European High Court Hears Case With Impact On Buying Software Online

The European Court of Justice (ECJ) this week held a public hearing on a German case involving software companies Oracle and UsedSoft, the second step to a ruling that could potentially set new rules for buying and downloading software on the internet.

The hearing happened on 6 March, according to the information packet on the case that ECJ posted on its website.

There were no further details about the hearing.

A public hearing is the second step in the ECJ decision-making process where lawyers from the opposing parties put their case before the judges and the advocate-general. The first step is the submission of written statements by parties to the judge responsible for the case. After the hearing, the advocate-general then gives an opinion on the case before the judge hands down a decision. ECJ procedures are here.

For this case, the ECJ was asked by the German Federal Court on whether exhaustion or the first-sale doctrine also applies to the sale of software licences which does not involve transfer of physical items.

UsedSoft, the defendant in this case, is in the business of buying and selling software licences from companies such as Oracle. An earlier decision from the Regional Court of Munich ruled that exhaustion does not apply to the sale of software licences.

The reference for a preliminary ruling from the Federal Court of Germany was lodged on 14 March 2011. Preliminary ruling refers to the procedure in which a national court that is in doubt about the interpretation of an EU law asks the Court of Justice for advice.

Questions on the case referred to the court are here.

The request for a preliminary ruling came amid contrasting decisions made by German courts involving UsedSoft and its business of reselling software licences.

In a separate case involving UsedSoft against another software company Microsoft, the Hamburg Regional Court decided on 29 June 2006 that the principle of exhaustion applies to the resale of software licences.

On the day of the public hearing on this case, industry group Business Software Alliance (which includes Microsoft as a member) released a statement calling for the ECJ to affirm the German court ruling that imposes limitation on the sale of software licences. Doing so, BSA argued, “would avoid the legal uncertainty and market disruption that would result from rewriting existing copyright rules.”

Thomas Boué, BSA director of government relations for Europe, the Middle East and Africa (EMEA), said in a release that the prevailing protection for software makers has “resulted in the availability of many popular online services.”

“This case has significant legal and economic importance,” Boué said. “A wrong decision, casting a shadow over the enforceability of licensing in online environments, would undermine development of the European digital economy, chill innovation, facilitate piracy, and damage new online and ‘cloud computing’ models for making content available.”

Maricel Estavillo, an intern at Intellectual Property Watch, is an LL.M. in Intellectual Property and Competition Law Candidate at the Munich Intellectual Property Law Center (MIPLC). A former business journalist in Manila, Philippines, she is currently working on research on copyright in digital media for her Master’s thesis.