December 2017 -  Habibou M'BAYE

Legal framework of software secondary market


Legalization of the used software market

In 2012, there was a dispute between the software publisher Oracle and the German company Usedsoft in the C-128/11 case, whose main activity was the resale of unused software licenses. In this case, the software in question was presented as updated due to the maintenance contract concluded by the first user.

A software developer cannot oppose the resale of his “second-hand” licenses allowing the use of his programs downloaded via the Internet. 
The exclusive right to distribute a copy of a computer program covered by such a license is depleted on its first sale. 
CJUE 2012


Exhaustion of the distribution right of software licenses 

For Oracle, such a practice was a violation of its exclusive right to control the distribution of its software, while Usedsoft relied on the theory of exhaustion of rights to extricate itself from the publisher’s control over a possible resale. This theory holds that once a product is placed on the European market, a producer can no longer resist the resale of the product between users.

This is a theory that is widely accepted for bodily goods but that was paralyzed by personal concession clauses in software licenses. As a result, this theory did not apply to all digitized products available for download. UsedSoft challenged this disparity of treatment before the CJEU.

The application of the theory of the exhaustion of rights with regard to dematerialized software had therefore to be decided by the Court of Justice. By comparing software embedded in physical media with software distributed in dematerialized form, European judges relied on the functional equivalence of the two types of software to extend the exhaustion of rights to software not incorporated in a physical medium. 

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12 principles of Software Asset Remarketing from the decision of the CJEU

The application of the theory of the exhaustion of rights with regard to dematerialized software had therefore to be decided by the Court of Justice. By comparing software embedded in physical media with software distributed in dematerialized form, European judges relied on the functional equivalence of the two types of software to extend the exhaustion of rights to software not incorporated in a physical medium. 


1. Invalidity of lock-up clauses

The publisher cannot control or oppose resale of license. Clauses to the contrary shall be deemed to have lapsed.

2. Independence regarding the publisher

The consequence of the exhaustion of the exclusive right of distribution of the publisher is to deprive him of the control over successive transactions. As with the resale of a vehicle, when reselling software licenses, it is not mandatory to notify the publisher.

3. Non eligibility of maintenance to transfer

Exhaustion of the right of distribution cannot apply to a service contract. Maintenance, as a service contract intuitu personae, is not transferable.

4. Acceptance of Terms by New Purchaser

After the transfer of a used license, the new purchaser must submit, without reservation, under the terms of the license.

5. Updates are transferred with the license

All rights of the first owner, including updates and corrections, acquired until the termination of the support contract, are incorporated into the license. They are therefore transferable and usable by the new purchaser.

6. Requirement to uninstall by the seller

The seller of a used license must uninstall and discontinue any use.

7. Requirement to maintain the integrity of licenses

The seller of a used license may not assign more rights than those available to him. All rights … and restrictions are transferred upon transfer.

8. Limitation to licenses marketed in the EU

Only licenses marketed in the European Union are eligible for resale. The jurisprudence is based on the domiciliation of the download site of the first purchaser to determine the country of marketing. Thus, a license acquired from a US publisher by a European company will be eligible for resale.

9. Possibility of splitting licenses resulting from a bulk purchase

Once the integrity of the license is respected, it is possible to sell licenses acquired during a bulk purchase. A company that has acquired several hundred licenses can thus resell its surplus licenses.

10. Requirement to maintain bundle integrity

Whether it is a suite, a pack or a multi-user license (eg Suite office or pack for 10 users), it is not possible to split a bundle license and to transfer Rights of use separately.

11. Possibility to download the executable from the site of the publisher

As a legitimate buyer (status reaffirmed by the CJEU, the buyer of second-hand licenses can legally download the executable files to install the software corresponding to his licenses from the publisher’s site.

12. Possibility for the publisher to audit the compliance of a transaction

As the rightful owner of the intellectual property represented by the software, the publisher has the possibility to implement the means required to verify the authenticity of the licenses and the chain of rights of a transaction. For this purpose, it can in particular check with previous owners, the uninstallation of the software.



About the Author:



Habibou M'BAYE

President and founder of SOFTCORNER, Habibou is an expert and a pioneer of the secondary market for software licenses.

Highly involved in the European ecosystem, he is convinced that, in a software industry undergoing an overhaul, the application of the virtuous principles of the circular economy will be the next big (r)evolution of the SAM, bringing to companies required agility to face their many challenges,