The long-running legal battle between ValueLicensing and Microsoft over the resale of software licenses has taken another turn following Microsoft’s attempt to make the case about copyright.
The litigation has rumbled since 2021, beginning with reseller ValueLicensing filing a suit alleging Microsoft had slipped clauses into customer contracts to restrict the resale of perpetual licenses in return for discounts. The effect, according to ValueLicensing, stifled the market. A sueball claiming £270 million in lost profits was lobbed Microsoft’s way.
Microsoft, naturally, denies the alleged wrongdoing and earlier this year bit back with an argument that reselling perpetual licenses was, in fact, infringing its copyright.
According to ValueLicensing, reselling a perpetual license is perfectly legal. The company is relying on a European ruling in the UsedSoft case, which found that used software licenses could be sold. Microsoft, on the other hand, asserted that Office is not covered by the Software Directive, but by the Copyright and Information Society Directive. The latter covers creative works, and because Office has resources like icons, fonts, and help files, Microsoft argues Office qualifies as a creative work.
In September, ValueLicensing boss Jonathan Horley told The Register: “It’s a remarkable coincidence that their defense against ValueLicensing has changed so dramatically from being a defense of ‘we didn’t do it’ to a defense of ‘the market should never have existed.'”
During the Preliminary Issues trial before the UK Competition Appeal Tribunal in September, Justin Turner KC, the chairman, commented to ValueLicensing’s KC, Matthew Lavy: “As you point out, Microsoft only had this bright idea relatively recently. Someone in the legal team may or may not become a hero or heroine, we shall see.”
Horley told The Register: “It was an important trial dealing with [the] way the pre-owned market for second-hand software licenses operated ever since the UsedSoft decision from the ECJ in 2012 and whether it was lawful. The judgment will be of interest to the Wolfson class action and many other pre-owned resellers across Europe.”
The Wolfson class action refers to a claim brought on behalf of UK customers regarding alleged abuses of market dominance and restrictive licensing practices by Microsoft. A loss could see Microsoft forced to make a multibillion-pound payout.
Microsoft also claimed that the practice of companies selling only a portion of their licenses was not permitted and that licenses purchased under volume licensing must be sold in their entirety. ValueLicensing disputed this.
However, the copyright question and its potential effects on reselling software as a whole were the stars of the show. Is Office an artistic work rather than a program? While the images on the Office toolbar might be an integral part of the software, Microsoft’s representatives pointed out that an Office installation also contained other copyrighted works, such as documentation. “It’s not Dickens,” said Jaani Riordan, on behalf of Microsoft, “but it’s a literary work. It’s original.”
It will be up to the Competition Appeal Tribunal to make a judgment on Microsoft’s latest argument. Finding in the tech giant’s favor risks blowing a hole in the pre-owned software market. Finding against could, however, end with Microsoft being on the hook for £270 million. ®
