Published by Matthew Evans (Guest Writer) November 16th 2013
Only a few days ago Sony updated the PSN Software Usage Terms for all European PSN users, affecting their rights to any digital software they purchase. Confusion arose as consumers became uncertain as to what extent this affected them. Surprisingly, it may not have an effect at all. The law is a fickle beast and there is more to this tale than may first meet the eye. The update in question states that “All Software is licensed, not sold, which means you acquire rights to use the Software, as described in these Terms, but you do not acquire ownership of the Software.” It goes on to state that “You must not resell… Software Downloads, unless expressly authorised by us and, if the publisher is another company, additionally by the publisher.”
The main factor within these two phrases is that any content purchased on the PSN Store counts as a license and not as a sale. A license is merely a right to use content whereas a sale should convey ownership rights. European law has been in a state of flux recently though, muddying the actual definitions of the two and creating a new precedent that many legal folk have been criticising. In the 2012 case of UsedSoft v Oracle, two parties had a disagreement as to who had rights to software. UsedSoft is a service that specialises in buying and reselling second-hand software, allowing license holders to sell licenses they do not need for money and allowing those that need licenses to purchase the ‘used’ licenses for up to 30% less than retail price. Oracle is a software development company.
This case concerned batches of 25 licenses that Oracle sold to a third party. This third party sold leftover licenses from these batches to UsedSoft in order to benefit from the unneeded licenses. Oracle argued that they held the exclusive right to reproduction under Article 4 of the Computer Programs Directive. This means that the Court of Justice of the European Union (CJEU) had to decide whether by selling its software online Oracle had exhausted any rights to it.
The court decided that Article 4(2) of the Directive should be interpreted broadly to include all forms of product, tangible or not, otherwise a distributor could simply claim the contract was for a “license” and not a “sale” in order to circumvent the law. Therefore, upon first sale, this right was exhausted. This applies even if the first “sale” is in fact a free copy given to a user. The court went on to state that for this to apply the reseller must stop using their copy of the software; otherwise this is the same as creating and selling a copy. The outcome of this case has had an interesting effect on the area of selling second-hand digital goods. The CJEU has removed all legal distinction between a license and a sale in terms of digital goods, changing the legal definition as to the principle of exhaustion in software cases. This is made even more confusing by the fact that the CJEU have decided to ignore the “non-transferable” license clause in Oracle’s license agreements, allowing resale to take place regardless of contractual agreement to not do so.
It has been noted by legal academic MacLean that “The CJEU has not changed the law; it has merely shed some light on how the current provisions should be interpreted”.* Nonetheless, the ramifications of this case are huge. Sony is very much affected by this outcome. The terms that they have specifically stated within their Software Usage Terms state that upon sale all digital content still belongs to them. The case of UsedSoft v Oracle disagrees and interprets the law in a way that states they lose all rights to their software upon sale. Technically this means two things to EUROPEAN consumers. Firstly, the updated terms and conditions actually do not have the effect they intend and therefore have no legal ramifications. Secondly, EUROPEAN customers currently have the legal right to sell any digital software they purchase as long as they no longer retain a copy of the software themselves.
Before gamers shout a massive hurrah and get ready to embrace a digital world, there is one major problem that exists. There is no current way to sell any software that you purchase through the PSN. Although consumers have a legal right to sell on any software, they do not have the technical ability to do so. I stated earlier that this only affects European users of the PSN. Firstly, only the European Software Usage Terms have been updated to incorporate these new terms. Secondly, the UsedSoft case is only binding on countries within the EU.
The US courts have taken a different approach to the same area of law. In the 2010 US case of Vernor v Autodesk a similar set of issues arose but the courts reached a radically different outcome. Unlike the UsedSoft outcome that states a license is equivalent to a sale, Vernor kept to the traditional definition of licence, mainly that a license is the right to access software that somebody else owns. This is what all software business models are built around and depend on, so this decision makes a great deal of sense.
It is likely that the current outcome of UsedSoft will be overruled in the future as the CJEU realises they have made a big mistake. If this happens then the updated terms in Sony’s Software Usage Terms will carry the heavy weight that they seem to imply. Until then the law will carry on to be a mess, with the state of purchasing digital software within the EU remaining legally confused.
* F Maclean, ‘European Union (CJEU) has delivered its long-awaited decision in UsedSoft v Oracle International Corp’ (2013) 19(1) CTLR 1, at 2.
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