Judgment handed down in JJH Enterprises Limited (trading as ValueLicensing) v Microsoft Corporation and Others

Following a trial of preliminary issues at the Competition Appeal Tribunal on 9th & 10th September, Judgment was handed down on 12th November with a unanimous decision in favour of the Claimants, JJH Enterprises Limited (trading as ValueLicensing) against Microsoft.

The matter relates to a claim for damages brought by JJH Enterprises Limited against (1) Microsoft Corporation, (2) Microsoft Limited and (3) Microsoft Ireland Operations Limited in respect of alleged breaches of section 18 of the Competition Act 1998 (the “1998 Act”), Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) and/or Article 54 of the Agreement on the European Economic Area (the “EEA Agreement”) and alleged breaches of section 2 of the 1998 Act, Article 101 TFEU and/or Article 53 of the EEA Agreement regarding the sale of software licences.

The Tribunal was asked to determine, first, whether exhaustion principles permitted the subdivision and resale of individual Microsoft Windows and Microsoft Office licences originally acquired in volume under Microsoft’s Enterprise Agreements was permissible, and secondly, whether the doctrine of exhaustion under the Software Directive applied to  Microsoft Windows and Microsoft Office given that they contain not only computer programs but other types of copyright works such as a graphic user interface, clip art, user manuals, helpfiles and typefaces/fonts.

The Tribunal concluded on the facts of this case, by reference to the Sample Transactions, as follows:

(1) On the first issue, exhaustion under Article 4(2) of the Software Directive operates by law and is not restricted by contractual terms in Microsoft’s Enterprise Agreements. The distribution and reproduction rights enjoyed by Microsoft in their products do not prevent the subdivision and resale of licences obtained by the first acquirer.

(2) On the second issue, the first online sale of Microsoft Windows and Microsoft Office in electronic form exhausts the distribution and/or reproduction right under Article 4(2) of the Software Directive in all works supplied and inevitably downloaded as part of those products, to the extent those works are distributed, downloaded and copied in accordance with the intended purpose for which Microsoft Windows and Microsoft Office were first sold.

Matthew Lavy KC acted for the Claimants, leading Henry Edwards of 8 New Square and Mark Wilden of 3PB, instructed by Charles Fussell, Catherine Stockler and Harry Prebensen at Ghaffari Fussell LLP.

To view the full judgement, please see here.