Selling OEM Windows copies – you can do it in Europe

According to this reading of the law, anyway

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Our recent piece on Microsoft's interesting claim (now withdrawn*) that it's a legal requirement that a preinstalled operating system system remain with a machine for the life of the machine prompted a contribution on a related matter from Andrew Katz of Moorcrofts Corporate Law, who argues in some detail that under European law Microsoft has no right to stop you selling on any copy of Windows, including preinstalled versions.

This is not what the licence agreement says, of course, and it's probably not what Microsoft's lawyers are going to say when you meet them in court. So if anybody wants to be a test case, please note Andrew's disclaimer towards the end of this piece. Now, over to Andrew.

In Europe, subsequent sale of computer programs is governed by the 1991 Computer Software Directive, the relevant text of which is:

The first sale in the Community of a copy of a program by the rightholder or with his consent shall exhaust the distribution right within the Community of that copy, with the exception of the right to control further rental of the program or a copy thereof. (Article 4 (c))

In English, this means that once Microsoft has sold a copy of Windows anywhere in the European Union (actually the European Economic Area, but let's not quibble over another country or three), it has no control over how that copy is subsequently distributed (with an exception only for rental). Reading this, barrack room lawyers will be saying "Stop! Microsoft doesn't sell its software - it licenses it - so these rules don't apply". Bollocks. The only way of reading this provision consistent with the "purposive" approach of interpreting European law is that "sale ... of a copy ... by the rightholder or with his consent" means "sale of a licensed copy". "Exhaust the distribution right of that copy" means "Prevent Microsoft having any control on how that copy is transferred from user to user". On the one hand, Microsoft can argue that since you bought the copy of Windows on a hard disk inside the computer when you bought it, then you can transfer that copy, on that hard disk. So there is an argument that that copy of Windows is linked to that hard disk. But it's not a very good argument.

Remember I mentioned "purposive" above.

"Purposive" means that the directive must be interpreted in a way which is consistent with its purpose. And the purpose of that part of the directive is to place Microsoft on a level playing field with the manufacturers of goods, like cars and fridges and tomatoes. No doubt, Ford would love it if it was allowed to "sell" Mondeos in circumstances where it could prevent the buyer from selling them on the second-hand market. But it can't for two reasons. (1) there is an established and flourishing second-hand market and no-one would buy a car they knew they couldn't sell second-hand; and (2) there are long established rules (in English law in any event) surrounding "unreasonable restraints of trade".

Any attempt by Ford to impose such an obligation on a purchaser would be struck down by the courts as an unreasonable restraint of trade. Why should Microsoft have an advantage that Ford does not have? Note that the advantage is to the supplier itself, not to the market or the economy as a whole. Hence the passing of this part of the directive, which (among other things) is intended to bring about the establishment of a legitimate second hand market for software (something which for other reasons - unfathomable to me - has never actually happened). Incidentally, I have in my possession a Microsoft mouse which is also allegedly not to be resold except with other hardware. I have never come across a more blatant and unreasonable restraint of trade.

Therefore, limiting the sale-on of the Windows software with the hard disk it came on is clearly (to me) an attempt by Microsoft to exercise the "distribution right" of that copy of the software after that right has been exhausted, and is unenforceable. I can argue this on and on. Clearly, if when you buy a machine with an OEM copy of Windows on CD (as in the good old days) there is no argument, and the copy on CD can be given away or sold on (provided you don't keep on using it as you are no longer an authorised user). However, you are fully entitled to take a backup (again under the directive). Which leads to the logical corollary (remember "purposive"?) that you must be allowed to restore that backup. If you choose to restore that backup onto another hard disk, then that restored version of the software must be "the copy". Or what if your copy of Windows is on a RAID setup, in which case there will be more than one copy of the software? The point is, in order to establish the correct scope of the directive, you must read "copy" in the correct context. Was the purpose of the directive to allow more than one person to benefit from a copy of Windows at a time? No it wasn't. Was is to allow a user to legitimately sell on a copy of Windows once he had finished with it: upgraded to Linux, say? Yes it was.

I've got to do the boring lawyer thing and say the foregoing is not advice: it's my own personal view, so if you publish this and people get hammered by Microsoft by trying to exercise the rights granted to them under E.U. law, I won't either be (1) surprised or (2) liable. But I'm always in the market for (legitimate) second-hand copies of software. After all, unlike a Mondeo with 100,000 miles on the clock, a second-hand copy of Microsoft Windows NT4.0 sp6 [we may be able to help you there - Ed] is in exactly the same showroom condition as it was the day the gold master was pressed.

By the way, I'm getting concerned calls from clients in the business of developing remote control software which suggests that it is an infringement of the Windows XP licence to use remote control server side software (in the "not X-windows" sense) on an XP (Professional) installation where you don't have XP Professional on the client side. Unless, of course, you are using NetMeeting as your remote control software. This throws open more issues than I can cover in a lunch break, but I don't like it one bit... ®

* Yesterday dogged Register sleuth Thomas C Greene received a response to the query he filed with Microsoft some days before we published the piece. It goes as follows:

The language surrounding operating systems that come already loaded on donated machines has been clarified to better reflect best practices:

If you feel it is in the best interest of your school to accept the donated PCs, make sure you know the licensing guidelines. For instance, if the hardware donation is an original equipment manufacturer (OEM) machine, the pre-installed operating system license is only valid when used on the original machine for which it was first installed, so it's beneficial to leave it intact.

Microsoft is committed to helping our education customers proactively manage technology assets. We appreciate your feedback and actively use your comments in our planning processes.

Higher Education Customer Communications

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