Microsoft fails to quash second-hand software market

Microsoft fails to quash second-hand software market

Summary: UK-based company claims it is still able to sell second-hand Microsoft software, despite attempts by the software giant to stop such transactions

TOPICS: Tech Industry

A UK company that specialises in second-hand software claims to have found a loophole in Microsoft software licensing that has enabled it to continue trading five months after the software giant attempted to stamp out the practice.

UK-based has been trading since 2005, selling pre-owned Microsoft software that has come on to the market because of bankruptcy or other issues.

Speaking to this week, Discount-Licensing (which used to trade under the name Disclic) discussed how it has continued to trade despite Microsoft's decision in October 2007 to introduce a clause into its software licences to make the re-selling of licences expressly forbidden.

Following the Microsoft changes, Discount-licensing employed lawyers to look at Microsoft's old and new terms and conditions. "That was where we found that it benefited us," said Noel Unwin, director of Discount-Licensing. "All our advice told us you cannot backdate a contract, which meant that we were free to continue reselling software licences with the previous terms (disused licences purchased before October 2007) for many years to come."

Microsoft has communicated with Unwin via email but has raised no specific objections to the company re-selling application licences that pre-date the 2007 changes, he claims. "We have asked Microsoft for any comment they may have at every step on the way," said Unwin. "So far they have not said we are doing anything wrong."

Discount-Licensing acts as a link between companies who have second-hand software to sell and potential buyers. The company only deals in applications software, such as Exchange or Office, rather than operating systems such as XP, according to Unwin. contacted Microsoft for clarification on whether second-hand software licence sales of this type violated its terms but the company did not reply in time for this article.

Discount-Licensing's model works when Company A — because of internal changes, bankruptcy or some other reason — has spare licences for Microsoft software. Company A contacts Discount-Licensing, which then establishes that the software licensing is Company A's to sell and not stolen or otherwise illegal. Discount-Licensing advertises the product on its website; Company B sees the availability and wants the software licensing, and Discount-Licensing sets up a transaction.

Rather than Company A selling its Microsoft licences directly to Company B, the actual transaction involves Company A setting up an intermediate company that is then sold to Company B — along with the software licences, explained Unwin.

Discount-Licensing will not touch the transaction, which becomes a straightforward transfer from Company A to Company B. The software licences are sold at a percentage of the full cost with Discount-Licensing taking a broker's percentage for setting up and handling the transaction. The all-important Microsoft product keys are supplied as part of the deal, and Company B can start running its new application.

"There is a busy trade in disused software licence stock, which I believe will now grow exponentially with the pre-owned Select licence market", Unwin told, "and with older versions of software, such as Office 2000, which is really popular".

Microsoft defines its Select License as being aimed at organisations with 250 or more desktop PCs, and based on a "forecast licensing model in which usage is measured against the forecast".

Topic: Tech Industry


Colin Barker is based in London and is Senior Reporter for ZDNet. He has been writing about the IT business for some 30-plus years. He still enjoys it.

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  • I have a query on this one.

    "... introduce a clause into its software licences to make the re-selling of licences expressly forbidden."

    If I buy a product, I own it. If I decide to sell it again, I can. Are we now saying that corporations can change, or overwrite, the whole concept of ownership of a purchased product? Aren't there laws about this?

    Are 'Terms and Conditions' now more governing than the law? Or is there something in the law that allows them to be?

    And why are we putting up with being given 'Terms' to comply with that stop us re-selling our goods second-hand, and at the same time say that if the product doesn't work or causes damage the company isn't liable?

    It seems to me that they're having their cake, eating it, and giving us the washing up.

    I use Ubuntu now and wouldn't mind selling my XP licence that I've legitimately paid for and therefore own.
  • It is only true up to a point

    Thanks for the talkback. The first point to be clear on is that all you buy is a license to use the software. The software is owned by Microsoft and they will always own it.
    Your license is subject to the terms and conitions set out by Microsoft. Until October 2007, Microsoft did allow the transfer of these licenses (look for the Ts&Cs on the Microsoft web-site which you will find underlicensing).
    So assuming you bought your software before the deadline, and as it is XP we are talking about we can assume you did, then you can sell the software.
    However, it may not be worth a great deal. You can look for second-hand Microsoft software on the web. The site is a good place to start except that they only deal with large multiple licenses. Nevertheless, it does contain a lot of general informaion that might be useful.
    One word of warning. There is a lot of stolen software out there that could get you into trouble very quickly so the usual replies. They are simply to be very careful about dealing with any company until you have made some checks into their validity, how long they have been in business, the information on their sites must be genunine and not just appear that way and so on.
    Colin Barker