A European Court of Justice (ECJ) has ruled last week that enterprises can have a legal right to resell software licenses and that software companies therefore cannot prevent (as some currently do) any resale. The verdict came after Oracle initiated the legal action against UsedSoft, a German company which resells used software licenses for approximately half price.
The court also ruled that any patches or upgrades made to the software through a service agreement also form part of the used software that can be sold on. However, it said the seller must make the copy downloaded onto his own computer "unusable" at the time of resale.
Very many large enterprise software vendors - including Oracle, SAP, IBM, SAS, CA Technologies, and Microsoft - have much to lose from the ruling and they may attempt some sort of legal fightback, even though the ECJ decision is supposedly the last word within the European Union.
Bottom Line for ICT Buyers:
1. On the face of it, this looks like a good chance to get some value out of the unused "shelfware" stacked up in cupboards (real or virtual), or conversely to buy someone else's shelfware at a good price. The opportunity is even bigger if one also considers used-once-but-not-anymore type software. When two enterprises merge, they typically standardize on one software, which leaves them with excess licenses. However, licenses purchased in "blocks" cannot be subdivided and sold secondhand in smaller lots, which could rule out the resale of most shelfware.
2. The international ramifications are potentially complex. As far as we are aware, the absolute right to sell secondhand software exists only in the EU at present. Organizations headquartered outside the EU may be barred from buying and selling used software licenses in the EU. European-based organizations may also be barred from using secondhand software in their overseas subsidiaries. For the moment, CIOs of multinational organizations should therefore seek legal advice before buying, and possibly even selling, secondhand software.
3. Buyers of secondhand software licenses need to be wary of future legal risks. IDC expects that the software giants ̶ and their lawyers ̶ will not rest until they find some way to nullify or restrict the effect of the ECJ ruling.. This expected legal counteraction lowers the value of used software licenses, because buyers will price in the risk of the licenses being ruled invalid in the future. We also expect the vendors to try to punish secondhand software buyers with heavy maintenance resubscription fees and thereby compensate for the loss of the initial license revenue.
The court also ruled that any patches or upgrades made to the software through a service agreement also form part of the used software that can be sold on. However, it said the seller must make the copy downloaded onto his own computer "unusable" at the time of resale.
Very many large enterprise software vendors - including Oracle, SAP, IBM, SAS, CA Technologies, and Microsoft - have much to lose from the ruling and they may attempt some sort of legal fightback, even though the ECJ decision is supposedly the last word within the European Union.
Bottom Line for ICT Buyers:
1. On the face of it, this looks like a good chance to get some value out of the unused "shelfware" stacked up in cupboards (real or virtual), or conversely to buy someone else's shelfware at a good price. The opportunity is even bigger if one also considers used-once-but-not-anymore type software. When two enterprises merge, they typically standardize on one software, which leaves them with excess licenses. However, licenses purchased in "blocks" cannot be subdivided and sold secondhand in smaller lots, which could rule out the resale of most shelfware.
2. The international ramifications are potentially complex. As far as we are aware, the absolute right to sell secondhand software exists only in the EU at present. Organizations headquartered outside the EU may be barred from buying and selling used software licenses in the EU. European-based organizations may also be barred from using secondhand software in their overseas subsidiaries. For the moment, CIOs of multinational organizations should therefore seek legal advice before buying, and possibly even selling, secondhand software.
3. Buyers of secondhand software licenses need to be wary of future legal risks. IDC expects that the software giants ̶ and their lawyers ̶ will not rest until they find some way to nullify or restrict the effect of the ECJ ruling.. This expected legal counteraction lowers the value of used software licenses, because buyers will price in the risk of the licenses being ruled invalid in the future. We also expect the vendors to try to punish secondhand software buyers with heavy maintenance resubscription fees and thereby compensate for the loss of the initial license revenue.
