ECJ asked to rule on re-sale of software licences

A German court has asked the European Court of Justice (ECJ) to clarify whether or not a company can sell second-hand versions of downloaded business software in a case involving software company Oracle. Oracle took action against usedSoft, arguing that that its sale of used licences for software is illegal. Customers who buy …

[despairing citizen]

Software Vendors taking the michael

If oracle win, does this mean that Ford, BMW, etc. will control the used car market?

Certain software companies quite frankly take the P!SS in the stuff they write into their contract terms.

Most major software vendor's EULA violate the unfair contract terms directive, which only protects private individuals, it would be nice to see this legislation expanded to protect SME from software companies whose legal services departments are larger than purchasing company's total staff head count.

[Anonymous Coward]

I thought I heard once upon a time

...that European law classified software licenses as an asset, whereas in the US they are just considered expenses. I'm not sure if that would mean anything to this case - IANAL and all - but restricting a business from divesting its assets would seem to be some sort of unfair restriction.

[I_am_Chris]

of course not!

You don't licence your car from Ford or BMW, do you? you buy it.

Why do people so often over stretch the car analogy when talking about software?

[Sabine Miehlbradt]

Nope

Car manufacturers sell tangible merchandise - not licences.

[Charlie Clark]

The power of precedent

AFAIK this is exactly the argument that German courts have already used when dealing with the resale of MS Windows licences: once purchased they belong exclusively to the purchaser and resale is allowed; and mod-chips for consoles and DVD-players are allowed. The click-through EULA has been declared invalid in Germany.

The producers know they haven't got much of a case but are determined to rake in as much as they can while they establish a new strategy of licence rental or SaaS. Limit the period of the licence and it quickly loses any value in resale.

[Anonymous Coward]

No...

You don't own most software, you just have a licence to operate it. So it would be like paying a hire company to use a car then selling the car - sort of - car analogies rarely work...

[Neil Milner-Harris]

@despairing citizen

No not at all, if you buy a car you are buying a product and it becomes your property once you have paid for it.

The issue here is the legal difference between buying a product (which everyone recognises then becomes yours) and buying a licence to use a product which is not the same at all.

IANAL so don't really know whether this is likely to fail or succeed at the ECJ but the answer is certainly not as simple as a lot of people (yourself included) think it should be.

Hopefully this ruling will sort that out so that we can all understand whether you are capable of owning a licence and therefore reselling it as you see fit.

[Anonymous Coward]

Once again, someone missing the point

If you LEASE a car from Ford, BMW, etc, you bet your hiney they control who you can sell it to.

If you LEASE an apartment, the apartment owner has a say in who you sublease to.

If you BUY a condo, you may have clauses that restrict who you can sell it to (e.g. an adult-only complex can lawfully in many jurisdictions prevent you from selling to a couple with children).

If you BUY a house; you pretty much have a free hand in who you sell it to.

It all comes down to legal restrictions.

You don't BUY software, haven't for decades. You LICENSE it. You can't transfer a license if the license specifically disallows transfers, as most do.

Many mainframe software licenses even prevent you from moving them to another location without permission, try THAT with your auto analogy!

[Sirius Lee]

And I'm disappointed my beer glass doesn't refill for free.

There's a big difference between a car and software. Cars rust and get old. Software doesn't. The car doesn't represent the entire IP (which also includes lots of manufacturing smarts) softwar does. You don't get automatic updates for you car making it last forever (if that's the business model) or the ability to upgrade to the latest model for a fraction of the original cost (wouldn't that be nice). You can 't get a 100% perfect copy of a car by typing 'copy' on the dashboard.

Until these disparities are resolved, I expect the court to uphold Oracle's position. And I disagree that "Most major software vendor's EULA violate the unfair contract terms directive" if it were true, the commission itself would have brought cases against software companies - which has not happened.

"Certain software companies quite frankly take the P!SS in the stuff they write into their contract terms"

And you don't have to buy their software if you believe that to be true. Or you could write your own or use an open source version.

[Anonymous Coward]

That's all very well

I take as my starting point that vendors can write more-or-less whatever they like in their licence terms, and the buyers can take it or leave it.

But the situation is a mess: if you're old-fashioned enough to buy a CD or a DVD, most of what you're paying for is the licence to the content, and yet you get to treat it like a 'thing' which you can re-sell. Why is a CD containing a digitized warbling of some pop star logically different from a CD containing the digitized rambling of some programmer?

