SAP’s second-hand software ruling – does it make a difference?

Last Friday 25th October, a very significant court ruling in Germany went largely unnoticed by the global technology press. While a few titles did pick up on its significance (hats off to PC World and later Computer Weekly for their more detailed analysis), it seemed to pass most people by.

Here’s the lowdown. On Friday, the district court of Hamburg ruled against SAP over its case against a German second-user software license reseller, Susensoftware. The court’s decision upheld an earlier 2012 European Court of Justice landmark ruling on second-user software, which ruled that the resale of used software licenses is legal. This was a major blow to the major software vendors that make their living by selling limited rights to the use of their IP via software licenses. It was also heralded as a victory for end users who could now legitimately and safely purchase discounted second-hand software. Organizations too now had a legitimate way of selling on their unused licenses – much more cost-effective than simply letting them expire.

But what does it all mean?

This court ruling builds on the fundamental challenge that has plagued software vendors and end-users alike ever since the birth of the commercial software industry; who actually owns the software? The problem with something as intangible as software is that it is very difficult to set boundaries of ownership. While the ownership of physical goods like a car or a chair is very clear, intellectual property, especially one that can be replicated so easily, is a whole different scenario. This is why software licenses can be complicated and long-winded (and why we’re here to help manage them); But they are necessary. If teams of lawyers hadn’t put these exhaustive agreements in place, the software vendors wouldn’t have made any money and the information revolution of the past half century would never have happened.

So, in essence, software licenses are a good thing. So does this court ruling undermine the validity of the software license? Not really. Intellectual property is still fundamentally protected. What it does do however is uphold another fundamental principle by challenging how stringent and restrictive software licenses can be – the principle of free trade. As a result, software vendors can no longer write whatever restrictions they like into their software licenses. This is good for end users.

Are second-user software licenses worth it?

Second-hand licenses such as those available from Susensoftware and UsedSoft (the two resellers involved in these landmark rulings) are significantly cheaper than those purchased ‘new’ from the vendors. So why wouldn’t you jump on in? Why hasn’t the used software market ballooned in size since the original ruling in July last year?

We suspect there are a number of reasons;

  1. Nervousness that firms will damage their relationships with the software vendors that their businesses are reliant upon. When Oracle, for example, is embedded so deep within your organization, would you really want to get on their bad side?
  2. Used software may carry limitations over new software. While technically the product is identical, there is nothing to stop the vendors from changing certain aspects of support. Will they drop support and maintenance for used software? While this may be difficult for them to uphold in the courts, do you really want to be the test case?
  3. It’s messy. Buying a new software license is a clean as you can get. The licenses might still be challenging to manage, but that’s life, and there are tools to help. But they’ll certainly be simpler than those for used software where a full paper trail is required to prove that a legitimate change of ownership has occurred. You also need to be absolutely sure the reseller you’re buying from is the legitimate owner of the license in the first place, otherwise your next audit will be the most difficult one yet.

The second-user software market may yet grow into a seriously compelling option for organizations looking to save money on their software. Who wouldn’t want to save money on their software? But until the points above are addressed, this may not happen for a while yet.

The vendors will react, whatever happens

Finally it is worth bearing in mind that if the second-user market catches on and vendors find themselves with significant shortfalls in their revenue, they will find ways to recoup the costs elsewhere. So it begs the question; are the savings even real in the first place, or will the second-user market open up a Pandora’s box that is better left closed?

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Ben Eagling

Ben Eagling

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