Legal background of secondary software
Please note that all information on this page applies only to the European Economic Area (member states of EU and EFTA).
Conditions for the transfer of software ownership
The situation regarding the legal background of secondary software has been developing gradually over a long time. It eventually resulted in a very clear decision by the Court of Justice of the European Union (CJEU) in 2012 which confirmed it is legal to sell previously owned software.
According to the CJEU judgement in Case C-128/11 UsedSoft GmbH v Oracle International Corp.:
An author of software cannot oppose the resale of his ‘used’ licences allowing the use of his programs downloaded from the internet. The exclusive right of distribution of a copy of a computer program covered by such a licence is exhausted on its first sale.
– Excerp from Press Release No 94/12 of the Court of Justice of the European Union, 3 July 2012
This means that the sale of the so-called “used” software products is legal. This judgement created a safe, legal framework for the whole European Union ensuring a fair and healthy competition on the European market.
The judgement also states that:
Perpetual software can be traded freely = the ownership right can be transferred from one acquirer to another.
The distribution rights of the producer are exhausted upon the first sale of the software. Customers who bought a computer program on a free market are entitled to use the purchased software and then sell it further (for example to a software broker such as Forscope) provided that they uninstall it and no longer use it.
Even if the resale of software is specifically forbidden by a license agreement between the manufacturer (= the copyright holder) and the first acquirer, the manufacturer cannot oppose the resale of that copy. The license agreement is subject to the European law and points which are in conflict with the European law are void.
There is no difference between the manners of distribution. Software can be distributed by a physical carrier (e.g. CD, DVD) or online (= digitally). The copyright holder cannot demand remuneration for further resale of the software copy because the appropriate remuneration was obtained during the first sale.
What documents do our customers receive?
As seen above, selling secondary software is legal. However, you should keep in mind that the transfer of ownership still has to meet clearly set conditions.
Perpetual products, no subscriptions
The possibility to transfer ownership doesn’t apply to subscriptions as the acquirer is not the owner of the product (software is only rented for a limited time).Fully paid for
The acquirer doesn't become the owner of the software product until they fully pay for it.Not in use by the first owner
The first owner doesn't stop being the owner of the software product until they uninstall it and make it unusable for themselves.Only within EU and EEA
The conditions for resale differ across countries and the EU can only control the conditions for products that were first sold and are being traded within its market.
What happens in case of a software audit?
In case of a software audit, it is important that you have all necessary documentation for the secondary software products that you’ve purchased. If you don’t, you are putting your organization at high risk of a fine. Our company provides complete ownership documentation for the products that we offer (Declaration of uninstallation, invoice, and other legally required documents) as well as audit assistance if needed, so there’s nothing to worry about. We have never come across a single case of negative ruling in a software audit of the products that we provide. You can read more about audits in our article.
What does the media say about the legality of secondary software?
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EU court: Sale of used software licenses is just fine. The European Court of Justice says that the rule applies to copies of software both on physical media and downloaded from the Internet. The court also said that once a software company sells “a copy of a computer program,” its “exclusive right of distribution” is eliminated, paving the way for other companies to sell the used licenses. | What this means is that, under EU law, software companies have no right to prevent users from selling their digital downloads to others; effectively, the software distributor’s rights to control distribution are exhausted after the first sale. So if you download a piece of software, you can effectively re-sell it – as long as you delete the copy on your own hard drive. | Europe’s highest court ruled that the trading of “used” software licenses is legal and that the author of such software cannot oppose any resale. This ruling sets a precedent for trading of used software licenses throughout the European Union. |
Legal history of secondary software
All major court decisions and EU directives that shaped and influenced the secondary software market are listed in the timeline below – click on each title for detailed information with links to relevant external documentation.
2000 – German Federal Court of Justice
The German Federal Court of Justice ruled that a computer program (OEM version) which has been placed on the market by the manufacturer or with his consent can be distributed further even without the associated hardware.
