption in the industry, forcing developers into a software-by-subscription model of gradual upgrades rather than standalone versions, and more experimentation with rolling service contracts.

There has been long-standing consensus that licenses for programs downloaded over the internet are not transferable. Today’s ruling disrupts that consensus

“Software providers will have to deal with the issue – and they might do it through upgrades,” said Scanlon, suggesting separate versions would allow old editions to be sold off, so rolling upgrades might be a better business model. “It now makes sense to say ‘Here’s a licence for two and a half years, and there’s an obligation on us to provide you with new software ongoing’, which might prevent on-sales.”

However, there remains some confusion over which types of software were covered in the ruling, with the Business Software Alliance believing it only applied to software licensed in a specific way, although it said it was still reviewing the situation.

“There has been longstanding consensus that licenses for programs downloaded over the internet are not transferable. Today’s ruling disrupts that consensus,” said Thomas Boué, BSA’s director of government affairs in EMEA. “Nonetheless, we believe the ruling pertains only to the narrow subset of the market that involves downloads of software subject to permanent licenses.”