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ACC Legal Quick Hit
Exhaustion of distribution rights and software downloads
Rob Blamires
Senior Associate
5 December 2013
UsedSoft v Oracle
Robert Blamires
Senior Associate
Mob (US): +1 (408) 335 9167
Mob (UK): +44 (0)7872 822 353
Email: robert.blamires@ffw.com
www.linkedin.com/in/robblamires

2. UsedSoft v Oracle: introduction

3. UsedSoft v Oracle: the facts
• Oracle develops and distributes computer programs
functioning as ‘client-server software’. Customers purchasing
the software over the web download a copy of the program
directly onto their computer from Oracle’s website. The user
licence includes the right to store a copy of the program
permanently on a server and to allow up to 25 users to access
it by downloading it to the main memory of their work-station
computers.
• The licence agreement gives the customer a non-transferable
right of use for an unlimited period, exclusively for his internal
business purposes.
• On the basis of a maintenance agreement, updated versions of
the software (updates) and programs for correcting faults
(patches) can also be downloaded from Oracle’s website.

4. UsedSoft v Oracle: the facts
• UsedSoft resells software licences.
• Once a customer has bought the licence from UsedSoft, they
download the software directly from the software company’s
website.
• Oracle obtained an injunction from the Munich Regional
Court restraining UsedSoft from reselling Oracle software.
• UsedSoft appealed to the German Federal Court which
referred a number of questions on the interpretation of the
Software Directive to the CJEU.

5. A quick recap: UsedSoft v Oracle (C-128/11)
• EC Software Directive (91/250/EEC; codified 2009/24/EC)
• Copyright owner has exclusive right to distribute copies
• The distribution right in a particular copy is exhausted on first sale of that
copy in the EU by or with copyright owner’s consent
• “Sale” =
– Provision of a copy (tangible or intangible) PLUS
– Licence for an unlimited period in return for a fee
• Purchaser of exhausted copy = “lawful acquirer” under Article 5(1)
Software Directive.
• “Lawful acquirer” has the rights to copy the software in order to use it
for its intended purpose.

6. UsedSoft v Oracle

7. UsedSoft v Oracle: the ECJ decision - a sale is a sale
• CJEU found in favour of UsedSoft.
• Downloading software + perpetual licence + fee = "first sale".
• Right of distribution in software is exhausted.
• Second acquirers from UsedSoft had therefore acquired the software
lawfully
• As “lawful acquirers”, they were entitled to copy the software in
order to use the software for its intended purpose.
• The right to copy included a right to download the software direct
from Oracle’s website.

8. Other findings:
• The original acquirer must make his/her own copy unusable at the time
of resale; software owner can use TPMs to ensure this
• Contractual prohibitions on transfer of the software are ineffective
where the exhaustion principle applies
• Exhaustion principle doesn’t apply to maintenance agreements but….
• Original acquirer can transfer the software including any
patches/upgrades obtained under maintenance arrangements
• No splitting of group licences

9. Contrast with US position: Capitol Records v ReDigi
• Judge affirmed that the first sale doctrine applies only to physical
assets, not digital assets.
"Put another way, the first sale defense is
limited to material items, like records, that
the copyright owner put into the stream of
commerce. Here, ReDigi is not distributing
such material items; rather, it is
distributing reproductions of the
copyrighted code embedded in new
material objects, namely, the ReDigi server
in Arizona and its users’ hard drives. The
first sale defense does not cover this any
more than it covered the sale of cassette
recordings of vinyl records in a bygone
era."- Judge Richard Sullivan

10. Recommendations
Licensors should consider:
• SaaS / Cloud-based service delivery
• Fixed term / subscription based models
• DRM / platform-based solutions
• Prohibiting transfer of maintenance contracts
• Volume licensing models

11. Application of UsedSoft to other digital content?
• Question mark over digitally delivered music or other non-software
content in Europe.
• Possible that a court in Europe would find that the resale of any other
form of digital asset purchased on a "download to own" basis for
appropriate remuneration carried with it an implied right to copy the
work in order to use it.
• If so, the principles in UsedSoft would apply equally to all forms of digital
content, not just software.

12. Key contacts
Robert Blamires
Senior Associate
Mob (US): +1 (408) 335 9167
Mob (UK): +44 (0)7872 822 353
Email: robert.blamires@ffw.com
www.linkedin.com/in/robblamires