Right of disposal over used software

Czech Republic: Is the sale of used software to a third party without the author’s authorization permitted or prohibited?

According to the Directive on the legal protection of computer programs (2009/24/EC), the right to distribute copies of a computer program (software) is exhausted by the first sale of a copy by the author (or with the author’s approval) in countries of the European Union or of the European Economic Area. In the wake of the Directive’s implementation, the Czech Copyright Act contains similar provisions.

In its decision in Case C-128/11 UsedSoft GmbH v Oracle International Corp., the European Court of Justice („ECU”) arrived at the conclusion that the first sale of a copy of a program within the meaning of the Directive also occurs where the use license to software is being transferred for an unlimited period of time against the payment of a one-time fee, based on a license agreement followed by offering the download of the software from the internet or, as the case may be, making the software available on a physical medium (such as a CD). This holds true even if the license agreement were to state that the use license is non-transferable. This is because, according to the ECJ, entering into this agreement and making the software available forms one indivisible whole. If the provision were not given a broad interpretation, says the ECJ, the effect of the exhaustion of rights upon first sale of a copy could easily be circumvented simply by choosing a suitable designation for the contract (i.e., by calling it a license agreement rather than a purchase agreement). The ECJ went on to conclude that the transfer of the ownership title to software refers to software that has been corrected, altered and enhanced by the author and is current as at the moment of transfer, in that the fixed functionality („patching”) of software is an inherent part of the original copy.

The ECJ further ruled that, when transferring software, a multi-user license cannot be split up by selling off a portion corresponding to a certain number of users and keeping the rest, because the original acquirer of the program copy must render its entire copy unusable so as to not infringe upon the exclusive copyright to software.

Czech courts have yet to rule on the issue of when and how the rights to software are being exhausted, but it is entirely possible that they will take away inspiration in their future decisions from the above-described ECJ judgment. Companies which develop and offer software should therefore make efforts to ensure that they do not exhaust the right to re-sell copies and do not meet the criteria by which the ECJ defines the sale of software – e.g. by offering „software as a service” over the internet, against payment of a monthly or annual fee (as opposed to a one-time license fee payment).

Source: Judgment by the European Court of Justice (Grand Chamber) in Case C-128/11 UsedSoft GmbH v Oracle International Corp. of 03 July 2012; Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society; Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs; Czech Act on Author’s Rights (Copyright Act – Act No. 121/2000 Coll., as amended)

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