UsedSoft III is the German Federal Court of Justice (Bundesgerichtshof, BGH) judgment of 11 December 2014 in a case Adobe brought against the German subsidiary of usedSoft AG and its managing directors. It is the third BGH step after the CJEU’s UsedSoft ruling and follows UsedSoft II. It concerns the resale of 40 volume licences of Adobe Creative Suite 4 Web Premium that an educational group had bought at a discount. The BGH held that Adobe’s distribution right was exhausted and that the contract limits on who may use the software did not stop the resale.[1]
Background
In 2006 an Adobe group company concluded a membership contract under a licence programme for educational institutions with a foundation, which allowed it and its affiliates to buy licences at a discount. Both the foundation and its affiliates had to be educational institutions and end users. The contract gave a “nicht ausschließliche, nicht übertragbare Lizenz” (non-exclusive, non-transferable licence) to copy the software only for internal distribution within the member’s organisation. In 2009 an affiliate ordered 40 licences of Creative Suite 4 Web Premium through an authorised Adobe licensing centre, downloaded the software from the customer portal, stored it on eleven media-kit discs and passed 40 licences and the discs to usedSoft, which supplied them to its German subsidiary. That company sold two licences and one disc to a city administration, with a self-made licence certificate and a notary’s confirmation.[1]
Adobe claimed copyright and trade mark infringement and misleading competition. The Frankfurt Regional Court largely upheld the claims. On appeal the Higher Regional Court held that Adobe’s distribution right had been exhausted and rejected the copyright claims, but kept the trade mark findings for some acts.[1]
Decision or outcome
- Exhaustion. The headnotes state that exhaustion of the distribution right occurs whether the right holder agrees to the sale of a number of physical discs or to the making of copies by download and further copies of that copy (continuing UsedSoft II).[1]
- Content limits do not stop resale. Once a copy has been put on the market by sale with the right holder’s consent, further distribution is free despite a content limit on the licence granted (continuing the OEM-Version judgment of 2000).[1]
- Multi-user versus multi-copy licences. If the first buyer’s licence allows several users to use one copy installed on a server, the second buyer can rely on exhaustion only if the first buyer made that copy unusable. If the licence allows several independent copies, it is enough that the first buyer made a matching number of copies unusable. Splitting a volume licence of separate licences was therefore not an unlawful division.[1]
- Proof of unusability. A notary’s confirmation that a declaration of the first buyer was shown does not prove that copies were made unusable; here the Higher Regional Court relied on the first buyer’s destruction declaration, and the BGH accepted this because Adobe’s own appeal said the first buyer had forwarded the software without installing it.[1]
- Intended use. The right of the second buyer to use an exhausted copy as intended cannot be narrowed by terms that impair the tradability of the program. Terms that limit use to a certain circle of users or a purpose, such as the educational programme, do not regulate the intended use within the meaning of section 69d(1).[1]
- Abuse by the first buyer. Even if the dealers had ordered educational licences in collusion for profitable resale, the BGH held that exhaustion has effect against everyone and cannot be weakened because a buyer acted abusively.[1]
Adobe’s appeal was dismissed in part and held inadmissible in part; the defendants’ appeals against the trade mark and competition findings succeeded and the claims against defendants 2 and 3 were dismissed. Adobe bore the costs of the appeal on points of law and two thirds of the court costs of the lower instances.[1]
Significance for software licensing and SAM practice
The ruling matters for any volume or academic licence programme: contract limits on the user group travel with the licence on paper but not necessarily in law once the copy has been sold. It also separates licences for several users of one server copy, which depend on one copy being made unusable, from licences for several separate copies. The same court dealt with a product key in Green-IT, and the earlier steps are in UsedSoft II and UsedSoft v Oracle.[1]
Lessons learned
- Check how the licence counts copies. One server copy with many users and many separate copies lead to different proof requirements.[1]
- User-group clauses may not survive resale. Limits to education or other groups were held not to define intended use.[1]
- Evidence of deletion matters. A notarial note of the seller’s own declaration is weak proof, and the reasoning turned on what the first buyer actually did with the copies.[1]
- Trade mark and advertising claims are separate. The copyright result did not decide them; here the defendants also won on those points.[1]