New Technologies

Reselling Used Apps?

In a recent decision, the Court of Justice of the European Union (CJEU) held that the resale of used software generally cannot be excluded in licence terms. The judgment, which aimed at the resale of used business software, may also affect the app market.

Smart­phone and tablet users are used to all these lit­tle helpers eas­ing their lives. Whether used to update the fam­i­ly pho­to album, to escape “real life” by play­ing some fun com­put­er games or to read and revise doc­u­ments for work, apps have become an inte­gral part of our “smart” world.

What if a user does not want to use an app anymore?

Once pur­chased, apps usu­al­ly can­not be returned for a refund. How­ev­er, one could con­sid­er sell­ing it to some­one who would be hap­py to use it for a reduced price. Giv­en the usu­al­ly low pur­chase prices of apps, this might not be a real­is­tic sce­nario.

But what about plat­form switch­ers? If some­one intends to give up his iPad and switch to an Android- or Win­dows-based tablet, he might indeed be inter­est­ed in receiv­ing at least some mon­ey for sell­ing the com­pre­hen­sive col­lec­tion of apps pur­chased over the years. This brings up var­i­ous ques­tions about the legal admis­si­bil­i­ty and tech­ni­cal fea­si­bil­i­ty of such used-app sales.

Recent CJEU case

While it was long unclear whether licence terms could for­bid the resale of used soft­ware, the CJEU recent­ly (case C-128/11, Used­Soft v Ora­cle) pro­vid­ed guid­ance on whether and under what con­di­tions the resale of used soft­ware licences could be pre­vent­ed by the righthold­ers of the soft­ware copy­right. The CJEU held that the prin­ci­ple of exhaus­tion of rights (Erschöp­fung) is also gen­er­al­ly applic­a­ble to pur­chased down­loaded soft­ware. Arti­cle 4 (2) of the Com­put­er Pro­gram Direc­tive stip­u­lates, “The first sale in the Com­mu­ni­ty of a copy of a pro­gramme by the righthold­er or with his con­sent shall exhaust the dis­tri­b­u­tion right with­in the Com­mu­ni­ty of that copy, with the excep­tion of the right to con­trol fur­ther rental of the pro­gram or a copy there­of”.

Exhaus­tion of rights thus prin­ci­pal­ly means that the developer/seller of soft­ware (or any oth­er copy­right pro­tect­ed work) can­not have any fur­ther influ­ence on the “fate” of one spe­cif­ic copy of the soft­ware once it has been sold to an end-user. Pre­vi­ous­ly (at least accord­ing to the Aus­tri­an approach) the prin­ci­ple of exhaus­tion was only applic­a­ble to phys­i­cal copies of the soft­ware (Werk­stücke), such as a DVD with a copy of the soft­ware on it.

But the CJEU over­turned this prece­dent and ruled that it does not depend on whether the soft­ware is sold on a DVD or is made avail­able for down­load on the inter­net. There­fore, the soft­ware developer/seller can­not pre­vent the soft­ware users from sell­ing the pur­chased soft­ware to a third par­ty (of course, the user would have to delete all copies of the soft­ware from his devices and not use the soft­ware fur­ther).

An excep­tion is that this does not apply to parts of vol­ume-licences. For exam­ple, one could not buy a vol­ume-licence for 100 clients, use only 50 and resell the oth­er 50 as “used soft­ware”. Only the whole vol­ume licence (ie, all 100 client licences) could be sold. The same excep­tion applies for parts of soft­ware pack­ages.

Fol­low­ing this CJEU deci­sion, terms in soft­ware licence agree­ments pro­hibit­ing the resale of used licences are gen­er­al­ly inap­plic­a­ble. This deci­sion, how­ev­er, only lim­its the developer’s/seller’s copy­right so that he can­not legal­ly pro­hib­it sales of used soft­ware. So it is not clear whether the developers/sellers must enable or facil­i­tate such used soft­ware sales (ie, pro­vid­ing the tech­ni­cal infra­struc­ture to allow such sales; this is par­tic­u­lar­ly rel­e­vant in “closed envi­ron­ments” like Apple iOS).

Conclusion

Clar­i­fi­ca­tion of this ques­tion will cer­tain­ly lead to fur­ther cas­es before the CJEU. There­fore, the CJEU deci­sion may also have an impact on the app mar­ket (even on “closed envi­ron­ments”). App devel­op­ers, tech­ni­cal­ly and legal­ly, should con­sid­er whether their apps and licence terms are fit for a pos­si­ble used sale by one user to anoth­er. App store oper­a­tors may want to recon­sid­er their licence terms and pro­vide tech­ni­cal solu­tions for used-app sales. Users should con­sid­er the option of sell­ing used apps when switch­ing plat­forms and check whether the sale would be tech­ni­cal­ly fea­si­ble.

The CJEU held that the principle of exhaustion of rights (Erschöpfung) is also generally applicable to purchased downloaded software, which may also allow resale of used apps.