Original URL: http://www.theregister.co.uk/2012/07/05/usedsoft_vs_oracle_ruling_analysis/

Used software firms win small victory in shrinking on-premises world

US next battleground as vendors flee to the cloud

By R 'Ray' Wang

Posted in Applications, 5th July 2012 14:44 GMT

Software-makers were caught off guard by a July judgment by the Court of Justice of the European Union on the UsedSoft GmbH v Oracle International Corp case.

The court ruled that “An author of software cannot oppose the resale of his ‘used’ licenses allowing the use of his programs downloaded from the internet”.

“The Court of Justice interprets EU law to make sure it is applied in the same way in all EU countries. It also settles legal disputes between EU governments and EU institutions. Individuals, companies or organisations can also bring cases before the Court if they feel their rights have been infringed by an EU institution.”

The recent ruling on the rights of used software mirrors other rulings in cases such as SusenSoftware v SAP and UsedSoft v Microsoft. Analysis of the ruling shows that:

The Bottom Line For Buyers: In the EU you own your software free and clear of vendor encumbrances

Prior to this ruling, customers could resell hardware to a secondary market but not their software. This inefficiency and inconsistency in the law has led to billions dollars of wasted expense by organizations around the world, perplexing buyers for decades. Pioneering efforts by SusenSoft and UsedSoft should be applauded by customers for fighting the legal battles to reinforce their rights.

Other efforts by Rimini Street and TomorrowNow to free up the third party maintenance market should be supported by the software users around the world and the European Union. As with reselling software, the anti-competitive practices of software vendors to limit access to third party maintenance is as heinous as limiting the ability to resell used software. This practice is akin to only being able to service one’s Toyota at the Toyota dealer.

One major concern for users – the cloud presents the next big lock-in. Why? Users do not own their licenses. This ruling may lead to all software publishers to deliver software via access in the cloud. In effect, no on-premises software would ever be sold again and users could only rent their software. This unforeseen ramification could prove even more costly as vendor lock-in will increase unless cloud users are granted protections in the market.

Kudos go out to the Court of Justice of the European Union for continuing to protect both the consumer’s software rights and in general the individual’s privacy rights. The only complaint, the inability to divide licenses in a resell. Buyers should learn to buy in separate contracts and refuse bundling to preserve their resell options. Users around the world should push for similar provisions in the World Trade Organization as well as the US Department of Justice.

The Bottom Line For Software Publishers: The US will be the Next battleground

Software publishers should take note that anti-competitive practices are no longer tolerated in the EU. This ruling will require new strategies covering multiple areas of the software distribution process:

Expect users and other rights groups to free the US market from the same practices. In the meantime, savvy users will purchase their software in the EU so that their organizations can benefit from these new consumer protections.

Guest columnist R 'Ray' Wang is the Principal Analyst and CEO at Constellation Research. He is also the author of the enterprise software blog A Software Insider’s Point of View.