Top EU court upholds right to resell downloaded software

The European Court of Justice has just released a ruling affirming that consumers in the EU have the right to resell downloaded software. This may seem sort of obscure, but, to adapt Joe Biden’s infamous quip, this is a big f*cking deal.

Software companies have long argued that consumers who download software aren’t “purchasing” it; rather, they get a “license” to use it.  And the difference isn’t just words.  If the transaction is a sale, then copyright’s “first sale” doctrine limits the software company’s copyright, and allows the consumer to resell the software. This rule doesn’t apply only to software.  Copyright’s first sale doctrine is why we have used bookstores.  And libraries. And DVD rental. But if the transaction is a “license”, then first sale doesn’t apply, and the consumer cannot resell his used software (or ebook — the sale vs. licensing issue also comes up there, as you might imagine . . .)

So how do we know whether a software transaction is a “sale” or a “license”? There is no principle by which you can tell them apart, other than the label the software company applies to the transaction — and you know what label that’s gonna be . . . .  The issue has gotten murkier as software is increasingly purchased via download, rather than on shiny little discs.  Now there’s no physical copy of the work to resell, so the transaction looks less and less like the familiar ones (e.g., the purchase of a paper copy of a book) that’s recognized as a sale. But the policy objective behind the first sale doctrine applies to downloads too.  The rule is there to make sure that consumers can freely dispose of their property.  And to ensure that there is competition — the used bookstore and the library definitely limit what publishers can charge for new books.

In the case in Europe, software giant Oracle argued that the first sale doctrine applies only to physical copies of software, not downloads.  Bu the European Court of Justice (Europe’s highest court in this area) didn’t buy it: “It makes no difference whether the copy of the computer program was made available by means of a download from the rightholder’s website or by means of a material medium such as a CD-ROM or DVD,” the court ruled. “Even if the rightholder formally separates the customer’s right to use the copy of the program supplied from the operation of transferring the copy of the program to the customer on a material medium, the operation of downloading from that medium a copy of the computer program and that of concluding a license agreement remain inseparable from the point of view of the acquirer.”

Here’s a cruel twist: after the ECJ’s decision, European software users now enjoy substantially stronger first sale rights than their American counterparts. Most courts in the U.S. have upheld the rights of software vendors to circumvent the first sale rule by labeling their transactions “licenses”.  Predictably, U.S. software companies now regularly do just that. Which raises a question. When European rights holders enjoy broader IP rights vs. their American counterparts, that fact is often advanced as a reason to strengthen U.S. IP laws.  Now we see an example where European consumers are granted greater freedoms than their cousins across the Atlantic. Will we see calls to ease U.S. law to give Americans the same rights Europeans can now take for granted?