On 12 October 2016 the Court of Justice of the European Union ("CJEU") rendered another decision regarding the sale of used software within the EU/EEA (C‑166/15). The judgment answers the question raised by the Criminal Law Division of the Riga Regional Court (Latvia) whether, in short, the initial acquirer of a copy of a computer program is entitled to resell his back-up copy of that program if the original material medium of the copy has been damaged.
Background of the case
The case stems from criminal proceedings brought against two defendants who sold online over 3,000 used copies of copyrighted software (such as Microsoft Windows and the Microsoft Office suite) stored on non-original media. They were charged with, inter alia, the unlawful sale, as part of a criminal organisation, of objects protected by copyright, causing material damage to Microsoft valued at USD 293,548.40 (approx. EUR 265,514).
The case turns on the interpretation of the Software Directive (2009/24/EC), in particular Article 4(c), establishing the rule of exhaustion of the copyright holder’s distribution right (meaning that after the rightholder's first sale of the software in the EC, the buyer can sell the (used) work without the rightholder's permission), and Article 4(a) and Article 5(1) and (2), granting the rightholder an exclusive right of reproduction and laying down exceptions to that right (such as that the lawful acquirer of the software does not need the rightholder's authorisation to reproduce the software or make a back-up copy in so far as this is necessary for the use of the software).
In its Oracle/UsedSoft judgment (of 3 July 2012, C‑128/11) the CJEU applied the principle of exhaustion to software that was purchased via download (as opposed to on a tangible medium like a CD-ROM). According to the conditions set out in that judgment, in order for a resale to be allowed the initial acquirer of the software copy must have an unlimited licence to use that software (in return for payment of a fee corresponding to the economic value of that copy) and must make any copy of that software still in his possession unusable at the time of resale. Under those conditions, the reproduction of the software by the subsequent buyer (by downloading it onto his computer from the rightholder's website) is also allowed, since it is necessary for the use of the software in accordance with its intended purpose.
In the case at hand, the defendants (and the EC) took the position that the exhaustion rule also allows the resale of a copy of software stored on a non-original material medium if the original material medium has been damaged or lost, subject to the Oracle/UsedSoft conditions. In that case, the back-up copy would be authorised under the exceptions to the exclusive reproduction right laid down in Article 5(1) and (2) of the Software Directive.
The CJEU, however, has ruled that – although the initial acquirer of a copy of a computer program accompanied by an unlimited user licence is entitled to resell that copy and his licence to a new acquirer – he may not, even where the original material medium of the copy that was initially delivered to him has been damaged, destroyed or lost, provide his back-up copy of that program to that new acquirer without the rightholder's authorisation. A back-up copy may only be made and used to meet the sole needs of the person having the right to use that program and cannot be used by that person – even though he may have damaged the original material medium – in order to resell that program to a third party.
At first glance, it may seem somewhat odd that, on the one hand, it is possible to resell a downloaded (intangible) copy (under the Oracle/UsedSoft conditions), even though the copy downloaded by the second owner can never be the same copy as the one initially downloaded by the first buyer (and presumably deleted at the time of resale), while on the other hand, it is not possible to resell a back-up copy of the same software if it was purchased on a tangible medium, not even if that medium no longer works or exists. On further thought, however, the outcome appears to be entirely in line with the EU copyright system. The situation is similar to that of the owner of a used book: he is allowed to resell the book itself but not any copy he made of it (e.g. because the original had deteriorated). This analogy was also proposed by Advocate-General Saugmandsgaard Øe in his opinion. In our view, it seems safe to assume that also for software initially acquired solely by download, the resale of (legally made) back-up copies of said software will nevertheless constitute copyright infringement.