In an eagerly-awaited judgment, the Court of Justice of the European Union (CJEU) has held that the first sale doctrine applies to digital copies of software sold in the European Union or European Economic Area.
In Luxembourg on 3 July 2012, the CJEU held that the resale and use of used software is permissible under European copyright law. The Court found that, under the first sale doctrine, which is part of the Computer Program Directive (Council Directive 91/250/EEC on the Legal Protection of Computer Programs), there is no difference between physical copies on a data carrier and digital copies distributed online. As the legitimate owner of the digital copy, a purchaser of used software is even allowed to download updates from the software vendor’s website.
The CJEU ruling is an important milestone in the legal battle between Oracle, the well-known vendor of enterprise software, and usedSoft, a European company that specialises in trading in used software. UsedSoft had offered for sale used copies of Oracle’s database software that had been purchased originally as a digital copy and not on a physical data carrier.
Oracle won an injunction against this practice at the Munich I Regional Court on 15 March 2007 (case no. 7 O 7061/06), which was upheld by the Munich Upper Regional Court (the court of appeals) on 3 July 2008 (case no. 6 U 2759/07). Upon usedSoft’s further appeal, the German Federal Court of Justice made a reference to the CJEU (decision of 3 February 2011, case no. I ZR 129/08) for an interpretation of the Computer Program Directive.
Although the German Federal Court of Justice has yet to make its final ruling, its decision is predetermined by the CJEU’s binding interpretation of the Directive.
The CJEU’s Interpretation
The CJEU explained that restricting the first sale doctrine to physical copies of software would allow software vendors to control the resale of digital copies of software sold with a permanent license and downloaded subsequently from their website. The vendor could then claim additional remuneration on each resale, in addition to the price paid by the original acquirer of the digital copy. This would go beyond what is necessary to protect the copyright in the software.
Furthermore, the CJEU ruled that the first sale doctrine also applies to upgrades and updates made available to the original purchaser under a maintenance contract that is limited in time. These corrections or additions form an integral part of the digital copy and can be used by the customer for an unlimited period.
Finally, the CJEU clarified that the second purchaser, as a legitimate owner of the software in terms of the Directive, is entitled to make further copies that are necessary to run the software. This includes volatile copies made in the main memory of the computer as further downloads of the current version from the vendor’s website.
The Court held, however, that the first sale doctrine would not allow for the splitting of licenses and the separate sale of the individual parts. The CJEU also concluded that the original acquirer would not be permitted to retain a working copy of the software upon resale.
As a result of the CJEU’s decision, software vendors will have to consider new technical measures as well as new distribution models. When software is purchased through the App Store and other, similar online distribution platforms, the use of the software is linked to the user account of the original buyer. While a resale may be legal, the downstream purchaser of a used copy is not then able to run the software under his or her own user account. Some vendors are also introducing subscription models, charging only a monthly fee for the use of the software. In these cases, there is neither a first sale nor a purchase price that could be saved by buying used software. The final word on this subject has not yet been spoken.