back to article Used software firms win small victory in shrinking on-premises world

Software-makers were caught off guard by a July judgment by the Court of Justice of the European Union on the UsedSoft GmbH v Oracle International Corp case. The court ruled that “An author of software cannot oppose the resale of his ‘used’ licenses allowing the use of his programs downloaded from the internet”. “The Court of …

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Sensible decision

Seems the EU has sense here, after all the claims that software is "Intellectual Property" should come with the same sort of rules that physical property has, that you can if necessary re-sell it. I hope this ruling also gets applied to music & DVDs that are delivered on-line to break the distinction between physical and virtual delivery. Of course, there are big concerns that a number of customers won't be honest and delete the copy before selling it on, but really, are they not likely to be the ones obtaining it dishonestly in the first place?

As for cloud-only to get round this - I can see a number of cases where that is simply not practical due to network latency & bandwidth concerns, not to mention issues over data sovereignty and applicable law.

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Steam/Origin?

Excellent, sensible news, from the world of legalese for once.

How does this affect Steam and Origin users? Does it mean that they will have to make the licenses transferable on a title by title basis?

At the moment, if you intend to keep your games re-sellable you have to set up a separate email account (plenty of free webmail around) and a separate Steam/Origin account based on that, and then give the buyer the whole account set. Of course, this is against the T&C's of Steam/Origin, but hopefully in light of this ruling these T&Cs thus become illegal and unenforceable in the EU (not that they had any way of stopping this sort of thing in the first place).

Does this new ruling mean that Steam/Origin and similar will have to go one step further and explicitly enable unbundling of a license from a user's account to facilitate sale of a licence without the sale of the whole account?

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Re: Steam/Origin?

Interesting question; I suspect Valve & EA will make no changes and ignore the issue unless the mainstream media decide to make a meal of it or a politician snaps it up for some 'standing up to corporations for the common man' style cheap heat.

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Anonymous Coward

Re: Steam/Origin?

Steam does not sell software, they provide subscriptions.

"The Software is licensed, not sold. Your license confers no title or ownership in the Software."

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Stop

@Gordan

You need to check out Steam again.

You can trade any item - game, or item from within a game - from one steam account to another, in return for other items or nothing. The transfer of money happens outside of Steam, Steam allows you to transfer the license to use a game to a different account.

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Re: @Gordan

Only if you haven't played the game before (registered it to your account).

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@Tom 38

Someone who is misfortunate enough to use Steam correct me if I'm wrong, but my understanding is that you can only transfer new, unplayed games to other steam accounts. I have heard some people work around this by installing every game in a separate account so they can simply transfer the whole account to someone else.

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Re: @Gordan

Ah well that sucks - gues I'm stuck with my copy of CS:GO then. Any one want to pony up for a test case against Valve?

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Re: Steam/Origin?

But the thing is, the court's ruling is that (1) the license is ITSELF a salable good, and (2) T&C agreements cannot abridge guarantees specified by the law such as the right of resale as described by the exhaustion/first-dale doctrine.

Games will be an interesting battleground since it's one field of software where the cloud is handicapped--timing is sensitive, so the inevitable round trip lag affects performance, plus it's graphics-heavy and so can put a strain on bandwidth.

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Anonymous Coward

Re: Steam/Origin?

You may have hit on a point here, Steam used the wording "your license", they could have instead said "your subscription to access our license"

BTW thanks for all the downvotes, I feel like a full fledge El reg commetard now :)

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Re: Steam/Origin?

And even that could be challenged on the ground that you're downloading and executing software on your machine (OnLive can get away with that kind of wording because it's a full-on cloud service--with all the pitfalls). The original ruling of Vernor v. Autodesk in 2008 (which was later overturned for outside reasons--namely, Vernor's copies were stolen, not legitimately purchased) basically went, "If it looks like a sale and transacts like a sale, it's a sale...and subject to the Copyright Act." The only way they can alter that is by altering the actual transaction into a lease contract, with terms and limits and so on. Thing is, leases typically require written contracts and pen on paper (on both sides) since such contracts can and sometimes do get challenged in court, and the judge will want the contract itself for study.

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A sensible ruling, with some sensible and thought our provisions - i.e. you can't just divvy up a licence for 25 users of software X between 5 buyers.

I can see what some of the scumbag companies will do now, they'll remove any concept of unlimited life licences and switch to timed licences throughout. If you're the registered "owner" of the licence (according to the supplier's master list), then they might just give you a new licence when your expires if you ask nicely - thereby killing a lot of resale opportunities and giving their upselling team the chance to do some more selling to a customer who at the very least is an active lead.

