Microsoft Software for Sale, Slightly Used

Alsee writes "The Register reports that recent UK business Discount-Licensing.com has been having booming growth reselling pre-owned Microsoft software licenses 20-50% below retail, after spotting the opportunity in Microsoft's licensing terms and Britain's insolvency laws for insolvent and downsizing businesses. Sorry, no discount personal OS resales, corporate bulk resales only."

Comments

What a crazy idea!

[IntelliAdmin]

What a crazy idea - the thought that you actually can do what you want with something you purchased. I wonder how long it is before the BSA finds some way of shutting these people down.

Re:What a crazy idea!

[caffeination]

If those are the examples you're using to back up your point, then I'm afraid you're not going to convince anyone. And why should consumer rights be subject to the exact same moral conditions as every other facet of society? That doesn't make any sense whatsoever.

Re:What a crazy idea!

[Anonymous Coward]

Maybe a refresher course in criminal vs. civil law would do you good. The examples you named are all crimes. Reselling otherwise completely legal stuff cannot, should not, be bound by a non-binding unilateral civil 'contract'. Oh, and by the way, surely it's a crime to drive a car you own if you're unlicensed. But you can resell it, right ? There goes your strawman..

Re:What a crazy idea!

[hey!]

What a crazy idea - the thought that you actually can do what you want with something you purchased.

Well, it would be, if Microsoft sold sofware.

Which they don't.

Whether you think i's a good idea for society or not, they sell licenses. A license by its very nature is more ambiguous than ownership, because it is, at its heart, an agreed upon, ungoing relationship between the licensee and licensor.

So, what is going on here is something a bit extraordinary. It's saying that licensees have in certain cirumstances the ability to transfer their relationship with the licensor to a third party, without the licensor's consent.

Re:What a crazy idea!

[aplusjimages]

Does M$ ever see any cheddar from this transaction, like they would on the first sale of a license? So aren't we getting ripped off by this company? Shouldn't they be selling the licenses for way less, like 50-75% off instead of 25-50%?

Re:What a crazy idea!

[ajs318]

It's quite legal to give alcohol to a minor, if you are in loco parentis and not on licenced premises ..... though if the recipient is under five years old, it has to be part of a prescribed or prepacked medicine. Likewise, it is entirely legal to drive a car without a driving licence, as long as you are not actually on the Queen's Highway and not breaking any other law. You can even legally drive a car with no tax disc, MOT {roadworthiness test}, and only a provisional licence and no accompanying driver ..... as long as you intend to attend an MOT test, get a tax disc with the MOT certificate, and take a driving test in the now taxed-and-ticketed car, all on the same day. Besides which, if stopped, you always have seven days' grace in which to produce your documents at a police station.

Re:What a crazy idea!

[ehrichweiss]

There's really absolutely nothing extraordinary about this at all. At least here in the States, "shrinkwrap licensing" doesn't hold water in the higher courts and the only real way to keep someone from selling their software is by signed agreement.

SGI has for years sold software under a license where you physically sign an agreement to purchase, and the license forbids resale of the software without express permission of Silicon Graphics. The thing is, they have the attitude toward their media that most of us wish that the record/movie companies had toward CD/DVD's..if it gets damaged, lost, stolen, etc. then they replace it for free...usually overnight Fedex. But that was back in the day, I'm unsure if they still do this now.

Anyway, I'm glad to see someone do this with the corporate licenses; it's about damn time.

Re:What a crazy idea!

[DavidTC]

While it is perfectly valid to point out that they're trying to charge the terms after the point of sale on purchased-in-stores software, this article is about business licenses, which, I assure you, are licenses. The company sits down with MS and hammers out an agreement, and then they both sign it.

No one walked into a store and out with a box, it's not an install EULA, or even a shrinkwrap license, and I have no problem with MS trying to keep people from reselling them. They are almost always company or site licenses, or at the leaat have deep discounts. MS has no problem getting paid half price for each license if you'll go ahead and buy 50 at a time. Letting companies break those apart and sell each one is rightly objected to.