[ElReg!comments!Pierre]

@ Sirius Lee

"Cars rust and get old. Software doesn't."

Oh yeah? Do you really think so? Maybe you need to think again then.

The analogy is actually better than it looks. As much as I usually hate car/software analogies, software does "rot" (bugs and security holes are discovered), and software does get old, too.

I might shell out some cash for a well-maintained year 2000 Toyota, but the salesperson trying to sell me a Win2K license had rather be damn sexy, and pay for the beer and curry, and have a very loose moral sense. And even then I'm not so sure.

"Or you could write your own or use an open source version."

Well, that I can agree with.

[8 Ace]

Not the same

You own the car, you licence the software. Mind you what's to stop Ford etc making their automotive s/w non transferrable.

[The Fuzzy Wotnot]

Interesting

I thought that Oracle licenses were generally a year-on-year agreement and almost all the Oracle software I have used has been serial-number free, so this sounds a little dodgy to me. Wouldn't want to be the poor sod who has bought second hand Oracle licenses and tried to get support from Larry's firm!

[Rolf Howarth]

Not sure

I don't know what the right answer is, but it's certainly not as clear cut as you imply. If you buy a *physical* item, like a book or CD, then you own that item and can pretty much do what you want with it (you can burn it, throw it away, sell it etc.), though even then there are limitations (eg. you can't play the CD over the tannoy at a shopping centre for example, or rent a DVD out for money). A software license isn't a physical item however, it's a license to do something specific, and could come with limitations. It's roughly analogous to renting a flat. There are lots of things you can do, but plenty your contract might say you can't (eg. subletting it, or keeping a dog, or whatever).

Imagine you're a software author, selling software to a customer. Should you be allowed to impose conditions in the contract, such as "only to be used for educational, or non-commercial purposes" (because you charge more for a commercial license). What about "not to be used by the military"? Not to be used unless you pay £x each year in support? Not to be used outside of the United Kingdom? Only to be used by customer X and not transferable to other users?

Which of these are reasonable contract conditions and which aren't? Which are so un-reasonable that they break the long established principle that businesses (not individual consumers) are capable of deciding for themselves what they want to agree to or not and as long as it's not blatantly illegal pretty much anything they agree to in a signed contract is enforceable?

[BristolBachelor]

This needs sorting

IANAL but I heard that this all stems from what a judge was once convinced.

The ruling said that when computer software is executed, then a copy is made (The machine code is copied into the instruction register to decode and execute it). This copying is subject to the rules of copyright, and hence the copyright holder can specify the conditions under which the copy can be made.

If this is true, it's beyond FK'd up. It means that I cannot listen to my CDs because the CD player makes a copy of the bitcoding. The same is true for records, and anyway all sound is copied as nerve impulses inside my head. Pictures and video too. Is this what the copyright laws were written to do? I thought that there was something in the copyright laws that allow

Now, if someone says that it is impossible to transfer the licenses, then it means that the software has ZERO residual value. Does that mean it cannot be a capital purchase? Does it no longer become an asset? What does that mean about tax on depreciation of assets?

The software companies take the piss. According to them: You can't sell what you've bought. You can only use it the way they say. They own anything you make using their software (MS). It is not subject to sale-of-goods act fitness for purpose. You cannot return it for refund if it doesn't work.

[ElReg!comments!Pierre]

Good.

If I remember correctly the music megacorp lobby tried to pull the same trick on used CD shops, and failed. I also believe that the transferability clause in MS' licenses is here for a reason (MS are not known for their philanthropic bias). All signs point to Oracle being en route for a long-deserved spanking, and all that crap about user-tied license as well.

[Yet Another Anonymous coward]

@Software Vendors taking the michael

In theory yes - in practice no. The public and bandwagon jumping politicians would care about that - since it affects them, they don't care about B2B.

It could affect cellphones though if Apple decided you couldn't sell your fondleslab used.

Biggest effect is probably accountants and tax, if you can't sell software it's not an asset, so a whole bunch of depreciation stuff doesn't apply.

[Dazed and Confused]

2nd hand SW

I thought the German courts had been through this before stating quite categorically that it WAS legal to resell SW in Germany and that the EULA wasn't worth the shiny stuff it was written on. I'm sure that digging back through El Reg's archives would find references to a judge there saying he would deal most harshly with any more SW houses that tried this one on.

UK courts have also in the past thrown out license agreements, even proper ones that needed to be signed not the sort of useless after the contract via sale sh!t that most of these crooks claim has some validity. DEC tried to stop the transfer of VMS licenses with 2nd hand VAXs and were told that the customer was perfectly at liberty to sell on the license regardless of the wording.

