Authorised and Regulated by the Solicitors Regulation Authority. Vat no: 796 6546 62SRA No. 364720
WHEN IS A SALE NOT A SALE, AND VICE VERSA?
Imagine going into a car showroom, signing the paperwork to buy a car and driving away, with neither you northe dealer being exactly sure what the deal was. You thought you had bought the car and were therefore free toeither keep it or sell
it. The dealer, on the other hand, thought that you didn’t own the car outright and couldn’t
sell it on without his permission.This never happens
right? Well, in “the real” world probably not, but in the world of cre
ative content andsoftware, it does happen.Take the recent controversy surrounding Bruce Willis where he was allegedly upset that he was unable tobequeath his iTunes library
to his children. Although press reports of Bruce’s threats to exercise serious
courtroom muscle against Apple turned out to be unfounded, the story did highlight a very important issue
when it comes to purchases in the digital world, be it software, mp3s, e-books or anything else, are we allmaking purchases without knowing exactly what the deal is?
3 key lessons
A recent ruling by the European Court of Justice (ECJ) involving software publisher Oracle and UsedSoft, a
vendor of pre-owned software licences, has highlighted that in the case of software downloads there really iswidespread confusion on both sides of these transactions regarding what rights a buyer walks away with after
purchasing software. As we’ll see, the case demonstrates three things. First, if the economic substance of thetransaction is a sale, then this doesn’t change if the language talks about a limited licence, meaning that the
buyer is generally free to re-sell. Second, even if it is a sale, there is a big caveat: the owner can still control
rental of the software. Put another way, business models (e.g. ‘software as a service’) built on rental do not
result in loss of control over re-distribution of the software. Third, although the case related to computersoftware, there are some important lessons for other forms of creative content.
It’s all about control
So what was the case all about? Oracle claimed that UsedSoft had infringed its copyright in the software on the
basis that Oracle’s customers (and subsequently any reseller such as UsedSoft) had no right to distribute
purchased copies of its software by re-
selling them. UsedSoft’s position was that, as with cars and other “realworld” purchases, once a
customer buys software for lifetime use, including via download, they have the right tosell it on without requiring any permission from the seller.
Oracle disagreed. It pointed to its licence terms, particularly the words “non
transferable”, to argue t
world rules did not apply to software downloads. As far as it was concerned, the software had been ‘licensed’,not ‘sold’, so it could still control what the buyer could do with its software, even after sale.
The case was referred by the German courts to the ECJ for clarification on certain aspects of the Copyright andSoftware EU Directives. We
examine the case in a moment and see whether it applies to other forms of digitalcontent and not just software. But what is the nub of the problem? For the software and creative contentindustries, new business models are built on licences but, as these cases show, there is a lack of clarity about
exactly what constitutes a “licence”.So what exactly is a “licence”? What does the consumer or busin
ess customer get? A typical provision in aconsumer service talks about a:
-exclusive, non-transferable, non-sublicensable license to access and make personal and non-
commercial use of the [content]”.
This isn’t an academic legal debate bur
ied inimpenetrable online terms and conditions. If a licence is in fact, a sale, then the consumer is free to give away orsell the content like 2
hand goods on eBay. Similarly, if the licensee is a trade customer, it can re-sell or dealwith the digital content without requiring any further permission from, or payment to, the content provider.