OTOH, bankruptcy laws apparently allow this, so I don't see what MS can do. Instead of objecting to this practice entirely, I suggest they object to any alteration of the terms. If it was a site license for 50 computers, by god it's still a site license for 50 computer. You can't break it up or use it at more sites.

No, this isn't the same thing as OEM licenses, which can be resold, no matter what MS says. Yes, they are bought at a discount, but the important thing there is that they are then sold to individuals who didn't agree to any special terms during the purchase, and thus the Right of First Sale is in effect. (Because EULAs are complete gibberish, and it's even more gibberish than usual to try to apply them when people aren't running the software.)

Of course, MS is free to ban reselling OEM licenses to end users, but that makes no sense.

Re:What a crazy idea!

[Bogtha]

Whether you think i's a good idea for society or not, they sell licenses.

When you walk into a shop, pick a box off the shelf and pay for it, does it say "Windows" on it, or does it say "A license for Windows" on it? When you see adverts for computers in magazines, does it say that they come with Windows, or does it say that they come with a license for Windows?

If Microsoft aren't selling Windows, then millions of people around the world have not got what they legitimately paid for and have been defrauded.

If you bought a television set, brought it home, and then found out you weren't allowed to resell it because Sony didn't actually sell you the TV set, but merely permission to use it, then you'd think that was nonsense, wouldn't you? There is no difference here. Copyright is not property, it's a temporary restriction on some types of unauthorised copying. That copy of Windows you bought is your property, not Microsoft's, the fact that Microsoft hold the copyright on Windows doesn't change that. There is no reason why you shouldn't be able to sell it.

Re:What a crazy idea!

[Sparr0]

Let me direct you to one of my favorite Sale vs License rulings, Adobe v Softman. Relevant excerpts follow:

A number of courts have held that the sale of software is the sale of a good within the meaning of Uniform Commercial Code. Advent Sys. Ltd. v. Unisys Corp., 925 F.2d 670, 676 (3d Cir. 1991); Step-Saver, 929 F.2d at 99-100; Downriver Internists v. Harris Corp., 929 F.2d 1147, 1150 (6th Cir. 1991). It is well-settled that in determining whether a transaction is a sale, a lease, or a license, courts look to the economic realities of the exchange. ...

Other courts have reached the same conclusion: software is sold and not licensed. See, e.g., RRX Indus., Inc. v. Lab-Con Inc., 772 F.2d 543, 546 (9th Cir. 1985); Applied Info. Mgmt., Inc, v. Icart, 976 Supp. 149, 155 (E.D.N.Y. 1997) finding that whether a transaction denominated a "license" was in act a sale conveying ownership was a disputed question of fact); Novell, Inc. v. CPU Distrib., Inc., 2000 U.S. Dist. Lexis 9975 (S.D. Tex. 2000). In Novell, a software manufacturer was pursuing a discount retailer for copyright infringement. Like Adobe, CPU argued that it purchased the software from an authorized source, and was entitled to resell it under the first sale doctrine. Novell claimed that it did not sell software but merely licensed it to distribution partners. The court held that these transactions constituted sales and not a license, and therefore that the first sale doctrine applied. 2000 U.S. Dist. Lexis 9975 at *18. ...

The Court finds that the circumstances surrounding the transaction strongly suggests that the transaction is in fact a sale rather than a license. For example, the purchaser commonly obtains a single copy of the software, with documentation, for a single price, which the purchaser pays at the time of the transaction, and which constitutes the entire payment for the "license." The license runs for an indefinite term without provisions for renewal. In light of these indicia, many courts and commentators conclude that a "shrinkwrap license" transaction is a sale of goods rather than a license.12 ...

The reality of the business environment also suggests that Adobe sells its software to distributors. Adobe transfers large amounts of merchandise to distributors. The distributors pay full value for the merchandise and accept the risk that the software may be damaged or lost.13 The distributors also accept the risk that they will be unable to resell the product.14 The distributors then resell the product to other distributors in the secondary market. The secondary market and the ultimate consumer also pay full value for the product, and accept the risk that the product may be lost or damaged. This evidence suggests a transfer of title in the good. The transfer of a product for consideration with a transfer of title and risk of loss generally constitutes a sale. VWP of Am., Inc. v. United States, 175 F.3d 1327, 1338-39 (Fed. Cir. 1999). ...