Will this also knock out MS's ghastly OEM OS licensing terms as well?

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WTF?

Is the author not reading too much into the decision?

This would essentially destroy the current app store model, where low prices come from users not being able to resell licenses. How can a developer sell a game for 69p when the user can keep on selling it with no further income to the developer?

No more app "sales" either, as people (or even businesses) would just buy lots of licenses at sale prices and sell them once the sale period ended.

There are also obvious loopholes. Make all apps "freemium" , where the app itself is free but you have to pay to use the features, rent an app, or of course cloud/web apps which you never own.

If it's true this decision applies to all kinds of software I really can't see how this will end up benefitting the consumer. It just means users will end up owning even less of the software they run.

This may be the thing that makes me leave the software business altogether.

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Anonymous Coward

It gets worse..

"Therefore the new acquirer of the user licence, such as a customer of UsedSoft, may, as a lawful acquirer of the corrected and updated copy of the computer program concerned, download that copy from the copyright holder’s website"."

So not only will the developer not get any money, they'll have to to let the new owner download the software from their website, at the developer's expense.

RIP installable software world. It's going to be all cloudy from now on.

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Re: It gets worse..

What about software that isn't cloud-friendly, such as games, multimedia software, and other timing-sensitive or media-intensive software that make it less suitable for moving to the cloud?

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Anonymous Coward

Re: It gets worse..

Games are already running off the cloud with remote GPU stuff like OnLive. Multimedia software can move to a rental model, exactly like Adobe started doing with CS6.

Actually the court says:

"Where the copyright holder makes available to his customer a copy – tangible or intangible – and at the same time concludes, in return form payment of a fee, a licence agreement granting the customer the right to use that copy for an unlimited period, that rightholder sells the copy to the customer and thus exhausts his exclusive distribution right."

So I suspect the trick will be making those licenses time-limited, e.g rental. IANAL, but it appears software licensed that way will not fall under this decision.

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Re: It gets worse..

OnLive may be a hit with people with underpowered computers, but more serious gamers know the pitfalls and stick to dedicated machines. So do the resale-conscious (people who like to send their software both ways) who realize OnLive's terms amount to a rental, not a purchase.

And you're right about time-limited agreements, but those amount to leases, which normally have to be bound in a contract. Such a contract has to fulfill certain obligations before they become legally binding, which is why most are done on pen-and-paper, in case there is a dispute and the case goes before a court. Furthermore, in a lease, the provider usually has to reciprocate in some way in exchange for the agreement, such as a guaranteed level of service, otherwise the LESSEE can challenge the contract.

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Anonymous Coward

Re: It gets worse..

Serious gamers have no problem shelling out £40 for a game which they can resell. However I'm thinking more of the very large market of <£20 games for which OnLive is perfectly suitable. Those are also the users who don't want to pay £40 upfront for a game even if it means they can resell it for £20 later.

The problem (for software publishers) of this law in the digital domain is it makes it extremely easy to sell used apps, you can probably just drag and drop a bunch of them them to some market application and get paid right away. I can see many companies jumping in at the chance and almost for sure big guns like Amazon will get involved. Everyone and their grandmother will sell their used apps.

Also short of very invasive DRM requiring an Internet connection it'll be something can be easily cracked, so users will find a way to keep their fully original, nicely installed, software around even after selling it.

Put all this together and you have a real nightmare for software developers, especially smaller ones without Oracle's clout and budget who can hook their customers in several other ways.

As for rental, you are correct on the lease terminology (just more popular to call it a rental), however it's not as difficult as you think. Look at Adobe's Creative Cloud for example. There's no paperwork to sign, it's all done online and charged to your credit card. There's also no problem with level of service since you get the same exact software as if you'd buy it. It just stops working once the lease runs out.

I think this judgment doesn't cover such software, so I can see many publishers moving to this leasing model and just stop offering indefinite term sale options (or make them a very expensive option)

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Boffin

only being able to service one’s Toyota at the Toyota dealer

According to the software vendor's perspective, you can only buy new Toyotas. If you don't use it anymore, drive it to the junkyard, you can't sell it on to someone else. That clearly is bunkum, and it's great to see the court uphold the right of resale.

The vendors also seem to imply that they couldn't support 'second-hand' license purchasers - again, that's like if I buy a 2nd-hand Toyota and the Toyota garage refuse to service it because I didn't buy it new, clearly also bunkum.

I don't understand the court's reasoning on disallowing the sale of individual licenses from a larger licence pool. After all, if i buy 5 Toyotas for a car fleet, I can sell them on individually. Technically I can still buy the 5 Toyotas individually and sell them individually, but I won't get a volume discount on the individual purchases.

