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ECJ rules that software backup copies cannot be resold without owner's permission

The Court of Justice of the European Union (ECJ) has ruled that physical software back-up copies can only be used by the legitimate acquirer.  They cannot be resold to a third party without the rights-holder's permission, even if the original physical medium has been damaged, destroyed, or lost.

This is a positive and important step for those in the software industry.

Background

Under EU Copyright law, a copyright holder has an exclusive right to distribute or to authorise any form of distribution to the public of its material, including software. 

If a copy of a computer program is sold in the EU or European Economic Area (EEA) with the rights holder's permission, the rights holder's distribution right is considered to be 'exhausted', provided that certain preconditions are fulfilled (for example the reseller must not retain any usable copy of the resold software).

This means that the rights holder cannot prevent the resale of legitimately acquired copies of software. Software copies licensed for use for a limited term only are not subject to this ‘exhaustion’ principle and cannot be resold without the rights-holder's consent.

In addition to this exclusive right to distribution, the Computer Programs Directive (the Directive) provides the rights holder with an exclusive right to authorise the reproduction of a computer program unless the reproduction of such media is allowed under certain exceptions listed in the Directive.

Facts

The case concerned two Latvian nationals, who were alleged to have sold thousands of copies of Microsoft products.  They were charged with the unlawful sale of copyright-protected Microsoft software and intentional unlawful use of Microsoft's trade mark in the Latvian courts. The material damage caused to Microsoft by the activities of the pair was evaluated at around €265,514.

The Criminal Law Division of the Riga Regional Court in Latvia, asked the ECJ for a preliminary ruling in the matter.  The ECJ was asked whether the principle of exhaustion allows a person who acquires a used back-up copy of a computer program stored on a non-original disc to resell that copy to a third party in circumstances where the original purchased software has been damaged, destroyed or lost.

Decision

The ECJ ruled that the copyright owner in a computer program who sold a copy of the program on a material medium in the EU with an unlimited user licence cannot object to subsequent resale of that copy even if its contractual terms prohibit such resale.

However, the question posed by the Latvian court focused on the resale of a used copy of a computer program that was not made or distributed on an original medium with the rights-holder's consent.

The ECJ's answer to the referred question was that backup copies may only lawfully be made by the person having the right to use that program and only to meet their sole needs.  Accordingly, that person cannot – even though he may have damaged, destroyed, or lost the original copy – use that back up copy in order to resell that program to a third party.  To sell a physical back-up copy of the computer program in such circumstances, would amount to an infringement of copyright.

Implications

For those in the software industry this is a positive decision as the ECJ has taken a restrictive view on exhaustion; finding that back-up copies do not enjoy the same status as computer programs.

For businesses in other sectors, the decision means:

  • They can still resell used software that they have purchased subject to an unlimited user licence; and
  • if legitimately obtained, they cannot be prevented from making backup copies of software if required for their own necessary use.

However, where a business unlawfully acquires software, it can neither make or resell back up copies.  Furthermore, even in circumstances where the business has acquired the original copy lawfully, it cannot sell a backup copy of the software because any such copy can only be made for its sole use.

Contributor: Asima Rana

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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