– Decision of the Federal Court of Justice of 6 July 2000, file no. I ZR 244/97 (in German)
2001 – EU Directive 2001/29/EC
The EU Directive 2001/29/EC released in May 2001 harmonized the exhaustion of copyright, which the whole concept of secondary software is built on.
The first sale in the Community of the original of a work or copies thereof by the rightholder or with his consent exhausts the right to control resale of that object in the Community.
– Excerpt from Directive 2001/29/EC
2005 – Supreme Court of the Netherlands
The reference for a preliminary ruling from the Hoge Raad der Nederlanden (Netherlands) in Case C-41/04 Levob Verzekeringen BV, OV Bank NV v Staatssecretaris van Financiën from May 2005 states that:
The bringing into circulation in the Community of a copy of a program by the rightholder or with his consent exhausts the distribution right within the Community of that copy (Article 4(c), second sentence, of Directive 91/250). Consequently, the first acquirer may effectively transfer ownership of the reproduction to a third party without the need for the author’s consent. The first acquirer may therefore dispose of the tangible property as owner.
As the lawful acquirer of the original data carrier, a third party is also authorised to use the program recorded on the carrier in accordance with its intended purpose. A contractual prohibition on the transfer of the right of use, which the manufacturer has agreed with the first acquirer, is not binding on third parties.
2006 – Regional Court of Hamburg, Germany
The Regional Court of Hamburg has confirmed that the exhaustion of copyright applies also to individual copies of a computer program acquired via the Microsoft volume licensing agreements.
– Regional Court of Hamburg judgement in case 315 O 343/06 (in German)
2009 – EU Directive 2009/24/EC
“The first sale in the Community of a copy of a program by the rightholder or with his consent shall exhaust the distribution right within the Community of that copy, with the exception of the right to control further rental of the program or a copy thereof.”
– Directive 2009/24/EC of the European Parliament and of the Council
2012 – Court of Justice of the European Union
“An author of software cannot oppose the resale of his ‘used’ licences allowing the use of his programs downloaded from the internet”
The exclusive right of distribution of a copy of a computer program covered by such a licence is exhausted on its first sale
Moreover, the exhaustion of the distribution right extends to the copy of the computer program sold as corrected and updated by the copyright holder.
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.
– Court of Justice decision, Case C-128/11 UsedSoft GmbH v Oracle International Corp.
2014 – German Federal Court of Justice
The German Federal Court of Justice ruled that individual licenses which are sold via volume licensing channels in bulk (but are treated as separate and with independent rights of use) can be split and resold to different purchasers.
– Decision of the Federal Court of Justice of 11 December 2014, file no. I ZR 8/13 (in German)
2016 – Court of Justice of the European Union
The initial acquirer of a copy of a computer program, accompanied by an unlimited user licence, may resell that copy and his licence to a new acquirer.
– Court of Justice decision, Case C-166/15 Aleksandrs Ranks and Jurijs Vasievics
2016 – Westphalia Public Procurement Chamber, Germany
In its decision from March 2016, the German Procurement Chamber in Westphalia assessed a case in which several core principles of public procurements were violated by the ordering party (which factually excluded secondary software suppliers from participating). The Chamber, among other things, stated that:
Demanding a specific type of contract [SelectPlus between the Federal Ministry of Internal Affairs (Bundesministerium des Inneren, or BMI) and Microsoft in this case], which only allows certain manufacturers into the tender, contradicts the principles of the Public procurement law such as fair competition, transparency and equal treatment.
The ordering party’s requirement of “new licenses”, thus the exclusion of “used licenses”, directly violates the German Public procurement law.
Determining a specific origin, product, or technology is prohibited under the Public procurement law. The ordering party is obliged to set the procurement subject matter product-neutrally.
The technical specification cannot refer to a specific production, origin, brand, patent, type etc. if doing so favours, or excludes certain companies, or certain products. If the procurement subject cannot be described with sufficient precision and in a generally understandable manner, it should include the addition “or equivalent”.