Is Selling Used Software Exploding Into
a New Market Niche for
Used Booksellers?

Selling used software has suddenly become a hot topic for Internet booksellers these days.

On July 3, 2012, the European Union Court of Justice ruled that purchasers of software that was distributed digitally can sell their licenses on the secondary market without interference from software vendors.

Automatic upgrades, software fixes, and other changes to the individual programs being sold are considered as part of the original sale.

The decision arose out of a lawsuit brought by Oracle, Inc. against UsedSoft, Inc; a used software retailer. UsedSoft buys software licenses from companies who no longer need them and resells those licenses on the open market.

This landmark ruling differs from past practices where only digital content distributed on physical media such as floppy disks, DVDs, and CD-ROM software were sold used.

And even in the cases of physical media the practice was on tenuous legal ground at best in the United States for companies selling software online that was previously owned.

Limitations of the Ruling

Companies that sell used software must destroy any backup copies they posses. In addition, if the original software purchase was for a multi-user system, it can't be broken up and sold piecemeal.

For example, if you buy a 10-user software license you can't break it up and sell it as two 5-user licenses to two different buyers.

It's an all or nothing deal.

Still, the ruling paves the way to officially create a brand new secondary market for consumers to legally purchase used software when none existed in the past.

Consequently, not only do vendors have to compete against traditional competitors, they have to consider the price pressure created by their on customer base from a used software sale years in the past.

A Little Bit of History

Generally, software vendors claim that the doctrine of "first sale" doesn't apply to software because they're selling a license and not the software itself.

A good example of the first sale doctrine as interpreted in the U.S. is when American courts slapped down the entertainment industry for trying to prohibit the resale of music and movie tapes and disks by consumers.

The courts declared that the rights of vendors to restrict the resale of products legally purchased by consumers was extinguished after the first sale. However, U.S. courts have failed to extend that ruling to used software.

I can tell you from first hand experience that I buy and sell used software programs all the time. I find them at library book sales, Goodwill thrift stores, and estate sales and resell them for a big profit online.

In fact, in the early 1990s I purchased a used copy of the now defunct Clipper DOS database programming language and even registered the software with the vendor, Computer Associates after transferring the license into my name.

They were happy to oblige me and after a few months I gladly purchased each new upgrade when they were announced. So the company eventually made profitable repeat sales that they would not have gotten otherwise.

License Agreements Generally Unenforced

I suspect the issue of buying and selling used software on the secondary market in the United States hasn't been such a hot topic because U.S. vendors generally don't mind the practice on small systems.

However, big iron vendors seem to have a different take on the matter.

Vendors of midrange and mainframe software systems have been highly aggressive in defending their turf and not allowing the transfer of licenses between third parties.

One driving factor behind that mentality is the fact that mainframe computers use a tiered pricing system that requires larger companies to pay more for the same software used by smaller companies.

Considering that the cost of large scale systems can run into millions of dollars it's no wonder that the recent EU ruling is making the U.S. software industry nervous.

A Whole New Market of Used Goods?

It should be noted that the EU decision is only binding in Europe and has little bearing in the United States, particularly on software used for business purposes.

However, as previously noted, the resale of license agreements in the U.S. is only loosely enforced by vendors.

Frankly, I think vendors should not only welcome but embrace a robust secondary software market in the U.S. because they have an opportunity to sell technical support, annual upgrades, and add-on products to a wider customer base.

Perhaps that’s why enforcement of license provisions is so relaxed in America. It allows software vendors to increase business profits in unexpected ways.

Nevertheless, if such a ruling were to hit American shores it would allow businesses of all sizes to earn profits on dead assets that were previously lost to the company.

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