Resale of second-hand software licences: the legal framework

Acquiring a second-hand software licence may seem surprising for an entirely intangible product — the used product is identical to the new one. Yet since the CJEU ruling of 3 July 2012 (C-128/11 UsedSoft v. Oracle), the principle of exhaustion of rights permits the resale of used software, whether or not it has a physical medium.

This ruling balances the copyright protection of software publishers against the interests of users and free movement of goods in the internal market. Its effect has been to liberalise the software resale market.

Is the resale of used software licences permitted?

The CJEU confirmed that the principle of exhaustion of the distribution right applies both to software sold on physical media and to software distributed by download. Exhaustion of rights is a principle of EU law under which the first placing of a product on the market within the EU exhausts the right to control its further distribution.

In practice, the publisher can only rely on its exclusive distribution right at the point of first sale. A third party may then resell the product without the original distributor’s consent, and without infringing any intellectual property right. A download is treated as a first sale, triggering exhaustion. Clauses prohibiting resale in software licences are therefore de facto invalid.

How to secure your acquisition of used licences

Acquiring used software may lead to a reduction in orders from publishers, with several consequences. Volume-based preferential pricing may become less favourable for future orders. Publishers will not hesitate to exercise the software audit clauses in their licences to verify that second-hand licences are being used compliantly. It is therefore essential to be prepared for a software compliance audit.

You should also verify with the reseller that the original copy is no longer in use. Licence resale platforms typically operate through attestations: the seller undertakes to uninstall and cease using the licences, and the platform provides the buyer with a usable licence.

Advantages and disadvantages of used software

Used licences are sold at highly competitive prices compared with licences purchased directly from the publisher. They are a good alternative to open-source software for businesses that wish to remain within a proprietary ecosystem.

Publishers are required to treat users of second-hand licences as legitimate acquirers: they must provide access to corrective maintenance under the statutory warranty against latent defects, and permit download of the software from the publisher’s website. The publisher must also allow access to contractual maintenance, although it retains discretion over the applicable pricing.

However, the most recent software versions are generally unavailable on the second-hand market. It may also be worthwhile to resell unused licences to resale platforms — for example following the acquisition of new licences — in order to rationalise the company’s software estate. For an overview, see the intellectual property services page.

Conclusion

The resale of used software is lawful but requires a clear understanding of the implications for audits and publisher relations. Before making this choice, ensure you are prepared to manage the consequences. If you are considering this software asset management strategy, book a call.

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