August 7, 2012

European Court decision opens up a new market in used software downloads – does this include games, apps, ebooks, music and TV downloads?? The European Court of Justice has held that the owner of rights in software or a computer program cannot oppose the resale of “used” licences. This ruling (Oracle vs UsedSoft) clarifies that there is no distinction for this purpose between software sold on physical media such as discs, and software sold as downloads. The case concerned business to business software, but it does raise questions as to whether it could also apply to games, and even to digital copies of other copyright material – in other words can people resell their downloaded games, music, ebooks and TV programmes? The European Court said that when a person is granted a perpetual licence to use software this nonetheless amounts to a “sale” of a copy of the software, even if the terms of use are described as a licence and even if the licence is stated to be non-transferable.  Therefore the buyer has the right to resell the copy of the software, and in technical legal speak the software distributor’s distribution rights are exhausted  after the first sale – i.e. the buyer can resell it, as long as he disables or destroys the first copy. Despite the fact that the case involved business to business sales and corporate systems software, it potentially opens up a second hand or used market in downloaded games (as they are essentially software), in much the same way as there is a used market in tangible copies of games on discs and cartridges. But maybe not – let’s come back to that after we explore first whether there are other consequences relating to other copyright-protected material. You might wonder whether the underlying principles that were applied in this case to copyright in digital software could also apply other digital versions of copyright works like downloaded music, ebooks and TV and films.  It seems not.  Whilst copyright principles normally apply consistently across all forms of “works” (including music, words, video and software), there is an extra bit of historic legislation that was introduced to apply to software alone because it is inherently digital and always requires copying to be installed.  This case was decided on those special elements of the historic software legislation and therefore only applies to software. So….in relation to other forms of digital copyright, it seems that there is likely to be limited impact, the rights holder can still prevent second-hand sales. Now this does create somewhat of an anomaly.  Why should software be treated differently (in being re-sellable) now that music and TV have caught up and are also available digitally; or looking at it from the other end of the lens, why should digital music and TV be treated differently to physical CDs books and DVDs, and not be re-sellable?  The law is confused at the moment, but there seem to be two potential outcomes – either the law is changed to remove the historic anomaly and close the resale of digital software extension, or the law is changed to bring all digital rights in line with physical rights and allow all digital resales.  We will have to wait and see on this. Now going back to games – the discussion above about the on-going restriction on music and video etc means that whilst there may in theory be an opening up of the second-hand digital games market, if a game contains music or video or other copyright materials, then those elements themselves could prevent the resale even if the software element is now freed up. In addition the case does suggest that DRM and practical restrictions are still allowable to make sure that the seller’s copy of the software is disabled on a resale.  Confused……? Until the Courts step in again to clarify all of this, it is likely that there will be limited impact from this judgement outside the business software market. For more information, contact Alexander Ross, Partner or  David Deakin, Consultant  Article first published on New Media Age on 26 July 2012: http://bit.ly/Nypknv