There's no such thing as "used software"

There's no such thing as "used software"

Summary: The EU high court got this one totally wrong. The reality is that selling used software is exactly the same as piracy.

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TOPICS: Software, Oracle
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The top EU court says you have a right to resell your downloaded software. According to Ars Technica:

The European Court of Justice has ruled that customers have a right to resell software they purchase regardless of whether the software was originally distributed on a physical medium or downloaded over the Internet. The ruling is a defeat for Oracle, which had argued that the court should uphold provisions in its license agreement prohibiting such transfers.

That's just silly. The software industry is right when it says software is licensed not sold. Software is in digital form so it never degrades. When you sell a car, or even a book, the physical degradation of the item takes care of valuation on the used market. But software is different. Once you buy it and use it, you have received what you paid for. Sellers of software licenses should be able to forbid their resale.


Topics: Software, Oracle

Steven Shaw

About Steven Shaw

Steven Shaw used to be a litigation attorney at Cravath, Swaine &gMoore, a New York law firm, and is now the online community managergfor eGullet.org and the Director of New Media Studies at thegInternational Culinary Center.

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36 comments
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  • Same thing as cars

    Why couldn't I resell the older version when I buy a new one?

    Maybe the bits don't degrade over time, but the usefulness of software may degrade over time as technology advance, so yes an older version can have a "second hand" value.

    I for one was a frequent buyer of second-hand software, mostly in games and on physical media (talking about PC versions, never had a gaming console). I could never get myself to pay over 60$ for a brand new NHL Hockey game and bought the second hand versions a year old for about 10$.

    I know Oracle software is a very different type with very different pricing, but as long as the original license is respected (except for what the judgement invalided like resell) like the number of seats and CPUs and stuff like that then I see no problem in reselling.
    lepoete73
    • Humorous too

      how Mr. Shaw sees things so crystal clearly. Oops, but not in line with those crazy Euros. lol

      "That's just silly. The software industry is right when it says software is licensed not sold."

      No room for debate here -- not when you have a vested interests to look after. Pffft.
      klumper
  • Are you forgetting the software update provisions for licensed users?

    Normally, a licensed user will receive software updates from the seller of a particular software product. (Some provisions in the EUA stipulate a time period where such updates "free of charge" can occur.)

    I'm no lawyer .. as opposed to you, Steven .. but it seems that when a persons "sells" his software, he is merely selling his "license" to that software and not the software itself. And, by extension, any support that a software company is responsible for in maintaining that licensed software.
    kenosha77a
    • I agree. Sure you can sell that license, and the media that goes with it

      but that doesn't mean that the software company has to honor any upgrade or support that came with the original purchase.

      Not all that different then non transferable warranties.
      William Farrel
    • But should a company be required to support an unauthorized transfer?

      What if, say, Oracle was to sell a one-time activation code for whatever the cost of the implementation is (for arguments sake, lets say $100,000)? The media is free...nothing can be done with it without the activation code. The code entitles the user to support -- it is the sort of thing a customer buys for his $100,000. The media itself -- no support. So while someone could theoretically buy used software, they could not, in fact, do much with it.

      If you're going to try and create a law that treats all software the same, from a used game to enterprise systems; vendors of the latter just have to be creative in how they actually sell their product. They can use methods that are not practical for mass-market items such as games or productivity suites. Designing their software so it cannot run without initial support -- then denying such support to a second-hand purchaser, is one way to handle this.
      jvitous
  • Well, Yes and No

    While from a logical standpoint I somewhat agree you have to realize the Pandora's box following your reasoning would lead to. What about used video games and the stores that sell them? Again the products maker is only getting paid once and yet more than one person is enjoying the very same product without degradation with no compensation to the maker. The same goes for places that sell used movies/cd's in digital formats. There are current models in place that somewhat assume that it is in fact legal to sell used digital content and overturning that notion would rattle quite a few companies.
    Yo Many0
  • Ridiculous argument

    Absolutely absurd argument. It's like saying that a Rembrandt is a "used painting" or the British crown jewels are "used jewelry".

    When phonographs first came out, the manufacturers claimed they were "licensing" the right to [b][i]use[/i][/b] the device, not [b][i]selling[/i][/b] the device. The courts quickly held that if the "license" price is basically the same as what similar devices [b][i]sell[/i][/b] for, it's really a [b][i]sale[/i][/b], regardless of what label the seller attaches.

