EU Rules You Can Resell Downloaded Games

[Thanas]

It might not even be an official tax. More of a punitive measure to force compliance.

[Ralin]

Ah, okay, thanks. Just seems like it would be hard to enforce.

[TronPaul]

Here's an article with a broader focus.

Used software firms win small victory in shrinking on-premises world

Software-makers were caught off guard by a July judgment by the Court of Justice of the European Union on the UsedSoft GmbH v Oracle International Corp case.

The court ruled that “An author of software cannot oppose the resale of his ‘used’ licenses allowing the use of his programs downloaded from the internet”.

“The Court of Justice interprets EU law to make sure it is applied in the same way in all EU countries. It also settles legal disputes between EU governments and EU institutions. Individuals, companies or organisations can also bring cases before the Court if they feel their rights have been infringed by an EU institution.”

The recent ruling on the rights of used software mirrors other rulings in cases such as SusenSoftware v SAP and UsedSoft v Microsoft. Analysis of the ruling shows that:

Exhaustion Rule is now the rule of the land. While the German Federal Court of Justice (BGH) on July 6th, 2000 upheld this legal foundation, many vendors have continued to challenge the case. In this instance the BGH sent the case to the Court of Justice to interpret the UsedSoft v Oracle International Corp case. The court deliberated and finally ruled that “The exclusive right of distribution of a copy of a computer program covered by such a license is exhausted on its first sale”.

Point of View: UsedSoft’s primary business model is to market licenses acquired from Oracle customers. After acquiring rights to the license, UsedSoft’s customers who do not possess the software download the licenses directly from Oracle’s website. Applied to the “Exhaustion Rule”, this means that the developer’s copyright expires at the time of sale. In summary, a developer can only make money on the initial sale and any attempt to restrict trade of used software through specific trade terms conflicts with the exhaustion rule.

Exhaustion Rule applies to physical and downloaded software. This applies to any on-premises software purchase in person and on-line anywhere in the territory of a Member state of the EU. The ruling states that “the principle of exhaustion of the distirbution right applies not only where the copyright holder markets copies of his software on a material medium (CD-ROM or DVD), but also where he distributes them by means of downloads from his website.”

Point of View: Oracle’s main argument in the case that the directive does not apply to licenses downloaded from the internet is struck down. As the highest court in the EU, this ruling is the final ruling. Downloaded or bought in physical form, exhaustion rule applies to all software including both enterprise, personal, and games. New acquirer of the licenses can download it directly from the vendor’s site.

Software publishers can no longer oppose the resale of the copy of software. The court clarified two points on resales of copies of software. The first, “Where the copyright holder makes available to his customer a copy- tangible or intangible - and at the same time concludes, in return form payment of a fee, a license agreement granting the customer the right to use that copy for an unlimited period, that right holder sells the copy to the customer and thus exhausts his exclusive distribution right.” The second, “Such a transaction involves a transfer of the right of ownership of the copy. Therefore, even if the license agreement prohibits a further transfer, the right holder can no longer oppose the resale of that copy.”

Point of View: The clarifications on the resale of the copy of software have huge ramifications. Based on the ruling, “the distribution right extends to the copy of the computer program sold as corrected and updated by the copyright holder”. Users basically have rights to all updates at the time of the sale and this can version can be sold to the secondary market. Users who fail to download updates have rights to resell those alterations to the next customer. The subsequent customer would not have such rights.

Software licenses can not be divided in the resale and be reused. The ruling clarifies ownership provisions upon reselling. “If the license acquired by the first acquirer relates to a greater number of users than he needs, that acquires is not authorised by the effect of the exhaustion of the distribution right to divide the license and resell only part of it...An original acquirer of a tangible or intangible copy of a computer program for which the copyright holder’s right of distribution is exhausted must make the copy downloaded onto his own computer at the time of resale.”

Point of View: The court wisely upholds copyright law by requiring the seller to remove the property from their possession prior to resell. However, the inability to divide licenses means that users will have to be careful about the number of licenses they purchase upfront or purchase with separate contracts to allow for the resell of licenses in the future.

The Bottom Line For Buyers: In the EU you own your software free and clear of vendor encumbrances

Prior to this ruling, customers could resell hardware to a secondary market but not their software. This inefficiency and inconsistency in the law has led to billions dollars of wasted expense by organizations 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 TomorrowNow 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.

One major concern for users – the cloud presents the next big lock-in. Why? Users do not own their licenses. 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.

