It is permissible to resell software licenses even if the package has been downloaded directly from the internet.
 
That was the landmark ruling from the European Court of Justice yesterday after it sided with a German firm in its battle with US giant Oracle – and it’s a ruling that one leading analyst reckons may fuel growth in the Cloud.
 
German firm UsedSoft's business model is built on the notion of reselling used packages or legally obtained licence keys for them so that customers can then download the latest version of the software directly from a company's web site.
 
Oracle had sued UsedSoft in a bid to prevent buyers of used software licences from downloading packages again. But the European court has ruled that a principle of exhaustion applies whenever software was originally sold to a customer for an unlimited time span.
 
Additionally the court decided that trade in used software is permissible even if the software had not been shipped on a physical medium such as a CD or DVD, but had been downloaded from a Cloud.
 
"The door for the trade in used software has been pushed wide open throughout the European Union," UsedSoft said in a statement, welcoming "perfect legal safety on the market."
 
It’s bad news for Oracle, reckons TechMarketView’s Angela Eager. “It opens the door to the emergence of a second hand software market – potentially establishing a parallel market,” she warns. “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.”
 
Ray Wang of analyst firm Constellation Research agrees that the ruling has wide ramifications for customers. “Prior to this ruling, customers could resell hardware to a secondary market but not their software,” he notes. “This inefficiency and inconsistency in the law has led to billions dollars of wasted expense by organisations around the world, perplexing buyers for decades. Pioneering efforts by SusenSoft and UsedSoft should be applauded by customers for fighting the legal battles to reinforce their rights.
 
“Other efforts by Rimini Street and now Spinnaker to free up the third party maintenance market should be supported by the software users around the world and the European Union. As with reselling software, the anti-competitive practices of software vendors to limit access to third party maintenance is as heinous as limiting the ability to resell used software. This practice is akin to only being able to service one’s Toyota at the Toyota dealer.”
 
But the mainstream emergence of the Cloud provides a complication, he cautions. “The Cloud presents the next big lock-in. Why? Users do not own their licenses,” argues Wang. “This ruling may lead to all software publishers to deliver software via access in the Cloud. In effect, no on-premises software would ever be sold again and users could only rent their software. This unforeseen ramification could prove even more costly as vendor lock-in will increase unless Cloud users are granted protections in the market.”