Exhaustion of Rights and the Resale of Used Software Licenses: The State of Play in Germany and the United Kingdom

Abstract

With the invention of the computer, subsequently came the software that enabled tasks to be performed on the computer system. According to Desmond (2008) software 500 survey indicated that the total worldwide revenues for companies in the software 500 list increased from $394 billion in 2006 to $451.8 billion in 2007. With the current growth rate at 14.7% and the commercial value of the software industry, it has become imperative that software should be regarded as an intellectual property asset which must be protected in order to maximize its commercial benefits.

In recent times there have emerged new business models that carry on business as a sellers of used or unwanted software licenses (known as shelfware), the legality of this act is still very much uncertain as there exist legal confusion as to whether used or unwanted software licenses can be validly resold without infringing the rights of the original licensor. The main thrust of this research paper considers whether the right of the software owner is exhausted upon the first sale of the software.

This research paper examines the relevant provisions of the Information Society/Copyright Directive and the Computer Programs Directive vis-a-vis the End User License Agreement (EULA) for both Microsoft’s and Oracle’s software package as interpreted by the courts in Germany and the United Kingdom in order to ascertain the validity of a software license resale in both jurisdictions. Both statutory and judicial authorities indicate that the distribution rights of software owners will be exhausted once the original software is distributed in a tangible media while the right of communication and making available to the public works against the exhaustion of rights doctrine once the original software package is distributed in an intangible form or deployed as a service.

The implication here will be the migration of software owners and vendors to online business models in order to circumvent the exhaustion of rights doctrine, here reliance will be placed on Digital Rights Management (DRM) solutions, enabling end-users to access the software and this technology is associated with its own legal issues. As a final conclusion, the effects of these DRM solutions on the end-users and its possible resolution will be considered.

Keywords: Exhaustion of Rights, Software Licenses, Germany, United Kingdom

JEL Classification: K12, K21, K39