Kudos go out to the Court of Justice of the European Union for continuing to protect both the consumer’s software rights and in general the individual’s privacy rights. The only complaint, the inability to divide licenses in a resell. Buyers should learn to buy in separate contracts and refuse bundling to preserve their resell options. Users around the world should push for similar provisions in the World Trade Organization as well as the US Department of Justice.
The Bottom Line For Software Publishers: The US will be the Next battleground

Software publishers should take note that anti-competitive practices are no longer tolerated in the EU. This ruling will require new strategies covering multiple areas of the software distribution process:

Appstores must account for new license rules. Software publishers will need to track ownership before and after exhaustion with each download. Companies such as Flexera and Avangate stand to benefit as their software can ensure that the necessarily updates and alterations will be delivered upon exhaustion.
Wholesalers business models disintermediated. Business models of Arrow, Avnet, CDW, Ingram Micro must radically change. While the cloud put large pressures on the business, each distributor will have to rethink what part of the reseller market they intend to participate in and what services will they have to focus on to make it into the next transition.
Software publishers will move entirely into the cloud in the EU. Faced with the exhaustion rule, on-premises distribution will seek to be profitable for many vendors. Expect most vendors to move purely to cloud delivery and the rental model in the next 18 to 24 months. Most vendors will lobby for protections in the US Department of Justice and the FTC to avoid the EU debacle.

Expect users and other rights groups to free the US market from the same practices. In the meantime, savvy users will purchase their software in the EU so that their organizations can benefit from these new consumer protections.

[someone_else]

When a broken game is released, the best you can hope for is a refund into your Steam wallet. Not a full refund like the law demands.

Yeah, because other companies selling games on CDs and DVDs are eager to give refunds if their games are totally unplayable. You want a list of games that were totally shit for at least a year after release (they were AT BEST betas) and none gave me my money back? (a few said I'd had to start a lawsuit, yeah, because I will surely cough up the money to pay a lawyer for decades over 50 euros of crappy software)

Also, short of blocking all internet access to Steam servers (and the outcry that will go along with it), what leverage does the EU have over Valve ?

Why is this wrong? If they do shit without obeying laws they can get DNS-ed away the same way Piratebay or megaupload or Kickass Torrents or whatever crappy Evulz-P2P-site-To-Download-Muzic-And-Movies-Ruining-The-Industry by the virtue that they are now cybercriminals and must be stopped.

Smart people can manage workarounds just like the ones wanting to get to piratebay / Kickass Torrents regardless, but the bulk of consumers are usually too dumb to do more than "waaaah! Does not work!" and fill the Steam forums of senseless flame/rant.

Microsoft has physical products that get imported to the EU. Cut off those imports, and the EU cuts MS out of the market.

Can you explain the rationale behind this? What gives EU the right to stop sales of MS Kinect or Xbox (for example) to punish MS for other of their products that disobey laws (and you cannot act upon)?
If a product does not obey laws that product cannot be sold, but hell, there is nothing that gives the EU the power to arm themselves with nerfhammers and go hammering the producers in the head in a non-EU country.

[Thanas]

Microsoft has physical products that get imported to the EU. Cut off those imports, and the EU cuts MS out of the market.

Can you explain the rationale behind this? What gives EU the right to stop sales of MS Kinect or Xbox (for example) to punish MS for other of their products that disobey laws (and you cannot act upon)?

Because they are one company and thus the whole company is held liable.

[TheFeniX]

Because they are one company and thus the whole company is held liable.

My information is sketchy on this, so if anyone knows better, I'd love to hear it. But I understand that this is one of the reasons Sony Online Entertainments shenanigans have not affected Sony proper's hardware division: they're basically two-different companies that just operate under the same "roof." Works internally as well with SOEs stupidity not affecting the quality of their electronics.

When a broken game is released, the best you can hope for is a refund into your Steam wallet. Not a full refund like the law demands.

Yeah, because other companies selling games on CDs and DVDs are eager to give refunds if their games are totally unplayable.

Broken games kind of double-fuck you. In recent memory, no one offered a refund for Brink and people who waited too long to trade in their console copies got reamed on the trade-in. I think this is a big reason pre-orders are so important to publishers: lock them in before information starts leaking our about how shitty the game is. But if you bought the PC version, sucks to be you because you can't sell it off and that's just dumb.

[Thanas]

Because they are one company and thus the whole company is held liable.

My information is sketchy on this, so if anyone knows better, I'd love to hear it. But I understand that this is one of the reasons Sony Online Entertainments shenanigans have not affected Sony proper's hardware division: they're basically two-different companies that just operate under the same "roof." Works internally as well with SOEs stupidity not affecting the quality of their electronics.

But Sony has nerver gotten into a dispute with the Commission or European Courts afaik.