Brexit has wide ranging implications on many areas of the law, including the exhaustion of rights in user licences for software. Under EU law, copyright in software is ‘exhausted’ when a copy of the software is placed on the EEA market by or with the consent of the copyright owner. This includes the grant of certain licences as long as a number of conditions are fulfilled. The licensee may then resell this licence freely within the EEA. Will this regime continue to apply to the UK following Brexit?
Nothing is changing until the end of 2020
The good news is that the law on the resale of user licences for software is not changing immediately. Until the end of the “Implementation Period” on the 31 December 2020, the regime applicable to the UK prior to its exit of the EU will continue to apply.
The existing regime has been established via EU law, most notably in Case C-128/11 UsedSoft GmbH v Oracle International Corp. The resale of user licences for software is generally permissible as long as the following conditions are met:
- the copy of the software was placed on the EEA market by or with the consent of the copyright owner;
- the initial acquirer of that copy of the software was granted a perpetual licence to use it;
- the copyright owner received reasonable payment for that licence; and
- upon resale of that copy, the initial acquirer makes any remaining copy it has unusable.
If the above conditions have been met, the rights in the copies of software have been ‘exhausted’ and can be resold freely within the EEA.
Conversely, the resale of user licences for copies of software sold outside of the EEA (e.g. in the USA) by or with the consent of the copyright owner will continue to require the authorisation of the copyright owner.
The same will continue to apply to copies of software in which rights have been ‘exhausted’ by the end of the implementation period.
Article 61 of the revised Withdrawal Agreement clarifies that rights in copies of software which were ‘exhausted’ at any time up to the end of the Implementation Period, whether in the UK or elsewhere in the EEA, will remain exhausted thereafter. This means that user licences entered into in the UK prior to 31 December 2020 for such copies can continue to be resold in the EEA after 31 December 2020.
What will happen after the end of the implementation period?
1. LResale from the EEA into the UK
The UK Government has made provision for what appears to be a temporary ‘default’ position on exhaustion of intellectual property rights in the Intellectual Property (Exhaustion of Rights) (EU Exit) Regulations 2019. The UK will continue to recognise exhaustion of rights in copies of software sold in the EEA provided that the conditions described UsedSoft Gmbh v Oracle International Corp above are met. Therefore, if rights are exhausted in the EEA, they will continue to be exhausted in the UK.
2.LResale from the UK into the EEA
By contrast, in the absence of the UK reaching any agreement with the EU for reciprocal exhaustion, rights in software sold in the EEA from the UK after the end of the Implementation Period will not be considered exhausted within the EEA. This means that the resale of user licences for software from the UK into the EEA may require the further authorisation of the copyright owner.
It is presently unknown how long the above arrangements will remain in place. The UK Government is undertaking a research programme to inform its future strategy on exhaustion. In the medium to long-term approach of the UK to exhaustion of intellectual property rights is likely to take its lead from the shape of any future trading relationship between the UK and the EU, including whether the UK forms part of a Customs Union.
3.LResale from non-EEA territories into the UK
The regulations mentioned above do not address what will happen after the end of the Implementation Period in relation to copies of software placed on the market outside of the EEA by or with the authorisation of the copyright owner and whether the related user licences may be re-sold in within the UK.
There is also a degree of uncertainty as to whether the resale of user licences sourced from outside the EEA would continue to require the authorisation of the copyright owner or whether they would be permissible. This is because under the Withdrawal Act, the UK has retained much EU law. This could include EU law precluding resales of user licences for copies of software first sold outside of the EEA without obtaining the further authorisation of the copyright owner. There is also a view that the UK would automatically revert to a position of ‘international exhaustion’ as existed prior to the UK’s membership of the EU, in which case such resales would be permissible.