Second-hand software broker: OK Microsoft – we made a mistake

Recycled software broker Discount-Licensing says it fell foul of trademark copyright laws by importing Microsoft licences from the US but reckons its "core" business is squeaky clean and outside the clutches of litigators.

It emerged this week that the Birmingham-based small biz trader coughed a "significant sum" in damages and legal costs to Microsoft to settle High Court action.

MD Noel Unwin, who jointly set up Discount-Licensing, told us that Microsoft had "threatened court action…for breach of copyright in respect of United States sourced software licences" back in April 2013.

Microsoft has claimed the case involved "hundreds of customers and thousands of licences", but Unwin said that of all the products obtained, it sold a "relatively small percentage" to punters in the European Economic Area.

Legal precedent on importing goods from outside the EEA was set back in 2002 when Tesco lost a four-year legal spat with Levi's over the importation of cheaper jeans from the States.

Unwin suspected Microsoft's decision to raise the case was "partly instigated" by a ruling in March last year by a US District Court that ReDigi's business of reselling pre-owned digital music infringed Capital Records' digital music copyright.

After learning of this legal judgement, outcome, Unwin said it "took the immediate precautionary step of freezing all of unsold US sourced software licences stock and refrained from purchasing any further software licences from the US and any other non-EEA country".

Unwin said it replaced all US licences "set out in the proceedings" to head off "possible repercussions of an unfavourable decision by the court".

Second-hand or recycled software includes licences bought from liquidators of bust companies or from businesses that are scaling back the workforce and the corresponding software estate.

This is not the first time Microsoft and Discount-Licensing have faced off: Unwin previously told us that Microsoft had changed Ts&Cs to prevent re-sale of licences but that his firm had sidestepped them to remain compliant.

Discount-Licensing sells Microsoft Open, Select and Enterprise Agreements. In the case of Open Agreements, it operates as a go-between from the user organisation selling the software and the buyer, meaning that it acts only as a broker.

In terms of Select, it manages the transfer and sale of the the licence from the insolvent company to the buyer, taking a commission in the process.

Unwin told The Channel:

"Throughout the course of the proceedings, Microsoft specifically stayed away from attacking Discount-Licensing’s core business, which is to source and sell Microsoft software licences sourced from the EEA/EU region.

"The EU Software Directive 2009 is in place to protect the pre-owned digital software markets and its customers in the EU region.  If all trading is kept within the EU, companies can dispose of their disused software licence assets and businesses can continue to purchase such products at discounted rates without the threat of legal action from the software vendors," Unwin added.

Microsoft has refused to detail the size of the settlement - but the fact small biz Discount-Licensing is still trading means it wasn't enough to put it under - and it refused to disclose the specific product licences involved.

Discount-Licensing claims to be a member of the Federation Against Software Theft and we have asked that trade group for a comment on whether this will be the case in the very near future.

Updated

A spokesman for FAST told us that Discount-Licensing is no longer a member, "After examining the details of the case FAST decided to end DL's membership this week." ®