Regional Court (LG) Hamburg: Trade in Used Software Licences

The Regional Court (LG) Hamburg had to decide whether a software manufacturer can prohibit the trade in used software licences in its General Terms and Conditions. Furthermore, the Regional Court (LG) Hamburg had to decide whether Terms and Conditions provisions regarding procurement from third parties are valid.

The claimant, the company Susensoftware, which purchases and markets used licences, initiated proceedings before the LG Hamburg for a competition law and anti-cartel law review of certain Terms and Conditions for the provision and maintenance of SAP Software. The claimant applied for an order requiring the defendant to cease the use of, inter alia, the following Terms and Conditions clauses:

1) "The transfer of S… Software requires in any case the written consent of S…. S… will grant consent if the principal provides a written declaration from the new user in which he undertakes to S… to comply with the rules agreed for S… Software regarding the granting of the right of use, and if the principal assures S… in writing that he has transferred all S… Software original copies to the third party and has deleted all copies created by himself. S… may refuse consent if the use of the S…. Software by the user conflicts with its legitimate interests."

2) "Any use of the S… Software that goes beyond the contractual agreements must be notified to S… in advance in writing. It requires a separate contract with S… regarding the additional scope of use (procurement)."

With the clause under 1), the software manufacturer makes the transfer of the software licence conditional upon its consent. With the clause under 2), the defendant requires a separate contract with the defendant for any use that goes beyond the contractual agreements.

Court's Decision

The LG Hamburg (judgment of 25.10.2013 – Az. 315 O 449/12) granted the claimant a right to demand cessation with respect to both cited Terms and Conditions clauses.

The Terms and Conditions clause under 1) unreasonably disadvantaged the claimant because it was incompatible with the essential principles of the statutory doctrine of exhaustion in copyright law. Following the decision of the Court of Justice of the European Union (EuGH) in UsedSoft/Oracle, the LG Hamburg reasoned that the author's distribution right is exhausted when the author has granted the customer the right, in return for reasonable payment of a fee, to use that copy without time limitation. This contradicts making the further resale of the licence dependent on the existence of the defendant's consent.

The court also reasoned, however, that it remains open to the defendant to prevent any abuses in other ways, not necessarily through technical means and protective measures.

The clause cited under 2), the court decided, constituted anti-competitive impairment of the claimant. The clause could be understood to mean that any procurement of software must always take place with the defendant and thus excludes procurement from third parties. The court did not follow the defendant's argument that the defendant merely sought to cover the case in which its customer wished to use a licensed client-server system (installation of a copy of the software application on the application server, which individual users access) for additional clients with this clause. Furthermore, following the decision of the Court of Justice of the European Union (EuGH) in UsedSoft/Oracle, the court emphasised that once the distribution right is exhausted on the copy, the further resale of used software, including client-server software, is in principle permissible.

However, a different assessment may be possible if the clause sought to prevent the original acquirer from selling isolated usage rights in used software, although the original acquirer continues to use the software copy installed on its server. In the latter case, no exhaustion occurs due to the failure to render one's own copy unusable.

Conclusion

Software manufacturers can no longer simply prohibit the trade in used software licences in their General Terms and Conditions, provided that exhaustion of the distribution right has occurred. Accordingly, particular care must be taken in drafting Terms and Conditions for the provision of software, which are intended to protect the copyright rights of the software manufacturer.