In a legal battle that could alter the landscape of Europe's second-hand software industry, Microsoft and ValueLicensing find themselves at the heart of a tribunal hearing this week. ValueLicensing, a UK-based reseller specializing in pre-owned licenses for Microsoft Office and Windows, is challenging Microsoft's actions that they claim amount to market restriction practices.
The case, which is unfolding at the Competition Appeal Tribunal, poses significant questions about the legality of reselling perpetual software licenses in Europe—a market that thrives on the exchange of pre-owned digital products. Microsoft's position, as argued in its defense, hinges on the interpretation of copyright law, including ownership rights extending beyond program code to elements like graphical user interfaces.
ValueLicensing's Claims
ValueLicensing contends that Microsoft's strategies, including offering customers discounts for subscription services in exchange for their perpetual licenses, have throttled the supply available for resale, costing the company an estimated £270 million in lost profits. Furthermore, the reseller alleges that contract clauses placed by Microsoft intentionally curtailed resale rights, providing further obstacles to the secondary market.
Jonathan Horley, the head of ValueLicensing, asserts that Microsoft's evolving legal stance signifies a shift from simply denying anti-competitive conduct to questioning the legitimacy of the entire software resale market. According to Horley, if Microsoft's arguments hold, it could signal an end to the secondary trading of software licenses in Europe.
Microsoft's Defense
Microsoft's legal argument juxtaposes the existing European Software Directive, aiming to navigate away from its confines by distinguishing between software code and other product components. The US tech giant cites a precedent from the Tom Kabinet ruling, where distinctions were made between physical media, software, and e-books, arguing that its products fall into a category that should never have been eligible for resale under current law.
The implications of this tribunal's decision could be vast. Should Microsoft's interpretation prevail, ValueLicensing might find that the lake it's been fishing in has disappeared overnight—a situation that could similarly affect other resellers within Europe's secondary software market.
The case arrives at a moment where the European Commission has been seeking clarity and uniformity in digital markets, making it a potential landmark decision for all stakeholders involved. The focus now shifts to whether the tribunal will uphold the principles allowing for secondary trading or affirm Microsoft's claim of exceptional ownership over certain non-software elements of its products.
