The advantages of buying used software are clear, but when someone hears about this concept for the first time, oftentimes they question the legality of the products. Let us guide you through the legal background of used software, so that you can see for yourself that if all conditions are met, there’s no reason for any concerns in this regard.
Please note that all information on this page applies only to the European Economic Area (member states of EU and EFTA).
What does the law say about selling used software?
The situation regarding the legal background of used 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.
The CJEU judgement in Case C-128/11 UsedSoft GmbH v Oracle International Corp. says that “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.”
This means that the sale of “used” and redundant 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.
Conditions for the transfer of software ownership
As you can see from the information above, selling used 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 he/she fully pays for it.
Not in use by the first owner
The first owner doesn't stop being the owner of the software product until he/she uninstalls it and makes it unusable for him/herself.
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 will happen in case of a software audit?
In case of a software audit, it is important that you have all necessary documentation for the used 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.
Legal history of used software
In case you would like to learn more about the major court decisions and EU directives that influenced the situation on the market with used software, take a look at the overview below.
The German Federal Court of Justice decided 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.
The EU Directive 2001/29/EC released in May 2001 harmonized the exhaustion of copyright, which the whole concept of used 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 the Directive 2001/29/EC
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.”
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.
“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.”
“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.”
“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.”
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 used 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”.