Books also often have a paragraph at the front that says that it is illegal to resell or lend them. Funny how there are so many 2nd hand bookshops around and that they've never been closed down for breaching the "license" in the book. There is a principle of right of first sale. SW houses have for years been getting away with insisting that somehow SW is different and that the law simply does not apply to them and that they can stomp on people rights.

I hope the courts finally tell them where to get off. They probably won't, the likes of Oracle are too rich and so have too many "friends" in their back pockets to be so easily dealt with. But hey we can always dream.

"despairing citizen" point about cars is well placed. A modern car is as dependant on the software inside it as any computer is. If Oracle can claim that reselling their software is illegal then there would be nothing to stop the likes of Ford et al to included an EULA in the engine management system and they could then refuse to transfer the license to a new owner.

[Richard 12]

Wrong - Books do not say you can't resell or lend them

Boilerplate on the front cover of a book published 2010:

"All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of the publisher, nor be otherwise circulated in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser."

What does that mean?

Note the particular phrasing of the second part - that is saying "You can't strip the book cover and sell it. You must sell it with the same cover it had when you bought it."

The reason for that particular requirement is historical - paperbacks used to be published in bulk and sent to booksellers. If the booksellers didn't sell them all, they'd rip off the cover and send that back to the publisher for credit, and recycle the pages themselves.

That clause allows the publisher to both forbid and easily detect the selling of the books after the bookseller has ripped the cover off. Hence a dodgy vendor can't get a refund and sell the book as well.

[Anonymous Coward]

books (do have titles. comment replies don't)

"Books also often have a paragraph at the front that says that it is illegal to resell or lend them."

... in a different cover.

Not quite as restrictive as you imply.

[Ken Hagan]

Re: taking the michael?

Are you saying that it shouldn't be possible for a copyright holder to issue a non-transferable licence?

You may have a point, but I'd be surprised if the current law agrees with you and I'd prefer if changes to the law were made by a parliament rather than a judge.

[Robert E A Harvey]

Bout time

About time this was sorted out.

I worked in a company that counted each boxed set of MSoffice as an "asset", and didn't even depreciate it year on year (It can't wear out, can it?). I suggested to the director responsible that he take half a dozen of them and try selling them. He got about a penny in the pound. Then I showed him the licence. People have been spending money on something they don't own for years, and it is time that a few company directors got smacked in the face with a cluebat over it.

Personally I think that usedSoft were always taking the piss, and knew it all along. What they were doing is just plain not allowed. (it might not be /wrong/, but it is not allowed).

My idea is that this will stir this particular shit-pool and people will finally recognise the stink.

[Dennis Healey]

So what happens when

So what happens when you buy the company including the computers - does it cease trading until the software is re-bought?

[Robert E A Harvey]

yes?

That's what DEC tried to tell us when APV sold Baker Perkins to Rockwell.

There were some serious discussions, and I believe some money was, in the end, paid.

[Anonymous Coward]

Spin on the car analogy

...be careful defending the vendors.

People say you BUY a car but License software.

Now what happend if all the car manufacturers got together and said, you no longer are buying a car, mearly licensing it's use? Terms of that license include only driving in dry conditions, using Shell petrol and having only the manufacturers dealers fix it. Otherwise all support (including spares) are null and void.

[Ken Hagan]

Re: Spin on the car analogy

"Now what happend if all the car manufacturers got together and said..."

Er, they'd have their arses sued clean off for anti-trust violations, *then* they'd have their shiny new licences ruled unfair *in some jurisdictions), *then* they'd face actions from customers who wanted maintenance on their "licensed" cars (in others), *then* at least one of them would realise that they could wipe the others out by breaking ranks.

[Rolf Howarth]

Car analogy

Bad example. Lots of cars on the road ARE licensed and not sold, and they DO specify what you can do with them. Check the small print in any contract hire or leasing agreement.

[Anonymous Coward]

License agreements

If a consumer signs a License Agreement that states the license is not transferrable *before* the consumer pays the consideration, then the agreement may be enforcable.

However, any so-called "EULA" terms that are presented after consideration has been made are unenforcable since they do not form part of the contract.

[bertino]

One off fee

If you pay X pounds for some software that has no fixed term, e.g. time unlimited, then you should be able to sell it on at any point. Even for a year on year license, if you have 6 months left you do not need you should still be able to sell that on for the remaining 6 months.