For sale - one set of Accounts Software: One careful owner, FSH, MOT

Autotrader is evidence that there is a sizeable used-car market in the UK. The same isn’t the case with software. Certainly, you can find software for sale at car boot sales and on eBay, but the default assumption is that it is likely to be...


Autotrader is evidence that there is a sizeable used-car market in the UK. The same isn’t the case with software. Certainly, you can find software for sale at car boot sales and on eBay, but the default assumption is that it is likely to be illegitimate.

You can’t get a certified secondhand copy of Word from your local Microsoft reseller, although you’ll have no problem getting a secondhand BMW 320 from your local BMW dealer.

Car manufacturers might like to put restrictions on the resale of their cars, but it’s now the case that the secondhand car market is so significant, and residual values an important factor in the original purchase decision (and the calculation of monthly lease payments) that if any manufacturer tried to impose a restriction on resale of a new car, this would be highly unpopular.

However, it’s not inconceivable that manufacturers might like to try to funnel sales through their authorised dealerships: already, FBMWSH is a desirable characteristic for a secondhand BMW, even if the local independent BMW specialist around the corner can do a better job.

As a matter of law a restriction on resale is unenforceable anyway, so far as it refers to physical goods.

The received wisdom is that software is “licensed, not sold” and that the software house can impose whatever terms it likes on the licensee, and that clearly it doesn’t want people selling on software, when they can make a new sale instead. The 1991 Computer Programs Directive introduced a principle called “exhaustion of rights”, which said that once a copy of a piece of software had been legitimately sold in the Europe (technically, the European Economic Area), the copyright owner couldn’t prevent the purchaser from transferring it to anyone else (by sale, or gift, but not rental).

The intention of this is to allow trade in secondhand software to develop. It hasn’t, in any meaningful sense. This is probably for a number of reasons:

  1. Until relatively recently, new versions of software were better than old versions of software, so people wanted to upgrade anyway. The idea of buying software that was a few years old seemed a bit daft, so there was no real incentive for an organized secondhand software business to be established. Now, of course, people are actively seeking out copies of Windows XP Professional and Office XP.
  2. Few people know about the directive, so there is still a feeling of illegitimacy about purchasing software secondhand. Because there are so few businesses legitimately selling secondhand software (and none of them, so far as I am aware, are blessed by the original software companies - in contrast with the BMW garage), there is no real reason for this perception to change.
  3. Software companies are contributing to the FUD by selling OEM copies of software. Although they are ostensibly tied to hardware, that tie is an attempt to control legitimate resale of the software, contrary to the directive.
  4. There is still some uncertainty in the law. Partially about what counts as software (the executable of “Word” is clearly software, but what about the supplied templates, and the help files, without which Word is significantly less useful?), but mainly because software is less and less likely to be sold as a physical item, but pre-installed, or downloaded. Conflicting decisions in different member states as to whether a downloaded copy of a piece of software counts as the sale of a copy within the directive doesn’t help.

The EU had a golden opportunity to resolve the legal issues last year when it released an updated Computer Programs Directive. It failed to make any meaningful clarifications. So the nascent secondhand software market remains nothing more than nascent; software companies retain an unfair advantage over their counterparts who sell physical things, and consumers remain paying more for software than they need to.

The US has a similar rule, called the first sale doctrine. Once an item containing copyright has been sold in the US, the copyright owner can’t restrain any subsequent sale or transfer. This rule applies to items like books, videos, DVDs and CDs. And until a recent case: was thought to apply to software. The case draws a distinction between “sale” and “license”, and held that a Mr. Vernor’s sales of originally-legitimately-acquired copies of AutoCAD on eBay were unlawful.

This case has no legal effect in the European Union, but the arguments used to persuade the American court are likely to be recycled should a similar case subsequently arise in the Europe. For Americans, as well as restricting the sale of secondhand software, this may potentially impact the secondhand sale of other goods in electronic format, including Blu-Ray disks, DVDs, CDs and eBooks.

Reading a physical book, giving it to a friend or selling it to a secondhand bookseller doesn’t involve any copyright-restricted acts, so the copyright owner has no control over those acts. An eBook is entirely different: even reading it involves copying, and copying (generally) requires authorisation under the Copyright Act, (like all legal points, it’s not quite as simple as this, as there are some exceptions in the copyright legislation, but their scope is still open to argument) so the copyright owner has a lot more opportunity to intervene and control usage.

Of course, cars now include plenty of software. How long will it be before motor manufacturers try to claim they are licensing the software, and not selling it, and try to control resale?