Will the EU's used software ruling affect Australia?

A European Court of Justice's ruling on the sale of second-hand software may not have direct legal ramifications in Australia, but it highlights the need for the country to address the issue, according to experts.

Oracle sued German pre-owned software licences reseller, UsedSoft, for buying licence keys for programs and then selling them on, instructing buyers to download software directly from the Oracle's website, to then use with the keys. Despite UsedSoft obtaining the software licences legally, Oracle considered the second download of its software a copyright infringement.

While Oracle had stipulated that a user cannot transfer the licence in the initial download, the Court ruled the "exclusive right of distribution of a copy of a computer program covered by such a license, is exhausted on its first sale". This means that software vendors have no right to restrict the on-selling of its products, after that point.

With the advent of digital software distribution, the issue of ownership has become increasingly muddled. Physical copies of software are fine to resell, as evident in the video games industry, but a number of software products now require an additional end-user licence to run, which restricts second-hand sales.

There is currently nothing in Australian law that prevents vendors from using these licence restrictions, which has stopped a second-hand software market from being established.

But with the Federal Government recently launching an inquiry into the cost disparity between IT goods sold locally and overseas, Australia seems ripe for an evolved second-hand software industry, according to Queensland University of Technology law lecturer Dr Nicolas Suzor.

"Consumers are now in a position where sometimes it's just as expensive to get a digital version, and you're left with less rights than you would have in purchasing a physical version," he told ZDNet Australia. "There is no way to resell a digital copy of software in a secondary market in Australia, so consumers are upset."

The direct impact of the decision in the Oracle v UsedSoft case to Australia is minimal, as it was made under a different jurisdiction. But the judgement may prompt Australia into action in terms of updating the country's Copyright Act.

"The difficulty with our Copyright Act is our amendments to it are often a few years behind technological development," Hall & Wilcox IP and technology partner Ben Hamilton told ZDNet Australia. "What I think this decision does is highlight the fact that this is an issue that needs to be looked at carefully, in particular, the issue of whether second downloads are permitted under the existing defences of our Copyright Act."

The problem is that the defences and exemptions contained within the Copyright Act are extremely prescriptive — there is no general defence under which used software sales might fall.

"There is not much room to move if the downloads don't fall within those specific exemptions," Hamilton said. "These defences can be extremely technical, and their full application is probably not tested."

Maddocks law firm partner in the ICT team Robert Gregory said that the European Court ruling has indirect relevance to Australia.

"You see ,quite often, a business model being used overseas, in this case, UsedSoft's model in Germany, that seems to be working, will inevitably be adopted in Australia," he said. "When somebody starts doing something like that in Australia, there will probably be a test to its legitimacy under the Copyright Act here."

The Australian Law Reform Commission (ALRC) is conducting an inquiry into whether exceptions in the Copyright Act are adequate, as we move into the digital age. A report is due to be released by November 2013.

Gregory, who is also a director for the Internet Society of Australia (ISOC-AU), said that there is definitely room for broader exceptions to be included in the Copyright Act.

"What we tend to talk about is a flexible fair use exception for copyright," he said. "At the moment, there is a lot of things we know people do that does infringe copyright, but then the issue of whether it does real economic harm to the owner of copyright is debatable, at best."

Suzor does not expect there to be a legal change to address complications surrounding copyright and digital downloads for some time, but said software vendors will eventually be forced to act.

"Software companies are worried if they permit a second-hand market, there will be increased rates of infringements, because some unscrupulous consumers might sell access to digital copies, but retain access themselves," he said. "But publishers will either have to facilitate a second-hand market or radically alter the price of digital downloads."

"The second-hand market has always been a really important part of the copyright balance, giving consumers affordable access to new copyright material and fundamentally helps disseminate that material, which is a really important part of copyright systems."