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Using used licenses correctly

November 14, 2019

Recently there has been a lot of attention on the topic of used licenses. Many resellers of used licences refer to EU legislation and explain to potential customers that "everything is legal" and that "there is nothing to fear". But if you want to buy and use used licences, there are some things you have to be aware of. In this article, you can read up on the legislation and learn how you may use used software legally and according to (copyright) laws.

Important note: This article contains information for all organisations based in the European Union. The article is neither an indication nor a legal basis. The content is provided for software license management purposes only and is provided without warranty of any kind. For strategic decisions on this topic, please read the relevant legal documents and/or seek professional advice on the subject of used licenses.

Directive 2009/24/EC

Directive 2009/24/EC of the European Parliament and of the Council, which was implemented in 2009, deals with the legal protection of computer programs. It concludes that the unauthorised reproduction, translation, adaptation or transformation of the form of the code in which a copy of a computer program has been made available constitutes an infringement of copyright. The Directive provides in Article 4 (2) that 

"the first sale of a copy of a program in the Community by the rightholder or with his consent shall exhaust within the Community the right to distribute that copy, except for the right to control the sublicence of the program or a copy thereof". 

Once the software company has sold the legal right (licence) to use the software for the first time, it no longer controls, in plain language, the right to resell the software. This is up to the buyer. The judgment of the Court of Justice of the European Union makes it clear that this is not a carte blanche to do what you want with it. 

Use Case

Besides the reference to the above mentioned directive, the parties involved in the resale of used software licenses often refer to a judgement of the Grand Chamber of the European Court of Justice of July 3, 2012 between UsedSoft GmbH (Germany) and Oracle regarding the resale of software licenses. Often these parties also apply the decision to other software suppliers such as Microsoft. 

Since the use case is specific to Oracle, it cannot be assumed that everything regulated by the Grand Chamber will also apply to other parties not involved in this particular case. However, there are some useful guidance.

Copyright protection

In the Grand Board's decision we find this specific sentence: 

"9 According to Article 1(2)(b) of Directive 2001/29, Directive 2001/29 "shall not affect or in any way prejudice existing provisions of Community law concerning the legal protection of computer programs". 

That means that, even after a resale of used licences, the software provider has the right to protect his copyright and the new owner is not free to use the software in the way he wishes.

Another sentence in the text: "42 According to a generally accepted definition, "sale" is an agreement whereby a person assigns to another person his or her ownership rights in a tangible or intangible object belonging to him or her in return for payment. Consequently, the transaction which, under Article 4(2) of Directive 2009/24, leads to exhaustion of the right to distribute a copy of the computer program must have transferred ownership of that copy". 

This means that the transfer of the computer program must be accompanied by the transfer of the license. And this should of course be verifiable. 

do not split up

Last Example

"69 However, it must be pointed out that the exhaustion of the distribution right under Article 4(2) of Directive 2009/24 does not entitle the first purchaser, where, as was stated in paragraphs 22 and 24 of this judgment, the licence acquired by him applies to a number of users exceeding his needs, to split the licence and resell the right to use the computer program concerned only for a number of users determined by him.

In other words, you cannot split a contract or license for X number of users / usage into smaller parts that are to be sold or transferred separately. Of course, there must be legal proof of this if an organization wants to buy used licenses and use computer programs accordingly.

How to do it right

Please don't just believe everything someone says about selling or buying reused software. Here are some guidelines regarding the court ruling on issues and conditions that must be met for reused software licenses:

  1. Proof of origin of the licenses; in which country were the licenses originally purchased? 
  2. Proof that licenses are perpetual licenses 
  3. Proof that the licences have been paid for in full by the previous owner 
  4. Proof that the original licensee (previous license holder) has deleted all software copies corresponding to the original licenses from all his desktops and/or servers before the license was transferred to Reseller X 
  5. Proof of completed license transfer from the first licensee to the Reseller X 
  6. Proof of full transfer of license from reseller X to buyer B or proof of full transfer of license from previous licensee (A) to buyer B 
  7. Proof that the licenses mentioned above for passing on to buyer B are genuine (original) licenses from software producer Z 
  8. Proof that the transferred licenses are complete and originate from a previous license agreement (all licenses sold under a license agreement by the original licensee must be transferred) 
  9. Product references (SKUs) must be indicated in all documents 

As a user of the software, your organization is responsible for meeting the requirements, which must also be proven. Please do not accept any reference to a file at a legal advisor where the information is held. You want and need this in your hands. Document all actions and carefully keep all (original) license orders, invoices and corresponding product keys.Nutzungsbedingungen

Once you have acquired ownership of the licenses for reused software, you must comply with all terms and conditions in any legal software licensing documents and/or terms of use of the Software Provider that are specific to the transferred software licenses, including but not limited to

  1. Assign licenses to devices or users 
  2. Possible downgrade rights 
  3. Multiplexing Restrictions 
  4. Batch processing restrictions 
  5. Restrictions or rights for virtual installations

Familiarize yourself with the terms of use of the software you purchased. This is important not only for reused software or used licenses, but also for new software and technology. 

Are you using your used licenses correctly?

Have you bought used licenses or reused software and you have doubts whether everything is in order and you comply with copyright law and the EU directive? Contact us, we will be happy to advise you!

Do you have more questions?

You are interested in the topic of used licenses and would like to receive further information? Then please contact us. We look forward to your inquiry!

Erol Anil

Managing Director
SYCOR IQ Solutions GmbH
+49 89 307 731 32

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