    The real question is whether the second-hand seller will keep any copies, even "for archival purposes only". You don't get to sell your car and keep a "backup copy". Whether the software was delivered on physical media or downloaded, if the reseller gives away all copies, then it's a genuine sale. If the seller "keeps a spare" [b][i]then[/i][/b] it's piracy.
    Rick_R
    • I'd have to say "no", you can't do this...

      "The real question is whether the second-hand seller will keep any copies, even "for archival purposes only"."

      Following the same "liquid asset" logic, I would say that no, if we were to require software vendors to allow reselling of software, we would also have to make the provision that if you do resell your software, you give up *all* rights to the licenses you sell.

      If that means you no longer have access to your data, it is up to you to determine either a) alternate methods of storing that data or b) whether you really want to re-sell it or whether you want to hang onto it.

      Of course, if said software is an ERP system, for example, or other systems whose data you have a legal obligation to hang on to, this requirement may prevent you from re-selling your licenses anyhow.
      daftkey
  • Don't agree, there is no natural or economic law to argue either way.

    "Once you buy it and use it, you have received what you paid for." This statement is true for almost anything including intangible services and tangible goods. It does not address any concept of residual value.

    Copyright law is not natural, it is a socio-economic construct designed to balance the need to motivate creation of new works for money against the benefit of having intangible goods freely available for the public weal. Of course, the public doesn't pay for expensive lawyers and lobbyists, so today copyright law sits perversely skewed to benefit rights holders exclusively.

    The EU high court is taking a few tentative steps to undo the harm done to public rights over the last thirty years, but it's going to take a massive citizen backlash against click-through and shrink-wrap licenses to make Congress publicly ashamed enough to pass legislation to reverse the trends of infinite copyrights and abusive licenses.
    terry flores
  • @Steven Shaw, the EU may have 'got it wrong'

    But you're an American corporate attorney, so I doubt they care diddly-squat about what you think.

    Business attitudes in Europe aren't done the same way as over here, in case you didn't know...
    CaviarBlack
    • Right, and I'd still take the EU battering ram

      over OUR battering ram, the army of legalsleeze brats we call lawyers in this country. For no other reason than they've been so instrumental in running the USA into the ground, along with their kissing cousins the politicos, and of course their funders, the multinational corpo-rats and international banking houses.
      klumper
  • there IS such a thing as "used software"

    Reselling software is a common practice in the music industry, and is generally sanctioned by the music software companies. The difference is, most music software has some sort of copy protection, whether it's a dongle, such as the iLok, or an activation code. Selling "used" plugins online entails deauthorizing the software and updating the registration information with the software vendors, some of whom charge a fee to transfer ownership.
    buddhistMonkey
  • Of course there is such a thing as used software

    Used software is software that has been used and is now eligible for resale or otherwise. The EU just declared as a matter of law that it exists and thus it exists as in the EU. Property rights are whatever the law says they are, as interpreted by the courts.

    And your analogy is clearly false. Just like a car's value will degrade over time, so will a piece of software's value. All software is limited by versions and OS. If you buy a copy of, say, Word 95 tied into the Windows 95 operating system, eventually it will cease to have any value because eventually the benefits of upgrading to a new version will outweigh any potential savings by purchasing a used copy. Also, eventually the software itself will become obsolete as it will not be compatible with the present day OS. That or the OS may not even exist. Everything, even software, eventually becomes practically obsolete.

    But what about the stubborn user who holds onto old hardware and old OS? Well, using your car analogy they are no different than the enthusiasts who continue to maintain, operate, and sell vintage cars. The vast majority of cars produce from the 30s-60s have long since met their eventual value of 0 but for a small minority of enthusiasts who have continued to pour in work into the cars they continue to function and can even function perfectly. These vintage cars can also be resold, exchanged, etc. But these holdouts do not decrease the value of new cars as practically speaking it doesnt make sense for most consumers to hold off upgrading to the newest version. The same thing occurs and continues to occur with software, at least so long as the old business model of proprietary software avoids being wiped out by the open source and cloud computing business models.
    nategator
  • Well depends...

    The difference between things like movies and games as opposed to software, is that if you sell a DVD or a console game, you no longer have it, someone else does. Sure you can copy it and then sell it, but I believe that counts as unlawful reproduction and is against the law. With software on the other hand, you can install it, and then sell it. Assuming it isn't a product that requires online activation, you have essentially reproduced the software, except you're making money off of it. I believe this should be illegal.