Appstore and Cloud consequences? Currently if I buy an app from an appstore, this is downloaded onto my device and linked to my username. No appstore that I know of has a mechanism by which an app can be unlinked from my device and linked to someone else's device (and get a credit from their account to mine). But with this ruling, I doubt the appstores can make the argument that it's not possible to do, because it's clearly technically possible. Say I have a formal contract with someone else to buy my app, and I officially inform the appstore and ask that they transfer my app registration to the buyer's name, the appstore has no legal basis to refuse (except maybe some obscure T&Cs which would be struck down in court). I predict app stores will fight against this until they realise that (a) it will cost them very little to implement a 'second hand sale' mechanism, and secondly, they CAN charge a 'processing fee' for this, of which they get to keep 100% with nothing going to the developer. Small developers are anyway forced to sell through the appstore because they don't get the sales otherwise, so they better just hope their product is good enough that users want to hang onto it and will not re-sell.

Bigger developers will, as the article suggests, move as much as possible of their apps to the cloud, but there's a limit to this. It can't imagine many corporate clients would offload all their applications (which would include their data) onto a cloud with zero control. For basic office apps this could work , and possibly be welcomed from a business point of view if it's a predictable yearly fee that is say 1/5 th of the cost of buying teh software licenses outright (and depreciating them over 5 years anyway)

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Anonymous Coward

Re: only being able to service one’s Toyota at the Toyota dealer

App stores are really not about making profit. People talk a lot about 30% commissions being high but considering the average sale price of an app, it's not that much for all the services (payment, review, legal, customer service, PR, etc) and delivery infrastructure that goes with it.

That's why no one yet came out with anything cheaper, they're almost operating at cost. Amazon even charges a download fee on top. The only purpose is to promote the ecosystem. They could care less about getting a "processing fee", especially since they're going to see a lot less actual sales.

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Re: only being able to service one’s Toyota at the Toyota dealer

First para seems spot on; the fundamental point of the ruling to allow resale of licences is logical.

But to require the original vendor to service those licences with services such as downloads, access to support sites, etc. *at no additional cost* is not at all analogous to the auto-service example you offer. Mechanics receive money for servicing your vehicle, no matter where you bought it.

On the other foot, the exclusion of the ability to split out licences from those acquired in a volume deal makes perfect sense, as this will prevent the rise of illegitimate resellers who do nothing but resell licences acquired in this way at a higher cost, thus eventually swamping the original vendor's support system.

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Value

When you buy a piece of software, part of what you are paying for is whatever support/upgrade/bugfixing service the manufacturer provides. That support/upgrade/bugfixing service should therefore be just as transferable as the original software.

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Re: only being able to service one’s Toyota at the Toyota dealer- @Morris Maynard

"to require the original vendor to service those licences with services such as downloads, access to support sites, etc. *at no additional cost*". Where is the additional cost? If the original contract allowed for downloads, support, updates etc, then it makes no difference that a person different from the original buyer now has the program. Alternatively, if the contract was for paid service/updates, again nothing changes (an we are back to the garage mechanic analogy again).

Like you, I do like the inability to split out licences to keep out those scum with a 'ticket tout' mentality.

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What about eBooks and music?

Does this ruling have any implications for ebooks and for music tracks? The biggest change that downloading has brought has been not the change of medium, but the inability to sell the product second hand, or even donate it to a charity or leave it to an inheritor.

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Re: What about eBooks and music?

The ruling could perhaps be extended to cover all digital products, including ebooks and music. But since no one's brought a case concerning them before the court, there's no hard-and-fast rule.

So, two words: Stay Tuned.

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Seems to be a final word - pity about the ban on splitting though

This has been a rich topic here in Germany for years; driven not by the brokers usedsoft and susen but by aggresive procurement professionals. The ruling seems pretty cut and dried, though I wait for the vendors' lawyersvto continue to be creative and generous with their clients' litigation budget. The proviso about not splitting a volume license is not good because most enterprises have shelfware sold them by aggresive sales people and that problem will not be solved.

Peter O'Neill, Forrester Research

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'gaming' of this ruling

An item bought is usually thought of as something that the buyer will hold on to for a while but there's no reason for it to be so. It may be that it could be held onto for seconds or minutes, long enough to do a task in the case of software, and then sold on. Hopping licences, let's call them.

So rather having a copy of some software per person in a company, just have a pool and "sell" it on. No, make that sell it on, there's no need to put quotes around the word, it would be a true sale. Provided some consideration occurs (money transferred, even if a nominal amount) between parties that can be construed as buyers and sellers (so maybe not a single company but a group that can trade between each other - or maybe multiple departments in a company, to get around that) then presumably the sale is legal.

