Green-IT is a judgment of the Bundesgerichtshof (BGH), the Federal Court of Justice of Germany, delivered on 19 March 2015 in case I ZR 4/14. It concerned a reseller that sold boxed copies of the security program Symantec Norton 360 by e-mailing the buyer only the product key and keeping the disc. The court held that the distribution right in the copy was exhausted and extended to reselling it by passing on the product key, but that the buyer could lawfully download and install the program only if the reseller had made its own copies unusable at the time of the resale. Because the reseller had kept the disc, it had created a serious risk that its customer would infringe the right of reproduction, and it was enjoined.[1]
The case was brought by the developer of Norton 360. Docket number I ZR 8/13 belongs to a separate BGH judgment of 11 December 2014, known as UsedSoft III, which concerned Adobe software.[2]
Background
The claimant sold its programs as boxed products consisting of a disc, the product key (serial number), the end-user licence agreement on the disc, other sales material and packaging. The box stated that a buyer who could not use the disc, for example because a notebook had no drive, could download the software from the claimant’s website using the product key. The claimant also held the EU trademarks “Symantec” and “Norton 360”.[1]
The first defendant, a nationwide software dealer, bought the claimant’s boxed products from authorised distributors and sold them as “retail” goods, as “bulk” goods without packaging, and as “Green-IT” goods. For Green-IT sales it sent the buyer only the serial number, with which the buyer could download the program from the claimant’s website; the buyer could request the box or the disc, and according to the dealer, discs that were not requested were periodically destroyed by a service company. On 21 June 2010 a customer ordered “Symantec Norton 360 Version 4.0” for EUR 17.95 and received by e-mail a serial number belonging to a boxed product containing version 3.0.[1]
Under the claimant’s licence terms, the software could be used only for the service period, generally one year, after which it was automatically deactivated. The licence also allowed transfer only if all copies and documentation were handed over and the recipient accepted the licence terms, and it allowed a free update from version 3.0 to 4.0 through the claimant’s website.[1]
The dispute
The claimant sought injunctions on copyright and trademark grounds, together with information and accounts to prepare a damages claim. The Landgericht Frankfurt am Main largely granted the claim. The Oberlandesgericht Frankfurt am Main dismissed the copyright claims, holding that the distribution right was exhausted and that the customer, as a lawful acquirer, was entitled to download the program, but upheld the trademark claim.[1] Both sides appealed to the BGH.
Decision or outcome
Exhaustion. Applying the Court of Justice’s judgment in UsedSoft v Oracle, the BGH held that granting the right to use a program for the whole time it remains functional is a sale that can exhaust the distribution right. Although the licence was limited to the service period, the program deactivated itself at the end of that period, so the claimant had given up its rights in the copy permanently. Contractual terms restricting resale have at most contractual, not proprietary, effect and do not prevent exhaustion. Exhaustion also extends to reselling the copy by passing on the product key, whether the reseller itself received a disc or a key, and to the improved and updated version where, as here, the updates were covered by the original terms.[1]
Reproduction. The BGH disagreed with the court of appeal on the buyer’s right to download. A later acquirer may rely on the right of reproduction in § 69d(1) of the German Copyright Act (UrhG) only if the reseller has handed over its copies or made them unusable. The dealer still held the disc when it sent the key, so its customer was not a lawful acquirer. It made no difference whether the disc was destroyed later, and the dealer’s certificate from the destruction company did not show which discs had been destroyed. It also made no difference that the claimant could have used technical measures against multiple use, because a rightsholder is entitled but not obliged to use them.[1] Because the court of appeal had not found that the customer actually downloaded the program, there was no infringement to found damages, but the dealer’s conduct created a serious risk of infringement, which supported a preventive injunction against the company and its managing director.[1]
Trademark. The BGH dismissed the defendants’ appeal on the trademark claim. Where the copyright distribution right is exhausted, the trademark right is in principle exhausted too, but the trademark owner may oppose further distribution under its mark where that distribution creates a serious risk that the buyer will infringe the copyright, as sending the key while keeping the disc did.[1] The court saw no need for a reference to the Court of Justice.[1]
The operative part ordered the defendants to refrain from sending customers who order “Symantec Norton 360 Version 4.0” only a serial number for version 3.0, instead of a complete boxed version with at least a disc, packaging and serial number, which enables the buyer to download and install the program from the claimant’s website.[1]
Significance for software licensing and SAM practice
Green-IT applies the European exhaustion rule to boxed software sold as a key, which is how many second-hand licences change hands. The court confirmed that a key can carry an exhausted copy, but it placed the risk of an incomplete transfer on the chain of sellers: the buyer’s right to install depends on what the seller did with its own copies, and the seller must prove it.[1] In UsedSoft III, decided three months earlier, the same senate held that where a licence allows use of a server copy by several users, a later acquirer can rely on exhaustion only if the first acquirer has made that copy unusable, and that licence terms restricting use to a particular group of users or purpose do not define the intended use protected by § 69d(1) UrhG.[2] Related resale cases include UsedSoft v Oracle, ValueLicensing v Microsoft and, under United States law, Vernor v. Autodesk.
Lessons learned
- A key can transfer a copy, but only once. The BGH held that exhaustion extends to reselling by product key, and that the buyer may download only if the seller’s own copies were made unusable at the time of the sale.[1] When buying second-hand licences, the relevant question is not only whether the key works.
- The reseller must prove it. The seller bears the burden of showing that the conditions for the buyer’s right of reproduction are met, and a certificate that some discs were destroyed, without identifying them, was not sufficient.[1]
- Keep the transfer evidence with the entitlement. Because the buyer’s position depends on the seller’s conduct, records of where a second-hand licence came from and how the previous copies were removed belong in the entitlement file. The court also noted that a rightsholder may use technical measures such as product keys to stop the seller’s remaining copy from being used.[1]