[signed]
DEAN D. PREGERSON
United States District Judge

Here's how they will "fix" this

[Anonymous Coward]

Microsoft will start putting a non-transferability clause in license agreements. Simple as that. US Bankruptcy law may or may not create an out for such a clause, so that a trustee can sell a debtor's licences. If the law allows it and if it causes a drain on sales revenue, you can bet that there will be another anti-consumer amendment to the bankruptcy code.

Re:Here's how they will "fix" this

[ajs318]

Three words: "Exhaustion of Rights".

In the UK at least, once you sell something -- even something nebulous like a licence to do something the Law of the Land already gives you the right to do -- then it is no longer your property and you lose control of it.

They can put a clause in the licence that apparently forbids transfer of licences; but UK law gives you the right to transfer licences. And a promise not to exercise a statutory right is worthless, so invoking the "severability" clause found in almost every EULA. If there is no severability clause, then the whole EULA is null and void.

Re:Here's how they will "fix" this

[BadAnalogyGuy]

So if the license says you can't transfer it, you can still transfer it?

Does that mean that if it says you can't install the software multiply that you may indeed install it as many times as you want? Does it mean that licenses are completely worthless to the licensor?

Are you a lawyer?

Re:Here's how they will "fix" this

[m50d]

So if the license says you can't transfer it, you can still transfer it?

Yes

Does that mean that if it says you can't install the software multiply that you may indeed install it as many times as you want?

No, because copyright law prevents that.

Does it mean that licenses are completely worthless to the licensor?

Licenses are useful for one thing only - making exceptions to your copyright. Any other terms are meaningless.

Are you a lawyer?Not yet

Re:Here's how they will "fix" this

[ajs318]

So if the license says you can't transfer it, you can still transfer it?

Yes, because the Law of the Land says you may transfer a licence -- and rights given to you by the Law of the Land cannot be denied to you by entering into a contract. That's what the magic words "Your statutory rights are not affected" mean. It's also the reason why EULAs have a severability clause; that's the bit that says if any provision is found not to be applicable it shall not prejudice any other provision.

Does that mean that if it says you can't install the software multiply that you may indeed install it as many times as you want?

No, because the Law of the Land does not say you may install it as many times as you want. Though, you might argue in court that this constituted Fair Dealing {a deliberately ambiguous term: it is for the courts to decide what does or does not constitute fair dealing}. If you were successful, you would set a precedent.

Does it mean that licenses are completely worthless to the licensor?

Pretty much so, yes.

Are you a lawyer?

No, but I know my rights.

This probably won't last for very long.

[gameforge]

From TFA: "The secondhand resale of a license agreement is not the intended purpose of these provisions."

Apparently, a Microsoft rep said that to the article writer.

Something tells me that Windows Vista and future versions of Office, etc. will probably restrict their licenses somehow to prevent this. Some company had "net saving in the region of £10,000." That means Microsoft probably lost a lot more than that.

Too bad they won't sell to individuals; I might actually purchase a Microsoft product if I could just download it from P2P and go buy a cheap license from these guys. Even better, someone should go start collecting unused Windows licenses and giving them away to those who need them, like college students (okay, just kidding).

Re:This probably won't last for very long.

[mjmartin_uk]

Ahhh but you forget that UK law would prohibit this (the forceable non-resale of a licence agreement). In the UK you can legally resell your copy of Windows, with the licence agreement, even if it is an OEM copy and was intended to be used (as Microsoft says) 'only on new computers'.

Re:This probably won't last for very long.

[Ironsides]

Something tells me that Windows Vista and future versions of Office, etc. will probably restrict their licenses somehow to prevent this. Some company had "net saving in the region of £10,000." That means Microsoft probably lost a lot more than that.

Microsoft didn't "lose" any money on this sale, neither did they "make" any money. This is similar to me buying the Monopoly(tm) board game at a garage sale. Parker Brothers neither lost nor made any money on the deal.

Re:This probably won't last for very long.

