The UK Court of Appeal has handed down a judgment dismissing two appeals brought by tech giant Microsoft against second-hand software reseller JJH Enterprises, trading as ValueLicensing. The ruling firmly establishes the jurisdiction of the Competition Appeal Tribunal (CAT) over complex intellectual property disputes embedded within antitrust claims and clarifies the boundaries of digital copyright exhaustion in Europe.
The protracted legal dispute began when ValueLicensing accused Microsoft of breaching competition law by deploying contractual restrictions and pushing consumers toward subscription models to stifle the secondary market for perpetual software licenses. Microsoft countered by arguing that ValueLicensing was actively infringing its copyrights, asserting that if its intellectual property arguments succeeded, the antitrust claim must fail.
Microsoft first challenged the CAT’s legal jurisdiction, arguing that because copyright infringement claims are typically the domain of the High Court, the tribunal had no authority to rule on them. The Court of Appeal flatly rejected this narrow interpretation, concluding that the CAT holds full statutory authority to resolve any legal issue—including complex copyright questions—that serves as a necessary prerequisite to determining a breach of competition law.
The core of the appeal centered on the doctrine of copyright exhaustion established by the European Court of Justice in the seminal UsedSoft case, which permits the lawful resale of downloaded software. Microsoft attempted to bypass this rule by arguing that modern software suites like Windows and Office are complex products containing distinct graphic elements, interfaces, and icons protected under the separate InfoSoc Directive, which does not recognize digital exhaustion. The appeals court upheld the CAT’s finding that the products are purchased primarily for their functional computer program capabilities, meaning the graphic components are merely accessory and their rights are exhausted upon the first sale.
Furthermore, the court dismissed Microsoft’s arguments against the subdivision of bulk or volume licenses. While Microsoft claimed that UsedSoft prohibits breaking up multi-user licenses, the justices clarified that the restriction only applied historically to interwoven client-server networks. For standalone software licenses, the court ruled that individuals and businesses are entirely free to disaggregate and resell surplus licenses independently, regardless of restrictive corporate contract terms.