A recent ECJ decision has endorsed the right for licensees to ‘resell’ their licensed ‘second hand’ software across Europe. This is dependent on the original licence term having been perpetual and regardless of whether or not the original licence prohibited onward sale. This position is based on the doctrine of ‘exhaustion of rights’.
This decision also has retrospective implications, apparently validating the ‘resale’ of any software which was ‘sold’ on a permanent basis. Yet the software can only be used by the ‘purchaser’ for the purpose for which it was originally bought as stipulated in the licence. However, the law of exhaustion does not apply to support contracts which are separable from the contract of sale. Therefore the transferee will generally not be entitled to support under the original contractual arrangements.
Options for software suppliers
Companies wishing to maintain an element of control over distribution of their software should look to provide time limited licences paid for periodically. Cloud based services might be a good option for software providers worried about the exhaustion of their rights as software is provided on a subscription, rather than sale basis. Another option is selling licences to groups of users as it was made clear in the ECJ ruling that these licences cannot be split for the purposes of sale.
For more information, please contact Simon Halberstam.