The knock on effect of the EU decision on reselling software

Summary:The EU rules that downloaded software can be resold. What's the potential impact going forward?

David Meyer reports that:

Oracle has found itself on the losing side of a judgement by Europe's top court, which ruled on Tuesday that software licences can be sold on a second-hand basis, even when the software in question is downloaded rather than sold on physical media.

Crucially for enterprise buyers, the court also said:

Oracle, which makes a vast proportion of its revenues from maintenance agreements as well, had tried to argue that it does not sell software as such, only licences. However, the court effectively backed up Bot's opinion that this was an "artificial distinction".

The court even went so far as to say that the resold copy of the software could benefit from the updates and bug fixes that come with any maintenance agreement made between Oracle and the first person or company to buy the software.


Meyer's post suggests that if upheld, this argument opens the door for a large second hand market. That may be true or it may not because as the article points out, there is still wiggle room for Oracle to appeal the decision. But it does open up some interesting possibilities around how companies license (sic) software they are not putting into the cloud over the next few years. 

One recurring problem lies in the fact that when buyers make new software acquisition decisions, they are rarely certain how many seats of a software they really need. That often leads to one of two scenarios:

  • Overbuying and the inevitable shelfware problem
  • Underbuying and being forced to relicense (sic) at higher than inticipated cost. 

Neither scenario is appealing. However, I can see a situation where buyers that are in need of new licenses could go out to a second market for additional seats. In extreme cases, they might even go out to a second market to acquire where they would have otherwise gone to the vendor. Personally I doubt the latter scenario holds much promise though it would be tempting to deliberately underbuy in the expectation I could either negotiate around or buy via a second market at some point in the future. If buyers can do so in the expectation that at least some maintenance is accrued along the way then there is the potential to at least make savings in the short term. 

This only applies in Europe because following the Vernor v Autodesk decision, US buyers were effectively put into a position where, subject to contracts that fall into the 'all you can eat' category, they only license but do not own software capable of being transferred in second markets. But...that opens up yet more possibilities.

Astute buyers will already know that with a bit of effort, software licenses can be acquired at differrent prices in different geographies. Now think of the possibilities this might bring to second markets that are outside US legislative control. 

I can imagine a good number of US types getting up on their hind legs on this one, saying that the Vernor case made a great deal of sense in the context of a market that is moving towards rental models. But that misses the point. What the EU court has done but which the US courts singularly failed to do, is protect the rights a consumer believes they have acquired.

What do you think? Is this a watershed case or will wily lawyers at enterprise vendors get busy dreaming up new ways to ensure revenue protection in a commoditizing world? My bet is on the latter and more legal wrangles. But in the meantime, this along with the Oracle/RiminiStreet case provide interesting pointers to the polarizing effect that disruptive business models are having upon the incumbent vendors.  

Image credit

UPDATE: As I thought, US types got on their hind legs . Pity the argument's logic is utter nonsense. 


Topics: Enterprise Software, Oracle, SAP

About

Dennis Howlett has been providing comment and analysis on enterprise software since 1991 in a variety of European trade and professional journals including CFO Magazine, The Economist and Information Week. Today, apart from being a full time blogger on innovation for professional services organisations, he is a founding member of Enterpri... Full Bio

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