One of Oracle’s quieter legal battles has been playing out in Europe over the right to sell secondhand software licences for downloaded software, and it has not gone well. The EU Court of Justice has just ruled that it does not have the right to oppose such resale.
Oracle initiated the action against UsedSoft, a German company who as its name suggests, is in the business of reselling software licences. Oracle argued that when it licences software (whether downloaded or delivered physically on a disk) it grants the customer non-transferable rights for an unlimited period. The Court has ruled that exclusive distribution rights are exhausted once the first sale has been made i.e. buyers have the right to resell the software, providing they remove it from their systems and destroy any copies.
This could have major ramifications for the software industry. First off, it opens the door to the emergence of a second hand software market – potentially establishing a parallel market. One of the tasks occupying many enterprises is how to reduce the cost of their Oracle (and other vendor) deployments in the light of reduced workforces, changes to the business that render certain software unnecessary, or unused licences, or after M&A's. They are also keen to reduce the cost of annual maintenance. The opportunity to sell-on their software creates options e.g. cutting costs directly, moving to an alternative vendor. With mid tier vendors and cloud vendors already posing a threat to established vendors like Oracle, the incumbent providers have a lot to lose. There is a degree of relief for Oracle. We are not legal experts but the ruling seems to say that buyers cannot break multi seat licence deals into smaller packages and sell them off, which will no doubt complicate the situation.
A second hand market could also revitalise the third party support market which took a battering from Oracle’s successful theft action against SAP/TomorrowNow. As software vendors like Oracle generate half or more of their software-related revenue from maintenance, fees the effect in their business could be serious.
The ruling is not set in stone as the German courts need to make their decision but it is hard to see them ruling differently. And this ruling only applies to the EU, not Oracle’s home market in the US.