    If all software required online activation, and you are able to 'un-activate' it, then I believe this would count as used software because it's not being copied every time it is resold.
    Matt Ziegler
    • There is no difference. I can "install" a movie on my computer or burn a "copy" of it and sell the original. Same difference. (And no, I don't think you should be legally allowed to sell a MOVIE or a piece of software if you DO NOT erase/destroy any and all copies you have of that MOVIE or SW)
      chadpengar
  • Oracle needs new lawyers

    On a side note, considering the fact that Oracle has lost some major legal battles, they should start looking for new legal representation...
    nategator
  • Of course there is such a thing as "Used" software

    If you are willing to give up the copy of your license and completely transfer it over to someone else, why should the software vendor have a problem with it?

    Just like the software vendors don't exist for the sake of helping people do their jobs, people don't exist just so software vendors can make profits.

    Let the software vendors sell their product to whoever is willing to buy them; and let the buyers decide whether they want to keep what they bought or sell it to another person (provided they give up all rights to use it and not keep a copy for themselves as well -- which, as another commenter pointed out, would be piracy, and hence, illegal)
    kushalsharma83
  • The Word Reality

    Copyright is an artificial construct. To copy is natural; it is how we learn and do. The governing bodies that define copyright, so as to provide some sort of business model for publication, are free to limit it as they wish. We'll quickly mention that you are a US attorney commenting on jurisprudence in Europe. Yes, that at the outset discounts your opinion on reality or obviousness or inappropriateness.

    While the scope of licenses do vary, ultimately our licenses are to copy the software onto the devices we own. Being chattel, these devices may be sold or lent, and it strikes me as absurd that the devices' new owners have to relicense when no additional copying takes place.

    I don't know where US law now stands; I believe that software publishers have successfully insisted that purchasers of computers as part of bankruptcies do not also acquire the licenses. While you may celebrate the win for the licensors, I also note the equal loss to the creditors as the debtor gets less cash from the liquidation.
    DannyO_0x98
  • Used software exists, whether you like it or not

    Software is like anything else. If I pay you for it then I own it, and it makes no difference whether it degrades, comes in a fancy packet, or not. I buy electricity from my local supplier and it isn't tangible, but I can use it as I see fit, including selling it - why should software be any different?

    I paid for it, I own it, and I can do what I like with it - it's that simple, and I'm glad the EU court had the intelligence to work that out. This "licensing" garbage is just a scam to "sell" something, grab their money, and then try and tell them what they can do with it. No wonder piracy is so prevalent. The software industry is like the music and motion picture industries, trying to use courts to command rulings to justify their outdated business models. Innovate or die!
    Kevin Newton
  • Software vendors want their cake and eat it too - EU got it right.

    Software vendors (and other IP companies) have the enviable ability to do work once, and then resell that work thousands of times. Now granted, that work that they do is incredibly expensive and comes with a huge up-front cost. Their whole business is built around a next-to-nothing incremental cost of sale. In Oracle's case, the incremental revenue for a single Database license is thousands of dollars.

    Now software vendors go further by disallowing a single license to be purchased for, say, a system serving 3,000 users. You have to buy 3,000 licenses (in some form or another), and sometimes even those licenses are by "named" user, so they can't even be split. The vendors rationalize this practise by saying that it is just like any other tool in a company's toolbox - you buy as many as you will need to use.

    All of the above, in my opinion, is actually fair.

    What the EU is basically saying is that this makes the license to use that software a tanigble asset, and should be liquid. I agree wholehartedly with this, especially given the fact that so many ISV's oversell licenses and functionality.

    In Oracle's case, this is for user licenses. The same should apply to software such as Windows or SQL Server CALs, or even seats for Dynamics GP systems.

    Case in point - if I have an enterprise system with 3000 seats, and I divest a part of my business and wind up only needing 1500 seats, I should be able to sell those seats to whomever would buy them (for example, the company buying the division I am selling). The best I can do is "delist" the 1500 seats I don't need so I'm not paying enhancement fees on it, but that's just like throwing those licenses in the can (not to mention, if I ever need more seats again, I have to re-buy them!)

    There is *NOTHING* special about software licenses that should make them non-transferable. Now enhancement plan agreements and support, that's another story. I would agree that a company buying software enhancement would have to pay an increased price for renewals if they have additional licenses they bought "used", and I would even agree if a vendor wanted to charge a "transfer price" if it were reasonable (10% of the license cost, or even a year's enhancement on the license fees would be resonable in my opinion).
    daftkey