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.
The decision of the Court of Justice of the European Union (CJEU) applies to the whole of the software industry operating within the EU, not just Oracle and UsedSoft, the German reseller that Oracle sued. It follows an opinion in April by CJEU advocate-general, Yves Bot, who also said that the same resale rights should apply to downloaded software that apply to software sold on CDs or DVDs.
"Where the copyright holder makes available to his customer a copy — tangible or intangible — and at the same time concludes, in return [for] payment of a fee, a licence agreement granting the customer the right to use that copy for an unlimited period, that rightholder sells the copy to the customer and thus exhausts his exclusive distribution right. Such a transaction involves a transfer of the right of ownership of the copy," the CJEU said in a statement (PDF).
The door for the trade in used software has been pushed wide open throughout the European Union - UsedSoft
"Therefore, even if the licence agreement prohibits a further transfer, the rightholder can no longer oppose the resale of that copy."
The court added that allowing different rules for downloadable software "would go beyond what is necessary to safeguard the specific subject-matter of the intellectual property concerned." However, Oracle disagreed.
"We think the Court of Justice of the European Union has missed a significant opportunity to send out a clear message about the value of innovation and intellectual property to the European economy and European businesses," the software giant said, while claiming that "unnecessary risks for users obtaining software through secondary channels who do not know for sure if the licences had been obtained legally by the first user need to be prevented".
Final judgement pending
Oracle has still not technically lost the case, as the final judgement will be up to the German court that asked the CJEU to help it out, but the CJEU's ruling is almost certain to form the basis of that final judgement.
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.
"Even if the maintenance agreement is for a limited period, the functionalities corrected, altered or added on the basis of such an agreement form an integral part of the copy originally downloaded and can be used by the acquirer of the copy for an unlimited period, even in the event that the acquirer subsequently decides not to renew the maintenance agreement," the court said in its ruling.
However, the CJEU did place two limitations on the resale rights, both of which apply to what UsedSoft has been doing. In cases where the 'first acquirer' had bought a licence covering more users than needed, the court said they could not then divide the licence and "resell only part of it".
"Furthermore, the Court states that an original acquirer of a tangible or intangible copy of a computer program for which the copyright holder's right of distribution is exhausted must make the copy downloaded onto his own computer unusable at the time of resale," the CJEU added.
UsedSoft said the decision meant "perfect legal safety on the market", according to a statement quoted by Deutsche Welle.
"The door for the trade in used software has been pushed wide open throughout the European Union," UsedSoft said.