If this were held to be legal then ... well it gets interesting.

Of course installing software takes time but it might be ruled that software that is unused does not need a licence so can remain dormant, or it can be transferred within a VM image which can be spun up pronto, or some other intangible and therefore fast way.

Maybe I've misread the article but this does seem to open some curious doors. Ur thoughts?

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Anonymous Coward

This a column?

Rather dry stuff, actually. The sort of stuff you read because your boss wrote it.

Well, 'e's not me boss, is 'e?

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Meh

How long for?

I wonder how long it'll be before the copyright holders/IPO et al get this ruling overturned by another international treaty?

With the seemingly never-ending number of new trade treaties that keep popping into existence, it won't be too long methinks.

(Cynical perhaps, but from long experience we've seen that this mob doesn't accept 'no' for an answer.)

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Re: How long for?

You mean like ACTA...which got so much bad press that the European Parliament decided to stake it through the heart, burn it, douse it in holy water, and bury it 17 feet deep head-first before the courts caught wind of it? Treaties are only good if they can be ratified. The ratification process is usually very tough (in the US, it requires a 2/3 majority of what is now a tightly-divided Senate; good luck there).

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Holmes

Re: Is the author not reading too much into the decision?

You can only re-sell it ONCE, not unlimited times! That would be piracy, plain and simple. So I don't think it will "kill the app store model" unless the origianl vendor relies on selling software people only want to use once (like a jailbreak app :) ) I suppose you could sell a game you had finished and never want to re-play or you could try and sell an app that you hated - key learning point: check the reviews before buying software, even second hand.

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Cloud is not about to take over & LA's can be divided!

I am not in total agreement with a couple of views made in this article:

1: Cloud is not suddenly going to become a household name and the only offering by the vendors.

Microsoft’s marketing machine has worked tirelessly to move businesses to a subscription model for the past 10 years and it failed because it could not change the buying behaviour across the numerous complex global cultures at the blink of an eye. Companies around the world prefer to ‘own’ their software licence assets for two main reasons: (1) It is cheaper (in the long run) than subscription (renting) & (2) They own the product and therefore, it has a residual value on the balance sheet. Cloud has also been around for over a decade and is now on its 3rd generation wave – however, the entire software licence industry is not about to move to Cloud. Perpetual software licensing will be around for many years to come, albeit we are seeing a rebalancing of the market share between the different software licence programs on offer.

2: Clarification on ‘Dividing’ a Licence.

I want to elaborate on the point of “dividing” licences and how this ruling relates to other software vendors as this point should have been made clearer by the CJEU in its judgment. The ruling concerns an Oracle “licence”, which would be more appropriately defined as a minimum “block” of 25 CALs. A company that purchased 100 blocks (2500) CALs can sell off those 100 blocks to 100 different customers but it cannot break down the individual licence blocks i.e.: a ‘licence’ cannot be broken down into 5 x 5 user licence blocks. Let’s compare this to a Microsoft Volume LA (Select / Enterprise), in which an LA can also be broken down but only to licence level:

[Example 1]: an LA containing 1000 x Office 2010 PRO can be broken down and sold off in smaller quantities e.g.: 500 + 500; however, you cannot break down / divide at the individual Office 2010 PRO licence level and then sell off as individual components (Word, Excel, PowerPoint, Access etc).

[Example 2]: Windows SBS CALs could be purchased in licence blocks of 5 or 20 CALs. A company may purchase 2 licence blocks, 1 licence block containing 20 CALs + another licence block containing 5 CALs. The ruling requires that you cannot break down the licence block of 20 CALs and sell off to two different customers in smaller quantities such as 10 + 10 CALs; however, you can sell the 2 licence blocks to 2 different customers.

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 e.g.: www.discount-licensing.com.

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does this mean when i buy a new computer which will no doubt ill be forced to have to purchase a Windows license even though im putting Linux Mint on it, i can now sell the license/coa & media since i will not be needing it?

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Possibly.

If you never agree to the T&C at first bootup, or you never allow that to appear in the first place by putting a Linux Live/Install CD in the drive and booting off it from the get-go, I would think, legally, you never agreed to the terms of the transaction, which would render it "no sale". So you should be able to return the software to Microsoft for a refund (under the stipulation that you never agreed to the EULA nor performed an action which could be construed as an agreement) or you should be able to sell it on as a clean, intact software license (unless it's part of a license batch). But again, the actual legal ramifications are unclear since no judge has ever ruled specifically on this issue.

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