[LewsTherinKinslayer]

Microsoft didn't "lose" any money on this sale, neither did they "make" any money.

You're right, Microsoft didn't lose money per se. However, Microsoft did lose a fairly substantial potential business because of this.

This is similar to me buying the Monopoly(tm) board game at a garage sale. Parker Brothers neither lost nor made any money on the deal.

Perhaps Parker Brothers should put some kind of license agreement in their board games that prohibits resale of Monopoly. This is of course, the move Microsoft is going to be making soon. (And already has, as in the case of OEM licenses.)

Personally I think the idea of a license agreement forcing non-resale is ridiculous. Its similiar to DRM: some company telling me what I can and can't do with something once I've purchased it. Feh.

Re:This probably won't last for very long.

[gameforge]

Software makers (Microsoft) would have you think that you did indeed rob GM when you bought a used car.

Remember also, cars wear out and die; a used software license installs and works perfectly every time. The CD might wear out, of course, but that's not what you paid for (that's why backing up any piece of media should always be legal... you didn't pay $300.00 for a $0.03 piece of plastic, you bought the numbers recorded on it).

You could argue that software goes obsolete; but the company that saved all that money that I was referring to bought older licenses of Office XP, which isn't the newest Office. They would have bought new licenses to Office XP from MS, but instead bought used ones. No matter which way you cut it, MS lost a sale, a potentially high value sale. I don't know of anywhere else you can go to buy used licenses to MS software in bulk.

I don't believe software makers should have the right to this "forced non-resale" licensing; I'm just pointing out that it's costing MS a lot of money, and if they can stop it (which it sounds like they can't, even in the US) they would love to do so.

Re:This probably won't last for very long.

[Penguinoflight]

Thats not actually correct. When you buy Monopoly, you are enforcing Parker Brothers market dominance, and adding to the original value of their product. If I know that I can sell monopoly for $2 after playing it for 5 years, it is worth $2 more than if I cannot sell it.

From another perspective, if the person who previously bought a parker brothers product has spare spending money, they will be somewhat more likely to buy another parker brothers product (this last one is influenced highly by the satisfaction of the customer).

So basically from customers making these sales, Microsofts product now has a higher value. Considering that most of the licences being sold are not the same license that microsoft is selling now (e.g., selling 2k for xp upgrade), the offering does not lower demand for the new product, and there is an overall increase in demand.

If Microsoft is smart about this, they will increase prices of their new products rather than try to shut down another "racket".

Re:This probably won't last for very long.

[Scarletdown]

Some company had "net saving in the region of £10,000." That means Microsoft probably lost a lot more than that.

Microsoft didn't lose anything. They made their money from the original sale of those licenses which were then resold. That would be like claiming nVidia would be losing whatever the current retail value is of the used GeForce card that I may sell, since I have replaced it with a new one. They made their money off it already.

This is legal in the US too

[Anonymous Coward]

This is legal in the US too. And protected under the "Doctrine of First Sale", much as the software companies would like it didn't exist.

"US copyright case law supports that consumers cannot make copies of computer programs contrary to a license, but may resell what they own."
http://en.wikipedia.org/wiki/First-sale_doctrine

"Software publishers claim the first-sale doctrine does not apply because software is licensed, not sold, under the terms of an End User License Agreement (EULA)."

but if it's licensed then one should be allowed to make backups of the disc or receive a replacement disc if the disc gets lost or damaged. Software companies will argue either way where it suits them.

they can't have the cake and eat it. It's either or

Re:This is legal in the US too

[ChristTrekker]

The exact same argument applies to the media (**AA) corps too (IMHO, IANAL). If I'm licensed to watch/hear your product, then replacing the physical medium or getting it in a different format should be a very nominal (pennies!) charge since I can show that I've got a license for the product. If I'm buying a copy of the product for my own, then how do they have any right to restrict what I do with my copy for my own use?

Re:This is legal in the US too

[deblau]

Let's be careful to dissect the different rights granted to a copyright holder.

Here is the distribution right:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: . . . to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending. 17 U.S.C. 106(3).

Here is first sale doctrine:

Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. 17 U.S.C. 109(a).

