Microsoft’s Windows 8 terms and conditions have been ruled partially illegal by a court in Germany. The court held that the terms unfairly restricted individuals from transferring the software (case ref.: 5 W 35/13).
Windows 8 terms and conditions
The Higher Regional Court of Hamburg has ruled that Microsoft’s Windows 8 terms and conditions are partially illegal. The terms contained the following disputed clause:
“You may also transfer the software (together with the license) to a computer owned by someone else if a) you are the first licensed user of the software and b) the new user agrees to the terms of this agreement.”
This means that an individual who has purchased the Windows 8 software may only transfer it to another person if they were the first person to purchase the software and if the person to whom they are transferring it agrees to Microsoft’s terms and conditions.
As a result the software may only be transferred once, namely from the licensee to a third person. Any further transfer is largely excluded by Microsoft’s terms and conditions.
The court held that the clause breaches the principle of ‘rights exhaustion’ under German copyright law.
The relevant legal provision is § 69c(3) of the German Copyright Act. Under this provision copyright holders’ distribution rights in relation to software are exhausted once the software is sold in the EU or in a member state of the European Economic Area.
The court ruled that the term requiring a transferee to agree to the terms and conditions before the transfer of software take places unfairly disadvantaged consumers. As a result, the court held that the terms and conditions are incompatible with the principle contained in § 69c(3).
Transferring software cannot be restricted
With this decision, the Higher Regional Court has demonstrated that the concept of rights exhaustion is a fundamental principle of German copyright law and that businesses cannot even partially derogate from it.
As soon as software producers bring software onto to market in the EU or the European Economic Area, their rights expire and with it the possibility of influencing whether and how the software can be transferred.