EU second-hand software ruling could prompt tightening of licensing laws

The software industry is tipped to respond to the European Court of Justice's declaration that digitally distributed software can be resold as new by tightening up its licensing laws.

The EU court released a statement yesterday, announcing the result of an ongoing legal spat between software giant Oracle and German software license reseller UsedSoft.

The vendor took umbrage against UsedSoft's strategy of reselling software licenses acquired from Oracle customers, and brought legal proceedings against the firm in the German courts.

The opportunity to sell-on their software creates options for businesses to cut costs directly.

But, the court ruled in UsedSoft's favour, claiming the software vendors have no right to oppose the resale of software, even if it is prohibited by its licensing agreement.

"The principle of exhaustion of the distribution right applies not only where the copyright holder markets copies of his software on a material medium, but also where he distributes them by means of downloads from his website," said the Court of Justice in a statement.

"Where the copyright holder makes available to his customer a copy and at the same time concludes a licence agreement, granting the customer the right to use [it] for an unlimited period, that rightholder sells and thus exhausts his exclusive distribution right."

The court's verdict may not be binding at this stage, as the German court still needs to return its judgement, but if approved could have dire consequences for the software industry.

In an alert to subscribers, Angela Eager, research director at analyst house TechMarketView, said: "With mid-tier and cloud vendors already posing a threat to established vendors like Oracle, the incumbent providers have a lot to lose."

This was a view backed by Andy Trish, managing director of Microsoft software supplier NCI Technologies.

"This could be devastating news for the vendor community," he told IT Pro. "End users will have no idea if their software is legal and virus-free and vendors will still be responsible to ensure they are."

Meanwhile, Eager said the ruling could pave the way for the development of a second-hand software market.

"One of the tasks occupying many enterprises is how to reduce the cost of Oracle (and other vendor) deployments in light of reduced workforces and changes to businesses that render certain software unnecessary," she said.

"The opportunity to sell-on their software creates options [to cut] costs directly."