Note that section 109 uses the word "owner" -- the one who controls title. The law makes a distinction between owning a CD (as plastic), and owning the music or software on that CD (as bits). In order to invoke first sale doctrine, you have to own the copy of the software, or be authorized. Now let's have a look at a typical MSFT EULA:

3. RESERVATION OF RIGHTS AND OWNERSHIP. Microsoft reserves all rights not expressly granted to you in this EULA. The Software is protected by copyright and other intellectual property laws and treaties. Microsoft or its suppliers own the title, copyright, and other intellectual property rights in the Software. The Software is licensed, not sold.
(MSFT retains ownership of the software)

13. SOFTWARE TRANSFER. . . . Transfer to Third Party. The initial user of the Software may make a one-time permanent transfer of this EULA and Software to another end user, provided the initial user retains no copies of the Software. This transfer must include all of the Software (including all component parts, the media and printed materials, any upgrades, this EULA, and, if applicable, the Certificate of Authenticity). The transfer may not be an indirect transfer, such as a consignment. Prior to the transfer, the end user receiving the Software must agree to all the EULA terms.
('the owner authorizes')

There are some who argue that software licenses are effectively sales. I tend to agree, because MSFT no longer controls the software. However, with 'activation' and other 'phone home' software, this may not really be the case. If MSFT exerts control over my PC from Redmond, then they have a legitimate claim that I'm 'just a terminal'.

if it's licensed then one should be allowed to make backups of the disc or receive a replacement disc if the disc gets lost or damaged

Here is the reproduction right:

Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: . . . to reproduce the copyrighted work in copies or phonorecords. 17 U.S.C. 106(1).

Here is the fair use doctrine, 17 U.S.C. 107:

Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the fac

Not at all like used anything else

[BadAnalogyGuy]

Typically, when you think of used goods, you think of worn out hand-me-downs donated to Goodwill or the Salvation Army. But software licenses are not anything at all like that. In fact, they do not wear out, nor do they have any physical form except for the paper they are printed on. They are purely logical constructs.

But IP owners would have you think otherwise. They want you to think that licenses are akin to the actual CDs that the media came on. One CD, one installation. However, this is prima facie ludicrous. One CD suffices to create a farm of PC installations, the only thing needed is multiple licenses for each individual installation.

So don't be fooled into thinking that buying CDs is absolutely necessary. All you need are valid licenses and you have the rights to install as many times using the same CD as you have licenses.

Re:Not at all like used anything else

[MichaelSmith]

But software licenses are not anything at all like that. In fact, they do not wear out

But they do become obsolete faster than most other products. The Windows98 license I own is pretty worn out in one sense.

Good and Bad

[ajs318]

On one hand this is good because it reaffirms such doctrines as "fair dealing" and "exhaustion of rights", which are statutory rights that cannot legally be abridged by contract. On the other hand it is bad because it perpetuates the myth of dependency on Microsoft {though I suppose I shouldn't complain about that without actually trying to do something positive, like build and try to sell a sexy little all-in-one business server based on i-tal software}.

Disclic aren't doing anything illegal, nor are they doing anything wrong {an important distinction in the UK, where many things that are not wrong are technically illegal, and many things that are wrong are not illegal}. I'm sure Microsoft would like to have a pop at them; but I don't know of anything that they could actually make stick. And if they do try, it will almost certainly call into question the legal enforcibility of EULAs in the UK.

Re:Should be co.uk

[MichaelSmith]

The best part so far has been seeing how they've dealt with the challenge of materialising something as abstract as software licences into a picture for a lgo. What the hell is that thing?

The favicon looks a bit like Netscape.

Strange that despite their business name they only claim to resell Microsoft software licenses. I wouldn't mind getting my hands on a copy of VMS.

I wonder what their Licence Procurement Division does. It that like dumpster diving?

I'm going to mix things and hope you won't notice

[Anonymous Coward]

"Modern societies go out of their way to restrict one's freedom"

Actually, modern has nothing to do with it. And just living with another person will restrict your freedom. Ask any married man. But some of those rules are societal such as you mention:

    "you cannot buy alcohol and give it to minors"

or

    "[you cannot] drive a car around without a license"

Let's be clear about these things. They are *laws* debated and agreed to by *represented officials* and can be changed at any time if society at large decides these rules need to be changed.

