Microsoft fails to quash second-hand software market

UK-based company Discount-licensing.com claims it is still able to sell second-hand Microsoft software, despite attempts by the software giant to stop such transactions
Written by Colin Barker, Contributor

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 Discount-licensing.com 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 ZDNet.co.uk 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.

ZDNet.co.uk 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 ZDNet.co.uk, "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".

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