In recent years, second hand trading of software has experienced substantial growth and the legal issues involved in such transactions have also caught the eyes of the players in the industry. Generally, the legality of software resale is decided by whether the distribution rights of the copyright owners are exhausted upon the transaction. However, it is difficult to decide when a transaction should be regarded as "licensing" and when the transaction should be deemed as a "sale". As the number of software resale cases brought before the courts increases, the courts’ understanding of the nature of software trading develops. Various jurisdictions have formed their own approach on differentiating an act of sale from that of licensing.

Common copyrighted products such as books or CDs can be resold because most countries adapt the "doctrine of exhaustion of distribution rights" in their copyright law, namely once a copyright owner publicly distributes his/her original work or the copies of such work by way of "sale" or "gifting", the distribution right will be deemed exhausted and the owner may not reclaim such right.

Xu Jing, Partner and Zhao Ye, Associate, IP Litigation

Continue Reading Software Resale: A China IP Puzzle Part I