By Sue McLean, Morrison & Foerster
Nov. 15, 2016
Europe's highest court has recently ruled that backup copies of software can't be resold without the right-holder's permission, even where the original purchased copy of the software has been damaged, destroyed or lost.
The decision aims to halt the sale of backup software copies obtained illegally and the sale of unauthorised copies of original software on the pretence that they are backup copies.
In the case of Aleksandrs Ranks and Jurijs Vasilevics, the European Court of Justice (CJEU) differentiated between original purchased copies of software and non-original backup copies.
Previous case law established that software sold subject to an unlimited user licence can be resold by the licensee without infringing the original copyright. The question arose (via a case before the Latvian courts) whether the same rule applies to the resale of backup copies.
Software owners will be delighted that the CJEU took a restrictive path, refusing to legitimise the onward sale of backup copies without the owner's consent. Businesses will need to be mindful of this new ruling when seeking to sell, or purchase, used software.
Background - Software Owner's Rights
Under EU copyright law, a copyright holder has an exclusive right to distribute (or to authorise any form of distribution of) its material, including software. However, if any copy of software subject to an unlimited user licence is sold in the EU or EEA with the rights holder's permission, the rights holder's distribution right is considered to be 'exhausted', provided that certain preconditions are fulfilled (for example: the reseller must not retain any usable copy of the resold software).
This means that the rights holder can't prevent the resale of legitimately acquired copies of software. Software copies licensed for use for a limited term only (so-called subscription models) are not subject to this "exhaustion" principle and cannot be resold without the rights-holder's consent.
In addition to this exclusive right of distribution, the Computer Programs Directive ("Directive") provides the rights holder with an exclusive right to authorise the reproduction of software, subject to certain exceptions listed in the Directive.
The Case - Aleksandrs Ranks and Jurijs Vasilevics
The case of Aleksandrs Ranks and Jurijs Vasilevics involved the sale by the defendants of used Microsoft software stored on non-original media (CD and DVD) through an online marketplace without Microsoft's consent.
The Latvian court asked the CJEU whether, under the Directive, a person who acquires a used backup copy of software can resell such a copy to a third party in circumstances where the original purchased software has been damaged, destroyed or lost.
The CJEU ruled that the copyright holder of software who sells a copy of the software on a material medium with an unlimited user licence can't object to subsequent resale of that copy even if its contractual terms prohibit such resale.