EU court ruling on software resale could shake up apps stores

The ruling is unlikely to prove a major boon to customers, though

Last week's European court ruling that Oracle may not oppose Usedsoft's resale of licenses for Oracle software could provoke a shake-up of the mobile apps market.

But this doesn't mean that customers will suddenly find a market for their old apps. On the contrary, developers are likely to start tightening any loopholes that could lead to such a second-hand market, according to experts.

UsedSoft buys and sells used software. Oracle sued UsedSoft in Germany when the company offered "pre-used" Oracle software licenses online in October 2005. The case was eventually referred to the European Court of Justice, which found that the exclusive right of distribution of a copy of a computer program covered by a license is exhausted on its first sale. This means that developers lose the ability to prohibit any second hand sale.

Oracle argued that the software was a free download and that the license was the paid-for element, but the ECJ rejected this, meaning that software no longer has to be in a physical form such as a CD or DVD in order for it to have resale value. This ruling sets a precedent for trading of used software licenses throughout the European Union and could potentially affect mobile applications.

"At its simplest level, an app is a computer program, and if that app can be accessed and used in perpetuity without a time limit, developers couldn't in principle prevent the subsequent sale of that software," said Indradeep Bhattacharya, a lawyer with legal firm Pinsent Masons.

However, he pointed out that the court ruling was very specific in defining the terms of a sale that apply. "The court only refers to software that is sold for continuous use. So it wouldn't apply to software that only allows access for a limited time," Bhattacharya continued. "As a result, we may very well see a change in the way apps or games are marketed, possibly through cloud networks or where access is limited to a set length of time."

He added that we could likely see a surge in sales of software as a service as developers attempt to better protect their products. Of course, currently there is no technical way to sell on apps for Android or iOS, but Bhattacharya said we may still notice a change in the way apps stores are structured.

For the moment, however, it seems that game and ebook publishers will have no cause for concern. As Ray Wang, principal analyst at Constellation Research, pointed out, "Content seems to be excluded from this ruling." He said that it will be interesting to see how the U.S. courts deal with the used software issue, but said that most games producers are already marketing their products as content rather than software.

Because there are separate rights of distribution and rights of reproduction in E.U. law, there was a shift from providing software in physical form to website downloads as vendors tried to secure their market. What we are likely to see now is a similar shift away from providing software per se, to providing software as a service. In short, the ruling may prove a game changer in terms of how software is sold and marketed, but won't result in a new market that will substantially benefit consumers, Bhattacharya said.

Follow Jennifer on Twitter at @BrusselsGeek or email tips and comments to jennifer_baker@idg.com.

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Jennifer Baker

IDG News Service

1 Comment

Noel

1

Despite the overwhelming pressure imposed by the French, Irish, Spanish and Italian governments to try to sway the CJEU on its decision in Oracle’s favour, I am glad to see common sense prevail on the subject of the Exhaustion Principle. Unlike other secondary software models (such as Microsoft), the secondary Oracle software market relied on the Exhaustion Principle to make it work; and while I am no fan of the rather dubious way in which Usedsoft has conducted its business over the past few years, it is great to see some ‘legal justice’ (an oxymoron that we do not often have the opportunity to use).

In any case, this court ruling puts a long awaited dent in the FUD (Fear, Uncertainty & Doubt) tactics employed by the software vendors. However, worth noting that Usedsoft's use of a Notary (in part, to hide where the licences came from) was deemed illegal by the German courts and Usedsoft is now also going through insolvency proceedings. There are other secondary software licence suppliers whom adopt more transparent business models that do not rely on the Exhaustion Principle eg: www.discount-licensing.com.

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