Although all eyes have been on the European Parliament this week, that doesn't mean things have stopped elsewhere in the EU machine. In particular, the European Court of Justice, the highest in the EU, has just delivered a stunning and really quite unexpected judgment that could have major implications for the digital world.
The case is essentially that age-old issue of whether you own the copy of software that you buy. As we know, software companies have long insisted that in fact it is only licensed to you, and is not yours to do with as you please. In particular, it is not yours to sell. Hence the bombshell: the ECJ has decided otherwise in its replies to three key questions posed to it by a German court:
1. Is the person who can rely on exhaustion of the right to distribute a copy of a computer program a "lawful acquirer" within the meaning of Article 5(1) of Directive 2009/24?
2. If the reply to the first question is in the affirmative: is the right to distribute a copy of a computer program exhausted in accordance with the first half-sentence of Article 4(2) of Directive 2009/24 when the acquirer has made the copy with the rightholder's consent by downloading the program from the internet onto a data carrier?
3. If the reply to the second question is also in the affirmative: can a person who has acquired a "used" software licence for generating a program copy as "lawful acquirer" under Article 5(1) and the first half-sentence of Article 4(2) of Directive 2009/24 also rely on exhaustion of the right to distribute the copy of the computer program made by the first acquirer with the rightholder's consent by downloading the program from the internet onto a data carrier if the first acquirer has erased his program copy or no longer uses it?'
Here are the answers:
On the basis of all the foregoing, the answer to Question 2 is that Article 4(2) of Directive 2009/24 must be interpreted as meaning that the right of distribution of a copy of a computer program is exhausted if the copyright holder who has authorised, even free of charge, the downloading of that copy from the internet onto a data carrier has also conferred, in return for payment of a fee intended to enable him to obtain a remuneration corresponding to the economic value of the copy of the work of which he is the proprietor, a right to use that copy for an unlimited period.
It follows from the foregoing that the answer to Questions 1 and 3 is that Articles 4(2) and 5(1) of Directive 2009/24 must be interpreted as meaning that, in the event of the resale of a user licence entailing the resale of a copy of a computer program downloaded from the copyright holder's website, that licence having originally been granted by that rightholder to the first acquirer for an unlimited period in return for payment of a fee intended to enable the rightholder to obtain a remuneration corresponding to the economic value of that copy of his work, the second acquirer of the licence, as well as any subsequent acquirer of it, will be able to rely on the exhaustion of the distribution right under Article 4(2) of that directive, and hence be regarded as lawful acquirers of a copy of a computer program within the meaning of Article 5(1) of that directive and benefit from the right of reproduction provided for in that provision.
This judgment applies equally to software that is downloaded from the Internet and to that supplied on physical media. Note that this is not a licence to make as many copies as you like of software that you have bought, and then sell them: the court is clear that you must destroy your own copy if you sell one to someone else. Interestingly, though, the court does not specify how this is to be done. Nor can a user "divide" a licence and sell unused parts of it – for example, some of its "seats": the sale must be of all the rights to all the seats.
This finding from the ECJ does not come into force immediately, but must now be considered by the original German court that posed the questions. It's possible that the latter won't follow the finding, and will come to a different decision, although that seems unlikely, since the ECJ's role is precisely to provide guidance for national courts by answering key questions of this kind. Assuming the German court follows that guidance, the legal landscape for software in Europe could change dramatically, although it probably won't have much effect on open source, since you can pass that on free of charge anyway.
So we can probably expect to see more companies selling used proprietary software springing up. There might also be a move to service models by software companies (following in the footsteps of open source businesses), as they try to limit the losses this ruling might cause them in terms of sales. But the most interesting question concerns digital goods not explicitly mentioned.
For example, does this judgment apply to smartphone apps? MP3 files? Ebooks? IANAL, but it seems to me that it might, which could have major repercussions in these sectors of the digital world. Certainly, it's going to be interesting observing the fall-out from this decision if it is adopted by the lower court.