Also, it's worth noting these laws don't restrict the sale or ownership of an item, they restrict the use of an item.

Let's compare that with a EULA from MS not to resell that item.

1) It's not against the law to buy or sell software
2) Copyright law has no jurisdiction in this case, because it deals with reproduction, not sale
3) First sale doctrine encourages me to resell what I own
4) Microsoft would rather I didn't and they put it in a EULA.
5) Nobody voted on this restriction. In fact, they didn't even get a say. I bought a PC a few years ago, it came with XP Pro, I assumed I could sell it, but no, it's licensed to the box and I can't resell it. Why? Well... just because. I don't think it would hold up in court, but it's not worth it to try.

So please stop comparing a EULA to underage drinking and societal conventions because they are not at all related. EULAs are a trick that may or not be legal and they are enforced by big money, not society.

What an awesome idea...

[mblase]

...Now, is there any chance I can legally buy a used driver's license?

Re:How's that work?

[ajs318]

Presumably when the buyers get the software, they have to phone in to get an activation number. Can't Microsoft just refuse?

If you bothered to read the article, you would see that, so far, they are only dealing with bulk licences -- not individual ones. No activation number involved. This makes sense on two levels; one, there'd be nothing to stop a company that was going out of business from passing on a bulk licence through some unofficial channel anyway, so it might as well be officialised; and two, companies are more likely to be in a position to defend themselves if it goes T.U. {although, don't forget, this is happening in the UK; loser pays all costs and no cash changes hands until a verdict is delivered}.

Second question. When you buy a used computer already loaded with software, what are your rights?

If the software was correctly licenced {discounting any licence terms which invoke the severability clause by contradicting the Law of the Land} then your rights are the same as any other licenced user. If the software was not correctly licenced, although you bought it in good faith, then your rights are limited to your statutory rights of fair dealing under copyright law {i.e. you may make copies only as deemed necessary to the task of using the software for its Rightful Purpose}. If the software was not correctly licenced and you had reason to believe that this was the case, then you may be an accessary to copyright infringement.

Used drivers licenses

[Kadin2048]

Sure, I have a few old expired ones hanging around; I'm not sure how far you'll get, seeing as they have my name and picture on them, and a corner is cut off...but they were given back to me by and employee at the DMV because I asked nicely, so I assume I can do whatever non-fradulent thing I want to do with them now.

In some states you can also buy old license plates. That doesn't mean it's legal to put them on your car, but you can get them. In fact, I know of at least one state where the DMV sells "novelty" plates direct: they're not legal to actually use as a license plate, but if you wanted to get a historical one for your Model T, they'll sell it to you.

You can buy and sell all sorts of stuff that would be illegal if used in a certain way.

Bit rot

[tepples]

Remember also, cars wear out and die; a used software license installs and works perfectly every time.

True, but the software itself bit-rots as crackers discover new vulnerabilities in an end-of-lifed operating system.

I don't believe software makers should have the right to this "forced non-resale" licensing

If it's banned, publishers of proprietary programs will just phrase their EULAs as 95 year rental agreements.

Re:Necrodupe?

[jamie]

That's not a dupe.

First story, November 2005: "Disclic, through discount-licensing.com, this week began offering secondhand software licenses..."

Today's story, April 2006: "Sales of second-hand Microsoft software licences have doubled month-on-month since the market was opened in November 2005..."

A dupe is when we post the same story twice with no new news between the two stories. This is a followup -- thanks for bringing it to our attention, and I've added the November story to our Related Links section.

Small things show just how bad it is.

[twitter]

On one hand this is good because it reaffirms such doctrines as "fair dealing" and "exhaustion of rights", which are statutory rights that cannot legally be abridged by contract.

Wow, I'm underwhelmed.

Wake me up when you can sell the crappy CD that comes with your non-naked PC the same way you could sell it's floppy drive, the manuals or any other worthless component. It's funny they want to extend all of the limitations of physical property into the binary world and then binary limits into the physical world.