10 Jul 2023
As one of the pioneers in the European trade with used software licences, PREO has been committed to a legally secure trade with used software since the 2000s. This goal was achieved at the latest with the landmark rulings of the European Court of Justice (ECJ) and subsequently the Federal Court of Justice (BGH) in 2012 and 2013, in which the resale of used standard software was declared legal on the basis of the so-called principle of exhaustion. However, certain requirements must be met for both the purchase and the sale in order to avoid unexpected problems in future software audits, which in a worst-case scenario could lead to expensive re-licensing and possible fines.
PREO's licensing experts therefore recommend that you only rely on offers from experienced and reputable providers with whom you are on the safe side in terms of licensing law. Our checklist, which you can download here free of charge, tells you what you should always bear in mind when choosing a provider.
The principle of exhaustion also applies to used software licences
The better IT managers know the applicable legal situation, the easier it is to take advantage of the benefits when buying or selling used standard software for their company. These include above all:
- More financial leeway in the IT budget through high savings in ongoing licence costs of up to 70 percent compared to the respective new version as well as the re-monetisation of licences that are no longer needed.
- Risk minimisation through the reduction of dependencies, for example in the event of a vendor lock-in with total cloud solutions.
- Entry into a CO2- and resource-saving circular economy for more efficiency and sustainability in the IT sector.
Years ago, the ECJ and the BGH created a clear legal basis for trading in used software, which has since proven itself throughout Europe. In Switzerland, the legal situation is similar. There, too, the principle of exhaustion applies. However what does that mean in terms of the respective rulings?:
ECJ ruling 2012: Used software may in principle be resold (Case C-128/11)
On 3 July 2012, the European Court of Justice ruled that used software may in principle be resold. The Court stated that the principle of exhaustion of the distribution right applies not only when the copyright holder markets the copies of his/her software on a data carrier (CD-ROM or DVD), but also when he/she distributes the software by downloading it from the Internet. The making available of a tangible or intangible copy and the transfer of the perpetual right to use it in return for payment is to be regarded as a sale, the ownership of this copy is transferred.
"Even if the original licence agreement contained a prohibition on resale, the right holder could no longer oppose the resale of the copy placed on the market with his consent."
BGH ruling 2013: Confirmation of the ECJ ruling (Case No. I ZR 129/08)
On 17 July 2013, the Federal Court of Justice (BGH) fully recognised the statements of the European Court of Justice. It thus confirmed the admissibility of the distribution of used software licences. According to the BGH, however, the party invoking exhaustion must demonstrate and, if necessary, prove that the conditions of exhaustion are met. The exhaustion of the distribution right of the copyright holder is dependent on certain conditions. The press office of the Federal Court of Justice has stated:
"Among other things, this includes that the copyright holder has granted the first acquirer the right to use this copy without time limit. Furthermore, the subsequent acquirer of a copy of the computer program can only successfully invoke exhaustion of the distribution right in that copy if the first acquirer has rendered his copy unusable."
(Source: Press release 126/2013 of 18.7.2013)
BGH ruling 2014: Volume licences can be split (Case No. I ZR 8/13)
On 11 November 2014, the BGH removed the last legal uncertainties. The court confirmed that volume licences can be split if they are independent rights of use. This is the case, for example, if several Microsoft Office licences are sold under one contract number. The judges of the BGH stated:
"If the first purchaser (...) has acquired a licence which allows the use of several independent copies of the computer program (so-called volume licence), he is entitled to resell the right to use the program in question for a number of users determined by him and to continue to use it for the remaining number of users. The individual licences are each independent rights of use which can be transferred independently."
Special conditions must be met for the exhaustion principle to apply.
When a company makes an acquisition, it generally has the right to resell the investment object whenever and to whomever it wishes. This principle applies to machines, office equipment or even standard software. However, due to the immateriality and the ease of copying, some special conditions apply to the sale of software. According to the case law of the Federal Court of Justice, for the change of ownership to be lawful, the following is required:
- The software was placed on the market in the territory of the EU or another contracting state of the European Economic Area (EEA) at the time of the first sale with the consent of the manufacturer.
- The licence must be for an unlimited period of time.
- If the purchaser of the used software downloads the programme from the manufacturer's data offer after acquiring the used licences and the programme already contains improvements and updates, this must be covered by a maintenance contract concluded between the copyright holder and the first purchaser. The new purchaser has the right to use the latest version available under the maintenance contract and to receive security patches and updates.
- All previous owners of the used software licences must have permanently deleted their respective copies on their computers.
Thanks to PREO - highest security in trading with used software
For us, the legally secure structuring of second-hand software transactions is our core competence. The rulings of the ECJ and BGH are therefore only the minimum requirements. In daily practice, PREO clients receive more security and transparency with every completed transaction of used volume licences. They benefit from this compliance advantage in all types of licence checks or compliance audits and make PREO a recognised professional partner for medium-sized and large companies as well as organisations and public administrations. This is evidenced by more than one million licence transactions carried out in an audit-proof manner as well as numerous projects for renowned companies from a wide range of industries.
5 advantages that argue in favour of used software from PREO
- Easier internal coordination: The use of used software licences often requires internal approval. It is important to be able to immediately dispel any legal concerns by referring to the Safe3 system and PREO's financial loss liability.
- You save your own legal department a lot of work: Our legal advisor is ready to answer your own lawyers' questions quickly, bindingly and satisfactorily, if necessary.
- No problems with missing documents during audits: Since we disclose everything to you and hand over all supporting documents, you have no problem submitting the requested documents immediately during audits instead of having to wait for them to be provided by a third party first.
- The integrated insurance protects against the worst-case scenario: The financial protection in the event of an accidental error underlines the high PREO security standards.
- A later resale is possible without complications: If you have become the legal owner of used software and can prove the legal acquisition, you can resell the licences at any time and generate additional income.
Do you have questions about the legally compliant use of second-hand software in your company? The PREO licensing experts will be happy to advise you and provide you with a free and non-binding offer.