The Second Hand Software Licence Phenomenon

The old maxim, let the buyer beware, is taking on a significance in the relatively new market of second hand software licenses. It is easier for all parties to be aware of risks associated with the proposed sale where the subject matter of the sale is tangible. But with a licence of software what is sold is the permission to use the software. Whether there is an entitlement to pass on that permission to use to a third party is question of contract. Whether the intangible asset is worth using is a question of due diligence and business necessity.

The issue has been come to the fore recently with the increased profile of a UK based reseller of discounted licenses from insolvent companies and the apparent acceptance by Microsoft of the sale of licenses for certain applications at a reduced rate of sometimes up to 50% of the original licence fee. For any software supplier, protection of revenue stream is the priority and onward sale of licenses is not necessarily a threat to revenue.